Rob Mullin: Gold Stocks Still Cheap, Energy Stocks Cheaper

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Today we've got the privilege of
chatting with Rob Mullen, the

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CIO and founder of Marathon
Resource Advisors, and this is

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someone we wanted to chat with
quite some time, isn't it?

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He absolutely is, mate, an
intriguing character.

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Rob is like from San Francisco
of all places.

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The dichotomy kind of grips us.
He's in the epicentre of AI and

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here we are talking about
beating up cash flow natural

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resources stocks.
Rob runs the sole fund at MRA.

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They are an asset manager purely
focused on the natural resources

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space, so this gives us an
abundance of things to talk

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about.
He can invest anywhere around

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the globe in any commodity.
Since MRA became a long short

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fund, returns have been bonkers.
Make 33% per annum.

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Manualise an incredible year to
date 80 odd percent.

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He sticks to his core looking
for, you know, cheap, cheaply

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valued equities kind of counter
cyclical understanding that

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these are cyclical businesses
and still thinks there's a lot

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of value in in gold.
Very attracted to energy.

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Totally.
And tacking on to that one mate,

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he writes some of the best
resource investor letters out

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there.
Just gripping kind of stuff in

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the way he sort of sees the
market, whether that be talking

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about private credit, private
equity, pod shops, what they've

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kind of done to the market and
how they've impacted the market

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all the way through to
generalist investors.

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Are they going to return to the
market?

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Are they going to come to places
like oil, metals, critical

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minerals?
So really hope you enjoy this

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conversation with Rob Mullen in
in an interview you did

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recently, you said we've done
very well for our investors

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having a very disciplined
approach, buying companies the

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old fashioned way.
What what does that sort of mean

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to you and how different do you
feel from the pack in in this

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kind of market?
Well, it's I, I have kind of an

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interesting seat, right?
I'm a, I'm a resource guy, a

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fundamentally value driven
investor sitting who grew up

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right in the middle of Silicon
Valley and I'm right smack dab

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in the middle of some
convergence of tech, AI and

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crypto.
So I I can't possibly be pulled

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by different worlds any more
strongly than I am currently.

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I'll even take that to a bigger
extreme in that, you know, my

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family heritage and the name of
the fund is from Marathon,

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Marathon, Texas, which my mom
grew up on the cattle ranch out

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in the middle of a very, very
quiet, desolate part of Texas,

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which is known as one of the
most Republican, most

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conservative parts of the
country.

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Flip side of that is I now live
a couple of blocks from the

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corner of Haight and Ashbury
streets, which is, you know,

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here in San Francisco, which is
quite and I think it has been

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measured as the single most
democratic zip code in the

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entire United States of America.
So, you know, I'm just, I'm just

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sitting in the middle trying to
make sure I don't offend anybody

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too much.
But when it comes to to sort of

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being a value investor, what it
means to me is the ability to

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get comfortable with the
underlying cash flow dynamics of

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the companies that you're
investing in, the sustainability

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of those cash flows.
And importantly, the willingness

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of the management companies to
share those with you.

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Because big cash flows don't
mean anything if they're just

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going to blow it on stupid
stuff, quite honestly.

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So what it means is how, how
fundamentally can I underpin or

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underwrite the value of my
investments given the cash flow

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that I know is going to be
coming back at me.

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And I think while that, you
know, used to be a fairly

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popular, it may not have been
everybody because there have

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always been growth investors and
you know, people who have, you

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know, really gone after more
exciting parts of the market.

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But you go back 30 or 40 years,
you know, the latter part of

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that is when I was kind of
cutting my teeth and as investor

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and that was kind of standard
operating procedure, you were

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looking to try and find a
dollar's worth of assets and buy

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them for something less than a
dollar.

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And I think that is become in
this market something that's

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kind of anachronistic.
There are there are very few

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people still left doing that
kind of analysis because quite

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frankly, for the most part, it
hasn't paid particularly well in

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a while.
Yeah, Yeah, that, I mean that's

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so fascinating.
And when you when you sort of

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talk about stocks that trade on
two to three times cash flow, I

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don't know about other people,
but that gets me super excited.

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But before we jump into some of
those kind of stocks, I am very

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curious to to know given that
kind of dichotomy of you sitting

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there in San Francisco, what
what the appeal of natural

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resources was in I think in the
90s when you first jumped into

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that corner of the market?
Yeah, well, look, having a

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having a family heritage on a
working cattle ranch out in the

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middle of Texas where they
haven't actually found any oil

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and gas on on the ranch, but
they looked for it and they paid

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us some bonuses.
So that was nice.

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But there's always been a little
bit of an underpinning of, you

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know, real working commodity
resource Y kind of businesses in

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my family.
But the, you know, the real

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driver was, you know, one of my,
one of the things that kind of

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personally defines my skill set
is I'm a very quantitative

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person.
And by that I mean I've got a

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fluidity with numbers that
enables me to build models and,

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and, and look at both absolute
and relative valuations and try

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and discern value.
And it's like, you know, every,

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there's a combination of
investing that is both a math

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problem and a little bit of
psychology.

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And so if you can do the math
side of it right, you then can

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you let you can learn the
psychology part of it over time.

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Bringing together those two
things is, is very helpful.

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So when I was at the Franklin
Templeton Group, I covered a

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bunch of different sectors
there.

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You know, the resource sector
was one of them, but I also

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covered consumer products and
the skill set required there was

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figure out, you know, how
popular Gillette's brands or

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Colgate Palmolive's brands are
going to be next year and what

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multiple the market will put on
that.

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That's a very different skill
set.

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Then, you know, build me a
discounted cash flow model so

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you can buy a copper company or
an oil company for something

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less than what the current strip
pricing would tell you is the

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cash flows that they'll produce
over the last five to seven or

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the next five to seven years.
So with that kind of skill set,

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I've, I've never been much of A
fortune teller.

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I'm no good at telling you what
app is going to be the most

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successful one or whether people
are going to find it really

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important to get a seventh way
to order a hamburger, you know,

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via effectively A limousine to
come to your house.

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That's never been my gig.
It's really just good going in

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and being able to understand
companies and cash flows and

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hopefully have a disciplined
process around that to be able

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to buy them when the market is
giving you the largest margin of

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safety.
In the, in the, the mid 90s,

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nineties, you kicked off the
gold fund at Franklin Templeton

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and we're going to spend a fair
bit of time today talking about

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gold, gold miners, gold stocks
and your views on gold.

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But like when you first became
acquainted with the gold sector,

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how are things different then
from from where they are right

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now?
Yeah, it's, it's wild.

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So just Full disclosure, I never
ran the gold fund at Franklin.

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That was, you know, that was
actually originally introduced

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in like the 50s.
I think Marty Wiskeman was the

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original Franklin partner who
brought that fund out.

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And while I definitely had a
dialogue with the manager of

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that fund, it was never part of
under my purview.

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I ran the natural resource fund
there.

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You know, that said, I came into
the business when gold stocks

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were valued at, you know,
typically at least two times, if

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not higher times.
NAV, you know, where people were

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willing to pay a significant
premium to, you know, on to the

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market multiples on cash flow or
earnings because they felt that

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gold stocks served a purpose.
They protected you from what

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might be an adverse or
inflationary outcome.

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That look, in the early 90's,
the 70s were still a pretty

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vivid memory for a lot of the
portfolio managers.

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Now that portfolio manager
generation has now more or less

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I, I won't say they've died off,
but they've gone into

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retirement.
You know, they're living on

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their boats.
They're they're hanging out

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elsewhere and over gradually
over that period of time between

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us getting the world, getting
very comfortable that we're in a

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low inflationary environment
perpetually and the leaning in

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on the sort of move towards
decarbonization and ESG.

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That embedded premium that gold
stocks used to trade with

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gradually whittled away over an
extended period of time.

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To the point where there was a
point earlier this year where

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the gold stocks had been cheaper
on relative multiples earnings

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cash flow, even though they were
generating fabulous returns on

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equity and returns on capital,
They were at the deepest

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discount to the broader market
that we had ever seen.

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They were the cheapest stocks on
my board, with the exception of,

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you know, like a few coal
companies and some really out of

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favor, you know, out of favor
energy stocks.

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So, so I think what that that's
why people got so frustrated

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with gold stocks over the last
decade plus after they peaked in

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2011, is that it just was like
relentless.

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You could not win the gold price
actually did OK, but this the

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stocks were demultipled or or de
premiumed into oblivion.

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And so what's changed over the
last, gosh, let's call it six

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months, is that suddenly the
businesses became so good that

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people had figured out that they
needed to pay a little bit more

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for them.
Where do you think that kind of

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goes to?
Do you do you think we get back

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to the the two or three times
cash flow days?

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You mean two to three times NAV?
Yeah, yes, yes, absolutely.

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I.
You know, I don't know.

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I don't know if we ever get
back.

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I mean, it'd be really fun if we
did, you know, because despite

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the fact that most of these
stocks are up a lot, so are the

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NA VS, right?
And so they're still trading

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relatively cheap.
I'm of a mind that if you have a

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real investment theme that the
broader market is going to

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embrace, you should get
expanding multiples on that.

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And that's what we've seen in
areas like, you know, AI power

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generation where you look at a
GE Vernova that's gone from, you

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know, it was spun out at 20
times earnings, now trading at

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50 times earnings because they
sell the turbines that people

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need to build new natural gas
fired plants to be able to

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actually build these new data
centers.

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You know, if you look at places
like the European defence stocks

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there, you've seen massive
multiple expansion too, as the

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rains have been taken off of the
Europeans in terms of their

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ability to budget spent or
deficit spend, to be able to

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expand, to take care of their
own borders.

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And so, you know, Leonardo has
gone from five times earnings to

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25 times earnings.
The gold stocks are all up on a

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as a group, you know, 100 to
150% this year, but the

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valuations have not expanded.
And so that's an interesting

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thing that, you know, has me
typically I'd be pretty scared

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with these stocks having run as
hard as they are.

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The fact that the multiples have
not expanded makes me more

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comfortable than I would
normally be.

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I actually looked at all of the
the gold mine evaluations it was

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yesterday and so there's there's
only two miners with trading at

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at 2 about two times and I have
London gold and Agnico Eagle.

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I was surprised to see London
gold there.

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But but but like what you're
trading relative to NAV depends

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so much on what your assumption
of gold price is.

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And of course these gold stocks
look phenomenally cheap if you

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assume that today's gold price
is a new gold price into

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perpetuity.
But every everyone's valuing

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these on a on a reversion to
make gold price assumption.

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Yeah.
If you mark them, if you mark

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the NAV to market, they're all
super cheap.

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I, I will walk you through, I
won't name the name of the

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company, but I will say.
So this has been a portfolio

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holding for us for a couple of
years and they're in the process

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of building, you know, what we
think is going to be a pretty

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good goldmine.
And so when we met with them at

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the Colorado Springs World Gold
Forum meeting in September of

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00:12:21,120 --> 00:12:25,080
2024, you know, the market cap
of the company was about 600

225
00:12:25,080 --> 00:12:27,960
million bucks and it looked like
they would generate about $300

226
00:12:27,960 --> 00:12:32,680
million of basically free cash
in the first year of production,

227
00:12:32,680 --> 00:12:36,920
which it is going to be 2027.
And so effectively trading 2

228
00:12:36,920 --> 00:12:39,800
times cash flow.
So I'm like, great, OK, that

229
00:12:39,800 --> 00:12:41,760
looks good, comfortable as a
portfolio holding.

230
00:12:41,760 --> 00:12:45,800
We go back this year.
So this, no, this September.

231
00:12:46,120 --> 00:12:49,800
So one year later, the stock is
up 250%.

232
00:12:50,320 --> 00:12:54,280
So the market cap is now one
point or actually a little bit

233
00:12:54,280 --> 00:12:56,560
more.
So it's $1.8 billion is the

234
00:12:56,560 --> 00:12:59,320
market cap.
But the first year cash flow in

235
00:12:59,320 --> 00:13:03,760
2027 is $900 million instead of
$300 million.

236
00:13:04,160 --> 00:13:08,240
So it's still trading at 2 times
cash flow and actually between

237
00:13:08,240 --> 00:13:11,200
then and now you've taken out a
lot of the execution risk, a lot

238
00:13:11,200 --> 00:13:14,000
of the big parts of the plant
have been ordered, a lot of the

239
00:13:14,000 --> 00:13:17,320
pre strip has been done, a lot
of the potential, you know,

240
00:13:17,560 --> 00:13:20,680
pitfalls that you get with any
sort of ancillary permitting or

241
00:13:20,680 --> 00:13:22,120
anything like that have been
worked through.

242
00:13:22,120 --> 00:13:25,720
So it's actually it's cheaper
now than it.

243
00:13:25,880 --> 00:13:29,640
It's up 250% plus it, but it's
cheaper than it was a year ago

244
00:13:30,360 --> 00:13:32,680
and it has been measurably de
risked.

245
00:13:33,040 --> 00:13:36,920
So that's the kind of thing
where I have a hard time saying

246
00:13:36,920 --> 00:13:39,040
I've got to sell this stock
because it's up.

247
00:13:40,240 --> 00:13:43,400
How much a part of the, the
narrative from totally out of

248
00:13:43,400 --> 00:13:47,200
fashion to, you know, the, the,
the hottest thing since sliced

249
00:13:47,200 --> 00:13:50,360
bread in the, in the, in the
scheme of this transition, do

250
00:13:50,360 --> 00:13:53,160
you think the retail investors
coming in and, and the flow is

251
00:13:53,160 --> 00:13:55,840
starting to come in?
We've started to see it happen,

252
00:13:56,160 --> 00:14:00,320
but we're nowhere near a sort of
euphoric type place with regard

253
00:14:00,320 --> 00:14:01,920
to retail investors in the gold
space.

254
00:14:02,760 --> 00:14:05,480
Yeah.
So that was the big, the

255
00:14:05,480 --> 00:14:08,600
puzzling factor earlier this
year is that and then really

256
00:14:08,600 --> 00:14:11,720
over the course of the last
several years is that you had

257
00:14:11,720 --> 00:14:17,640
this massive visible overt
buying of physical gold by

258
00:14:17,640 --> 00:14:20,160
global central banks,
particularly eastern global

259
00:14:20,160 --> 00:14:23,840
central banks.
And the reason that gold prices

260
00:14:23,840 --> 00:14:26,680
weren't going up faster is that
the West was selling it to them

261
00:14:26,960 --> 00:14:28,840
in a right.
We were, we were liquidating our

262
00:14:29,080 --> 00:14:30,600
ETFs.
We were, you know, still had

263
00:14:30,600 --> 00:14:33,120
some Western central banks
deciding to be marginal sellers.

264
00:14:33,920 --> 00:14:36,720
And so the that that kind of
helped keep a keep a lid on it.

265
00:14:37,200 --> 00:14:40,000
That's the narrative that
changed this year for physical

266
00:14:40,000 --> 00:14:43,560
gold, which is all of a sudden
the central banks are still

267
00:14:43,560 --> 00:14:47,000
buying, but and they have now
company.

268
00:14:47,000 --> 00:14:51,760
It's more than just the, you
know, turkeys and Russias and

269
00:14:51,760 --> 00:14:55,640
Chinas you've added in things
like Poland and, and others that

270
00:14:55,640 --> 00:14:58,200
have been pretty aggressive and,
and, and a lot of other central

271
00:14:58,200 --> 00:15:01,080
banks.
So that's been part of it.

272
00:15:01,080 --> 00:15:03,960
But you've actually seen the,
you know, you've seen, as you

273
00:15:03,960 --> 00:15:06,760
say, the retail investors have
started to join.

274
00:15:06,760 --> 00:15:09,480
So it went from having
relatively balanced buyers and

275
00:15:09,480 --> 00:15:12,600
sellers to now everyone kind of
on the margin is buying and

276
00:15:12,600 --> 00:15:15,400
they're very few people who at
this point are willing to sell

277
00:15:15,400 --> 00:15:17,320
their gold.
Except today we've note that I

278
00:15:17,320 --> 00:15:21,120
think the gold price was down
about 90 bucks US in today's

279
00:15:21,120 --> 00:15:24,200
trading.
So, you know, maybe maybe the

280
00:15:24,200 --> 00:15:27,040
correction that people have been
waiting for for a while has has

281
00:15:27,040 --> 00:15:30,120
arrived.
But I think that's that's part

282
00:15:30,120 --> 00:15:32,040
of the narrative.
The interesting thing to me is

283
00:15:32,040 --> 00:15:35,560
that gold stocks still, you
know, the major gold stock ETFs

284
00:15:35,560 --> 00:15:38,920
in the US has still had net
liquidations year to date.

285
00:15:39,680 --> 00:15:42,120
So that doesn't happen very
often.

286
00:15:42,120 --> 00:15:46,800
I went back and looked at, gosh,
I think 15 years worth of top

287
00:15:46,800 --> 00:15:51,240
performing ETFs and how often
they had outflows and it's about

288
00:15:51,240 --> 00:15:54,880
3% of the time.
And so it's a pretty unique

289
00:15:54,880 --> 00:15:58,880
beast to have the top performing
ETFs having net outflows over

290
00:15:58,880 --> 00:16:01,400
the course of the year.
The last I checked, the GDX in

291
00:16:01,400 --> 00:16:05,080
the US has still had net
outflows of close to $3 billion

292
00:16:05,080 --> 00:16:06,960
this year.
It's reversed a little bit in

293
00:16:06,960 --> 00:16:10,120
the last few weeks.
So we've gotten six $700 million

294
00:16:10,120 --> 00:16:13,120
worth of inflows.
But you know, to have a, a, a

295
00:16:13,120 --> 00:16:16,600
vehicle that has performed that
well and to have had net public

296
00:16:16,600 --> 00:16:19,160
liquidation of it, it's really
kind of telling you something

297
00:16:19,160 --> 00:16:24,400
that I think it's not early
early, but it's not late by any

298
00:16:24,400 --> 00:16:27,520
stretch of the imagination.
When, when when do things look

299
00:16:27,520 --> 00:16:33,080
like they're late?
You know, that's, that's when

300
00:16:33,080 --> 00:16:35,520
you're starting to see I, I'm
looking for two different

301
00:16:35,520 --> 00:16:38,760
things, one of which is where
you're starting to see, you

302
00:16:38,760 --> 00:16:42,000
know, new share issuance by the
GDX and the GDXJ start to go up

303
00:16:42,000 --> 00:16:44,640
markedly.
So you don't just see it going

304
00:16:44,640 --> 00:16:48,120
up because of performance.
You see the NA VS or not the NA

305
00:16:48,160 --> 00:16:51,520
VS, but the Aums going up
dramatically because you're

306
00:16:51,520 --> 00:16:54,840
getting, you know, billions and
billions of dollars of inflows.

307
00:16:55,200 --> 00:16:59,240
Not seeing that yet.
You know, when you start to see,

308
00:16:59,240 --> 00:17:02,000
we've seen a lot of smaller
companies do equity issuances.

309
00:17:02,200 --> 00:17:05,720
When you start to see the big
guys do equity issuances because

310
00:17:05,720 --> 00:17:08,440
they're starting to buy other
things and they don't really

311
00:17:08,440 --> 00:17:12,200
want to, you know, issue their,
you know, do a lot of debt or

312
00:17:13,000 --> 00:17:16,000
things like that, then then
you're starting to get a little

313
00:17:16,000 --> 00:17:20,440
bit later in the game for sure.
You know as in terms of

314
00:17:20,440 --> 00:17:25,240
yardsticks for me, I still look
at, you know where is the gold

315
00:17:25,240 --> 00:17:29,560
price and the US held gold
relative and how much does that

316
00:17:29,560 --> 00:17:32,520
cover of our foreign held
treasuries.

317
00:17:33,640 --> 00:17:37,200
And so right now the historical
range on that has been anywhere

318
00:17:37,200 --> 00:17:44,120
from like 40% to 5% of basically
us having enough gold to cover

319
00:17:44,120 --> 00:17:47,720
the entirety of the Treasuries
that we have issued to foreign

320
00:17:47,720 --> 00:17:51,640
entities.
And so right now that metric is,

321
00:17:51,720 --> 00:17:54,960
you know, call it the, the
domestic stockpile of US gold is

322
00:17:54,960 --> 00:17:59,880
just over a trillion dollars.
We've got close to $10 trillion

323
00:17:59,880 --> 00:18:02,720
worth of Treasury securities
issued to foreigners.

324
00:18:03,160 --> 00:18:05,760
So it's a little, I think it's
about 11% right now.

325
00:18:06,120 --> 00:18:09,320
So, you know, that would tell
you that we're still relatively

326
00:18:09,320 --> 00:18:12,160
early in this process.
But what I know for sure is

327
00:18:13,080 --> 00:18:16,840
we're never, and this is what I
tell investors with us, we're

328
00:18:16,840 --> 00:18:20,600
never going to get the really
easy steady up into the right

329
00:18:20,600 --> 00:18:23,680
kind of bull markets that
technology investors or

330
00:18:23,680 --> 00:18:26,680
healthcare investors get for
these long extended periods of

331
00:18:26,680 --> 00:18:29,400
time.
We have signed up for a totally

332
00:18:29,400 --> 00:18:33,560
different rodeo in that we're
going to have these sharp brutal

333
00:18:33,560 --> 00:18:38,280
corrections that are going to
shake your confidence to the

334
00:18:38,280 --> 00:18:41,760
very core.
It's just what this sector does

335
00:18:41,760 --> 00:18:44,800
it what's it's what makes it so
hard to invest in.

336
00:18:45,800 --> 00:18:49,480
And that's above and beyond the
fact that environments where

337
00:18:49,480 --> 00:18:53,920
resource stocks are doing really
well are inherently really

338
00:18:53,920 --> 00:18:57,960
volatile periods because
inflation is rising, inflation

339
00:18:58,680 --> 00:19:02,040
concerns are rising.
That creates stress between

340
00:19:02,040 --> 00:19:05,520
equity and bond markets.
And so it's, you know, it's

341
00:19:05,520 --> 00:19:09,440
almost like we are self
defeating because the goodness

342
00:19:09,440 --> 00:19:13,000
that comes with this broadening
inflationary outlet comes with

343
00:19:13,000 --> 00:19:15,840
this massive volatility that you
suddenly have to manage through

344
00:19:15,840 --> 00:19:18,400
it.
That's what also makes the, the

345
00:19:18,400 --> 00:19:21,040
resource sector so, so
fascinating to, to follow that,

346
00:19:21,040 --> 00:19:25,200
that dynamic of, of global in
nature and and very volatile.

347
00:19:25,920 --> 00:19:29,000
I'm curious to hear where you're
seeing just maybe rounding out

348
00:19:29,000 --> 00:19:31,760
on gold, they're the most value
because you have a global

349
00:19:32,040 --> 00:19:35,040
mandate.
And I think you said a few

350
00:19:35,040 --> 00:19:39,920
months back that overall you
were relatively light on in, in

351
00:19:39,920 --> 00:19:41,840
North America.
I think you said 25% of the

352
00:19:41,840 --> 00:19:44,360
portfolio was, was US, Canada.
I'm not sure how much that's

353
00:19:44,360 --> 00:19:46,600
changed, but where?
Where are the pockets of value

354
00:19:46,600 --> 00:19:48,800
when it comes to gold?
Yeah.

355
00:19:49,360 --> 00:19:52,160
So gold, I think in some ways
you have to look at almost a

356
00:19:52,160 --> 00:19:55,480
little bit of ancillary plays.
So we came into this year very

357
00:19:55,560 --> 00:19:58,440
heavily positioned in precious
metals and we're still pretty

358
00:19:58,440 --> 00:20:00,720
heavy, but we've been trimming a
little bit off the top.

359
00:20:01,240 --> 00:20:04,720
You know, where we're still
comfortable is, you know, at the

360
00:20:05,240 --> 00:20:10,040
valuations haven't expanded
dramatically on sort of the

361
00:20:10,400 --> 00:20:13,680
resource asset managers.
So you know one of our largest

362
00:20:13,680 --> 00:20:15,960
positions is a company that has
both.

363
00:20:16,760 --> 00:20:21,400
Commodity, commodity equity ETFs
in gold, silver, platinum,

364
00:20:21,400 --> 00:20:25,000
uranium, sprout, et cetera.
So, yeah, yeah.

365
00:20:25,000 --> 00:20:28,760
So that's an area where, look,
your, your downside risk is a

366
00:20:28,760 --> 00:20:31,360
little bit truncated because
they're not going to get taken

367
00:20:31,360 --> 00:20:36,040
out by a single coup in one
country or a tailings dam fall

368
00:20:36,040 --> 00:20:38,720
or a permit that doesn't go
through.

369
00:20:39,520 --> 00:20:41,480
You know, if the sector does
well, they're going to do well.

370
00:20:41,480 --> 00:20:44,200
And it's typically something
that will carry past the end of

371
00:20:44,200 --> 00:20:46,520
the cycle.
So that's an area of exposure to

372
00:20:46,520 --> 00:20:49,080
us.
I think there's still reasonably

373
00:20:49,080 --> 00:20:51,400
good value in some of these
developers.

374
00:20:51,400 --> 00:20:56,640
So companies that are, you know,
maybe 12 to 18 months out from

375
00:20:56,640 --> 00:21:00,120
getting production online
because there's still, you have

376
00:21:00,120 --> 00:21:02,320
to do your due diligence on
execution risk.

377
00:21:02,680 --> 00:21:07,000
But those are places where it's,
you can find, I think some

378
00:21:07,000 --> 00:21:10,440
reasonable value.
I also think that some of the

379
00:21:10,440 --> 00:21:14,680
things around, you know, the
blocking and tackling, you know,

380
00:21:14,680 --> 00:21:18,840
I came away from, shoot, I met
with like 40 companies over the

381
00:21:18,840 --> 00:21:23,000
course of, you know, and myself
and my colleagues met with about

382
00:21:23,000 --> 00:21:27,200
40 companies in 10 days between
Beaver Creek and Colorado

383
00:21:27,200 --> 00:21:30,680
Springs.
And what we walked away with is

384
00:21:30,960 --> 00:21:37,360
let's find ways to buy companies
that benefit from people after

385
00:21:37,360 --> 00:21:39,360
actually having to drill a lot
more projects.

386
00:21:39,720 --> 00:21:43,000
So, you know, drilling rig
contractors and things like

387
00:21:43,000 --> 00:21:44,880
that.
Because you know, when you've

388
00:21:44,880 --> 00:21:50,360
got juniors raising a lot of
money and having to keep up some

389
00:21:50,360 --> 00:21:53,840
news flow for their new
investors to make sure that not

390
00:21:53,840 --> 00:21:56,920
only can they make the happy,
make them happy the people who

391
00:21:56,920 --> 00:22:00,000
bought the last deal, but make
sure you can get them excited to

392
00:22:00,000 --> 00:22:02,600
buy the next deal.
You know, you got to run the

393
00:22:02,600 --> 00:22:05,120
truth machine and which is the
drilling rig.

394
00:22:05,120 --> 00:22:09,840
So I think services around that
are kind of an interesting way

395
00:22:09,840 --> 00:22:14,640
to position yourselves in in in
the market now that we're moving

396
00:22:14,640 --> 00:22:17,880
into a sweet spot where
enthusiasm is translating to

397
00:22:17,880 --> 00:22:19,520
having to put capital in the
ground.

398
00:22:21,040 --> 00:22:23,800
Yeah, yeah, yeah.
The the picks and shovels place

399
00:22:23,800 --> 00:22:27,240
always always interesting.
Picks and shovels Approach picks

400
00:22:27,240 --> 00:22:29,360
and shovels in the resources
space.

401
00:22:29,680 --> 00:22:31,000
Is that like Sandvik ground
support?

402
00:22:31,120 --> 00:22:32,560
It is.
We're talking about businesses

403
00:22:32,560 --> 00:22:35,880
like Sandvik Ground support,
mate, because, well, there's

404
00:22:35,880 --> 00:22:39,880
always a booming demand for the
world's best ground support,

405
00:22:40,040 --> 00:22:43,160
which we know is there's
infinite demand for that kind of

406
00:22:43,160 --> 00:22:45,800
product.
But when times are when times

407
00:22:45,800 --> 00:22:48,040
are absolutely humming in the
resources, space, infinite

408
00:22:48,040 --> 00:22:52,040
becomes even more infinite.
Do you know why I'm so attracted

409
00:22:52,040 --> 00:22:55,120
to to the old DSI, to the
Sandvik ground support business

410
00:22:55,120 --> 00:22:58,240
as well?
Because they are the premier

411
00:22:58,240 --> 00:23:01,720
name in the sector, mate.
The quality rises to the top and

412
00:23:01,720 --> 00:23:04,040
these guys have mastered it in
Australia.

413
00:23:04,480 --> 00:23:07,720
What do you what do you think
Rob would think of someone who's

414
00:23:07,720 --> 00:23:09,320
a self-described quantitative
guy?

415
00:23:09,320 --> 00:23:12,040
What do you think he would think
of my my statement that

416
00:23:12,200 --> 00:23:14,320
something infinite can become
even more infinite?

417
00:23:14,960 --> 00:23:16,120
Do you do you think he'd
approve?

418
00:23:16,120 --> 00:23:17,560
Can I get a job at Marathon
after this?

419
00:23:18,080 --> 00:23:20,640
Doesn't matter because standard
ground support.

420
00:23:20,680 --> 00:23:22,840
They might give me a job because
it's the best ground support.

421
00:23:22,840 --> 00:23:24,040
Maybe they need someone to sell.
Grounds.

422
00:23:24,040 --> 00:23:26,160
It'd be a privilege to work
under Derek Hurd.

423
00:23:26,520 --> 00:23:30,480
Go, Derek, go the Sandvik Ground
support team, and if you're a

424
00:23:30,480 --> 00:23:32,120
minor out there, get your order
in today.

425
00:23:32,320 --> 00:23:36,200
Get some ground support and
improve my math.

426
00:23:37,080 --> 00:23:40,640
But yeah, the cyclical nature of
them is like fascinating as

427
00:23:40,640 --> 00:23:42,680
well.
Like I do think of this like

428
00:23:42,680 --> 00:23:45,720
phenomenon when it comes to
like, yes, cyclical businesses

429
00:23:45,720 --> 00:23:49,440
where at the, at the peaks of
cycles, often the multiples look

430
00:23:49,920 --> 00:23:52,760
the cheapest and it's at the
troughs where multiples look the

431
00:23:52,760 --> 00:23:56,640
most expensive just by by virtue
of the, the relative valuation

432
00:23:56,640 --> 00:23:59,360
and the the compression of
earnings around there.

433
00:24:00,960 --> 00:24:05,320
But I was struck Speaking of
like, you know, energy stocks

434
00:24:05,320 --> 00:24:08,360
when when you've actually got
what is what feels like a

435
00:24:08,360 --> 00:24:12,440
relative through and yet
multiples are tremendously low.

436
00:24:13,080 --> 00:24:16,080
This is strange, right?
Totally.

437
00:24:16,800 --> 00:24:22,880
And I would say you know what I
try and do with the strategy

438
00:24:22,880 --> 00:24:27,000
that we manage which is you know
try and have a kind of core book

439
00:24:27,000 --> 00:24:31,520
of these high cash generating
significant capital returning

440
00:24:31,520 --> 00:24:33,880
kind of companies is in the best
of all worlds.

441
00:24:33,880 --> 00:24:39,160
What you do is utilize downturns
to acquire positive carry

442
00:24:39,160 --> 00:24:41,920
convexity.
And what I mean by those two

443
00:24:41,920 --> 00:24:45,400
terms, the positive carry comes
from the dividend yield that

444
00:24:45,480 --> 00:24:48,200
comes in with it.
So you get, you know, 5, seven,

445
00:24:48,200 --> 00:24:51,320
1012% dividend yields and that's
your positive carry.

446
00:24:51,320 --> 00:24:55,920
That's what you're paid to wait.
The convexity comes from low

447
00:24:55,920 --> 00:25:00,120
expectations on future earnings
or future commodity prices and

448
00:25:00,120 --> 00:25:05,400
very compressed multiples.
So when you're paid well to be

449
00:25:05,400 --> 00:25:09,160
patient, it's almost like you're
buying a long duration option

450
00:25:09,400 --> 00:25:14,720
that pays you to own it.
And so that, that to me, having

451
00:25:14,720 --> 00:25:18,480
been through a few or a more
than a few of these cycles in

452
00:25:18,480 --> 00:25:23,760
resources, that's the way you
work your way through the choppy

453
00:25:23,760 --> 00:25:27,440
times is making sure you've got
a real core positioning in that

454
00:25:27,440 --> 00:25:30,960
kind of stuff.
Some of these, these energy

455
00:25:30,960 --> 00:25:36,480
names to, to tease out what
you're saying, they're like 10

456
00:25:36,480 --> 00:25:40,040
plus percent dividends.
And they're, you know, they're,

457
00:25:40,080 --> 00:25:41,640
they're the unloved types of
ones.

458
00:25:41,640 --> 00:25:45,840
They're the ones listed in, in
perhaps London or, or Norway or,

459
00:25:46,440 --> 00:25:50,000
or these types of things.
But when, when you, when you put

460
00:25:50,000 --> 00:25:53,760
it all kind of together, how do
you see that playing out from

461
00:25:53,760 --> 00:25:56,280
where we are today?
How do you see the cycle playing

462
00:25:56,280 --> 00:26:01,760
out?
So what I will say is that the

463
00:26:01,760 --> 00:26:05,480
way we are expressing the
cheapest way that we're finding

464
00:26:05,480 --> 00:26:11,080
to express a positive energy bet
is just as you said, a lot of

465
00:26:11,080 --> 00:26:13,480
the North Sea listed ENP
companies.

466
00:26:13,520 --> 00:26:21,320
So whether that's Norway or the
UK, it is I think you know, in

467
00:26:21,320 --> 00:26:27,280
my career, it's unusual for me
to be able to find these types

468
00:26:27,280 --> 00:26:30,560
of quality companies at
multiples like this.

469
00:26:30,560 --> 00:26:32,840
And we understand why that is
right?

470
00:26:32,920 --> 00:26:36,160
Is that what over the last
what's happened in the last

471
00:26:36,160 --> 00:26:41,880
decade in Europe has been the
most got tear off your nose to

472
00:26:41,880 --> 00:26:46,040
spite your face regulatory and
tax regime in the history of

473
00:26:46,040 --> 00:26:48,280
mankind.
I think it's it's possibly the

474
00:26:48,280 --> 00:26:53,000
biggest own goal in the history
of global capitalism in that

475
00:26:53,000 --> 00:26:55,440
they shut down a bunch of
perfectly functioning nuclear

476
00:26:55,440 --> 00:27:00,560
plants as well as significantly,
you know, discouraged domestic

477
00:27:00,560 --> 00:27:03,960
production of hydrocarbons and
left themselves wholly

478
00:27:03,960 --> 00:27:08,440
vulnerable to some combination
of Russian pipeline gas and

479
00:27:08,440 --> 00:27:11,240
global LNG.
And so, you know, effectively

480
00:27:11,240 --> 00:27:13,920
what that's happened is, you
know, German industrial

481
00:27:13,920 --> 00:27:16,120
production didn't fall for 40
years.

482
00:27:16,120 --> 00:27:18,240
It's fallen for five straight
years now.

483
00:27:18,960 --> 00:27:21,480
And it didn't recover at all
after COVID and kept, in fact,

484
00:27:21,480 --> 00:27:25,400
it's kept going down because
there's no stability or no

485
00:27:25,400 --> 00:27:29,640
confidence in energy policy.
So, you know, with, with high

486
00:27:29,640 --> 00:27:32,840
taxes and high regulation,
they've done everything they can

487
00:27:32,840 --> 00:27:37,080
to discourage local production.
Question is, is that changing?

488
00:27:37,160 --> 00:27:40,640
And what you when you see who's
starting to lead in the polls,

489
00:27:40,640 --> 00:27:45,040
if you're in France or if you're
in the UK or if you're in, you

490
00:27:45,040 --> 00:27:49,880
know, in Germany, you've got
moderate to slightly right

491
00:27:49,880 --> 00:27:53,240
leaning governments who I think
have the potential to have a

492
00:27:53,240 --> 00:27:56,520
significantly more pragmatic
energy policy.

493
00:27:57,400 --> 00:28:00,000
And if that's the if that's the
case, if you can look at this

494
00:28:00,000 --> 00:28:03,920
like a rational human being,
which may be a stretch for

495
00:28:04,080 --> 00:28:08,240
European politicians, but if you
can, if you can be rational for

496
00:28:08,240 --> 00:28:15,120
just a moment and say, OK, it's
a cheaper domestic to produce it

497
00:28:15,120 --> 00:28:20,000
domestically.
It helps domestic employment, It

498
00:28:20,000 --> 00:28:24,920
helps domestic tax receipts.
And oh, by the way, even if

499
00:28:24,920 --> 00:28:29,120
you're producing natural gas in
the North Sea and delivering it,

500
00:28:29,160 --> 00:28:34,720
you know, on shore via pipeline,
it is wildly less carbon

501
00:28:34,720 --> 00:28:39,320
intensive, so much greener than
shipping it in from Trinidad and

502
00:28:39,320 --> 00:28:44,320
Tobago, right?
So you know, it's it's the case

503
00:28:44,320 --> 00:28:47,800
for it is overwhelming.
That said, it's not a sure bet,

504
00:28:47,800 --> 00:28:50,320
but that's why the stocks are
trading at 2 times cash flow.

505
00:28:50,960 --> 00:28:56,440
So my thought on these as you've
got really good companies in

506
00:28:56,440 --> 00:29:01,400
terms of people, companies who
have taken advantage of a cycle

507
00:29:01,640 --> 00:29:06,480
where all of the BPS and shells
and totals have been encouraged

508
00:29:06,480 --> 00:29:10,400
to sell their boring stuff to
invest money in renewables,

509
00:29:10,400 --> 00:29:12,760
which is crappy returns.
But they've sold all these

510
00:29:12,760 --> 00:29:15,640
boring assets that are on the
very, very cheap.

511
00:29:16,280 --> 00:29:19,200
And these five or six companies
in the North Sea have gobbled

512
00:29:19,200 --> 00:29:21,560
all these up at super bargain
prices.

513
00:29:22,200 --> 00:29:25,160
And they're just sitting there
waiting for things potentially

514
00:29:25,160 --> 00:29:28,640
to get just a little bit better.
And so, you know, I don't think

515
00:29:28,640 --> 00:29:31,320
these are going to be 5 to 6
times cash flow businesses, but

516
00:29:31,320 --> 00:29:34,120
if they're currently trading at
1 1/2 times or two times cash

517
00:29:34,120 --> 00:29:37,800
flow and they go to three times
cash flow and they're paying you

518
00:29:38,000 --> 00:29:41,360
double digit dividends annually
along the way, that feels like a

519
00:29:41,360 --> 00:29:45,520
pretty good ride to me.
And so that's that's the core of

520
00:29:45,520 --> 00:29:49,800
our energy exposure right now is
in kind of three different

521
00:29:49,800 --> 00:29:51,280
companies who operate in that
realm.

522
00:29:52,160 --> 00:29:55,000
And, and how about if you
contrast that with the, the

523
00:29:55,000 --> 00:29:57,480
energy companies in, in the
states, because you've spoken

524
00:29:57,480 --> 00:30:01,600
about the, the sharp drop off
in, in shale, perhaps, perhaps

525
00:30:01,600 --> 00:30:03,840
you've got a view that that's
even sharper than other people

526
00:30:04,160 --> 00:30:06,800
might anticipate.
But what what do you sort of

527
00:30:07,040 --> 00:30:10,840
make of the the multiples and
the valuations that the

528
00:30:10,840 --> 00:30:12,960
companies, you know similar type
companies trade at in the

529
00:30:12,960 --> 00:30:16,280
States?
You know, it takes someone who's

530
00:30:16,280 --> 00:30:19,960
actually taking the time to
understand what a decline curve

531
00:30:20,040 --> 00:30:23,680
looks like.
And so and what that speaks to

532
00:30:23,680 --> 00:30:25,520
is longer term capital
intensity.

533
00:30:26,680 --> 00:30:29,120
You know, if you have a company
that's predominantly shale

534
00:30:29,120 --> 00:30:33,240
oriented, you're going to be
losing, you know, 35 ish.

535
00:30:33,240 --> 00:30:35,360
If it's a relatively mature
base, it's something that's

536
00:30:35,360 --> 00:30:38,040
growing, it's more like 50% a
year in annual decline rate.

537
00:30:38,040 --> 00:30:40,520
So you are struggling to
produce.

538
00:30:40,520 --> 00:30:43,680
If you're producing 100,000
barrels a day, you know, you got

539
00:30:43,680 --> 00:30:47,200
to find, you know, 40 to 50,000
barrels a day of new barrels

540
00:30:47,280 --> 00:30:50,280
barrels the next year to make
sure you just stay flat.

541
00:30:51,600 --> 00:30:54,240
When you're talking about these
North Sea assets where you've

542
00:30:54,240 --> 00:30:57,680
got mature fields, where you're
not talking about the same kind

543
00:30:57,680 --> 00:31:00,440
of massive upfront frac and
rapid decline curves.

544
00:31:01,080 --> 00:31:03,440
You know, if you're 100,000
barrels a day producer, you only

545
00:31:03,440 --> 00:31:08,160
have to find 20,000 barrels a
day, 25,000 barrels a day, maybe

546
00:31:08,160 --> 00:31:12,080
15,000 barrels a day.
And therefore, all of the cash

547
00:31:12,080 --> 00:31:15,240
flow that you're generating off
of that 100,000 barrels a day,

548
00:31:15,760 --> 00:31:19,160
you've you're free to do other
stuff with, you're free to buy

549
00:31:19,160 --> 00:31:21,960
back stock, you're free to pay
down debt, you're free to pay

550
00:31:21,960 --> 00:31:25,320
dividends, you're free to make
accretive acquisitions with

551
00:31:25,320 --> 00:31:28,120
cash, which means they are truly
accretive.

552
00:31:28,760 --> 00:31:32,600
So that's the opportunity set
that I see.

553
00:31:32,600 --> 00:31:36,120
And so that's uniquely to, I
think that's more North Sea and

554
00:31:36,120 --> 00:31:39,080
elsewhere.
Most of the sort of headline

555
00:31:39,080 --> 00:31:43,800
names in the Permian, you know,
are of the first variety, which

556
00:31:43,800 --> 00:31:47,440
is rapid decline curves where
you don't have a lot of

557
00:31:47,440 --> 00:31:50,480
visibility of what that
production curve is going to

558
00:31:50,480 --> 00:31:52,760
look like in three to five
years.

559
00:31:52,880 --> 00:31:55,160
All you know is you're going to
have to spend a ton of money

560
00:31:55,280 --> 00:31:57,320
between now and then just to
stay flat.

561
00:31:57,840 --> 00:32:04,520
And so I, I, I don't find a lot
of value in US based producers.

562
00:32:04,800 --> 00:32:07,920
I've got a few and there's some
good royalty companies in the US

563
00:32:07,920 --> 00:32:11,280
and Canada that I think are are
worthwhile vehicles.

564
00:32:11,880 --> 00:32:15,960
But that said, you know, I just,
I'll take the, I'll take the

565
00:32:15,960 --> 00:32:20,880
European stuff just on a
multiple reserve life positive

566
00:32:20,880 --> 00:32:24,320
potential catalyst that's
outside of just oil prices and

567
00:32:24,320 --> 00:32:27,720
gas prices going up.
You know that to me is a is a

568
00:32:27,720 --> 00:32:31,440
much easier bet and I'm being
paid a lot better to take that

569
00:32:31,440 --> 00:32:35,520
bet as well.
Underpinning maybe, maybe some

570
00:32:35,520 --> 00:32:41,160
of the yeah, potential upside as
well is like, have you had a

571
00:32:41,160 --> 00:32:43,800
look at the chart?
It's just a gold price to to oil

572
00:32:43,800 --> 00:32:48,960
price ratios And just like how
how how extreme things are on on

573
00:32:48,960 --> 00:32:51,960
the high end from just a
historical like basis over the

574
00:32:51,960 --> 00:32:55,760
last yeah, like 50-60 seventy
years.

575
00:32:56,200 --> 00:32:57,960
It's kind of remarkable, with
the exception of COVID.

576
00:32:58,920 --> 00:33:03,040
It is, I think I understand it.
And I've had people talking to

577
00:33:03,040 --> 00:33:05,800
me this talking to me about this
for a year, a year and a half.

578
00:33:05,800 --> 00:33:08,240
And like, does that make you
want to go short gold and lung

579
00:33:08,240 --> 00:33:10,960
oil?
My answer is no, because there's

580
00:33:10,960 --> 00:33:13,320
there, there's fundamental
drivers behind it.

581
00:33:13,320 --> 00:33:17,680
You know, look, I, you know, I
was a presenter at the LBMA

582
00:33:17,680 --> 00:33:22,600
forum last November, so just
under a year ago in Miami and I

583
00:33:22,600 --> 00:33:25,280
had a chance to sit down, you
know, with some fellow

584
00:33:25,280 --> 00:33:27,600
presenters, couple of whom were
central banks.

585
00:33:27,720 --> 00:33:32,880
And, and I said, look, just
between, you know, us two guys,

586
00:33:33,440 --> 00:33:37,920
you know, if we see a risk off
situation where, you know,

587
00:33:37,920 --> 00:33:42,120
treasuries are well bid and gold
goes down, in theory, what do

588
00:33:42,120 --> 00:33:44,720
you think the global central
bank community does?

589
00:33:45,680 --> 00:33:48,920
And they said they would take
that as an opportunity to sell

590
00:33:48,920 --> 00:33:50,520
more treasuries and to buy more
gold.

591
00:33:51,000 --> 00:33:54,880
So I think we're in a regime
that's very different from what

592
00:33:54,880 --> 00:33:59,160
define the twenty 20s or sorry,
the 2000s to 2020.

593
00:33:59,600 --> 00:34:01,920
That 20 year period was totally
unique.

594
00:34:01,920 --> 00:34:05,240
Very low inflation, very low
inflation expectations.

595
00:34:05,520 --> 00:34:08,440
And that's what gave bonds and
stocks their anti correlated,

596
00:34:09,199 --> 00:34:12,040
you know, feature.
We're out of that realm right

597
00:34:12,040 --> 00:34:14,159
now.
So that's what you know, if your

598
00:34:14,159 --> 00:34:17,239
inflation is above 2 1/2 or 3%.
Bonds and stocks aren't

599
00:34:17,239 --> 00:34:19,159
inversely correlated.
In fact, they're more likely to

600
00:34:19,159 --> 00:34:21,480
be positively correlated.
So you need something else in

601
00:34:21,480 --> 00:34:24,360
there that acts differently and
gold is serving that purpose,

602
00:34:24,880 --> 00:34:28,080
you know, but flip that to oil.
I actually, I, I think the

603
00:34:28,080 --> 00:34:32,199
sentiment in oil is awful, which
just makes me kind of attracted

604
00:34:32,199 --> 00:34:34,960
to it.
I like, I like, I'm, I'm a, you

605
00:34:35,199 --> 00:34:37,760
know, I'm a, I'm a, I'm a
metaphysical dumper, dumpster

606
00:34:37,760 --> 00:34:42,159
diver by, you know, by training.
So that to me is where there's

607
00:34:42,159 --> 00:34:44,960
really interesting opportunity.
Now, if you look over a much

608
00:34:44,960 --> 00:34:49,719
longer time frame, look at 120
years worth of history, There's

609
00:34:49,840 --> 00:34:53,800
a, there's a great guy, Rob
Connor, who writes the Crude

610
00:34:53,800 --> 00:34:56,320
Chronicles.
If you're not a subscriber to

611
00:34:56,320 --> 00:34:59,000
that sub stack or follow me on
on X.

612
00:34:59,400 --> 00:35:04,480
It's worth doing.
But the lesson of the last 120

613
00:35:04,480 --> 00:35:11,880
years, if you look at whether
it's gold, base metals, energy,

614
00:35:13,800 --> 00:35:17,440
agricultural commodities, they
tend to travel together over

615
00:35:17,440 --> 00:35:21,000
time.
And so from that perspective, I

616
00:35:21,000 --> 00:35:24,440
think gold is telling us
something very interesting right

617
00:35:24,440 --> 00:35:29,080
now about where the rest of the
commodity complex can go over

618
00:35:29,080 --> 00:35:33,320
the next three, 5-10 years.
And I think if you, if you

619
00:35:33,320 --> 00:35:36,120
listen closely, it's telling you
higher.

620
00:35:36,560 --> 00:35:40,720
So you just need to think about
that and maybe be a little bit

621
00:35:40,720 --> 00:35:43,080
patient.
But this is the time to pick up

622
00:35:43,080 --> 00:35:46,200
that really inexpensive
convexity in the energy patch.

623
00:35:47,480 --> 00:35:50,720
So to, to tease that out even
even further, you, you've spoken

624
00:35:50,720 --> 00:35:53,760
and I think you wrote in your
quarterly Rob, about embracing

625
00:35:53,760 --> 00:35:57,000
volatility, which is a, a
fascinating concept.

626
00:35:57,000 --> 00:35:59,960
And it yeah, for some of the
listeners that might come from a

627
00:36:00,080 --> 00:36:04,000
more mining oriented background.
It's a concept that might need a

628
00:36:04,000 --> 00:36:06,880
bit of breaking down.
But essentially we're in a world

629
00:36:06,880 --> 00:36:11,400
where where the pod shops and
all these other, you know, PE

630
00:36:11,400 --> 00:36:15,200
private credit are trying to
eradicate volatility from their

631
00:36:15,200 --> 00:36:18,480
portfolios and make it sort of
seemingly so from, from the

632
00:36:18,480 --> 00:36:20,920
outside.
And again, you, you seem to be

633
00:36:20,920 --> 00:36:24,120
pretty attracted to, to doing
the opposite.

634
00:36:24,120 --> 00:36:27,400
So I'd love to just hear your
thoughts on how you embrace

635
00:36:27,400 --> 00:36:29,200
volatility.
Yeah.

636
00:36:30,560 --> 00:36:34,640
So understanding that we're in a
volatile sector, you know, it's

637
00:36:34,640 --> 00:36:38,400
the reason why we feel so
strongly about being long, short

638
00:36:38,400 --> 00:36:40,960
and hopefully being able to
offset some of your sector

639
00:36:40,960 --> 00:36:43,840
specific risk that way.
But there's some risks that are

640
00:36:43,840 --> 00:36:47,280
just a little hard to offset and
those are broader systematic

641
00:36:47,280 --> 00:36:50,400
risks.
And so those are areas where,

642
00:36:51,080 --> 00:36:53,600
you know, I went on a on AI
guess you could call it a

643
00:36:53,600 --> 00:36:57,520
volatility journey back in the
late, you know, for kind of

644
00:36:57,520 --> 00:37:02,680
2016, 17 to 2019.
Really understanding how

645
00:37:02,680 --> 00:37:06,000
bringing in certain instruments
with I think the common terms

646
00:37:06,000 --> 00:37:09,800
would be either either long
volatility or tail hedge type of

647
00:37:09,800 --> 00:37:14,040
characteristics into a portfolio
that you know and resources

648
00:37:14,040 --> 00:37:15,880
that's inherently volatile
itself.

649
00:37:15,880 --> 00:37:21,200
Often for very unusual or or
usual reasons that having that

650
00:37:21,200 --> 00:37:26,120
long volatility bias gives you
the ability to do some things

651
00:37:26,120 --> 00:37:27,600
that are think are very
important.

652
00:37:29,600 --> 00:37:35,920
This sector in particular makes
you feel like you need to sell

653
00:37:35,920 --> 00:37:39,960
things at the bottom because it
hurts so badly, right?

654
00:37:41,240 --> 00:37:45,320
And it also makes you feel like
you have to buy a ton more at

655
00:37:45,320 --> 00:37:47,600
the top because man, it feels
really good.

656
00:37:48,960 --> 00:37:52,600
There are ways that you can
structure it from a security

657
00:37:52,600 --> 00:37:57,240
specific standpoint to be able
to say, look, I'm going to

658
00:37:57,240 --> 00:38:01,560
spend, you know, 50 basis
points, 100 basis points, 150

659
00:38:01,560 --> 00:38:05,200
basis points of the fund over a
course of three to six months.

660
00:38:05,720 --> 00:38:08,760
And just say, you know what?
There's some ways, if I look

661
00:38:08,760 --> 00:38:13,560
across what I consider the kind
of volatility surface of various

662
00:38:13,560 --> 00:38:17,360
instruments, where can I, where
can I exercise this cheap

663
00:38:17,360 --> 00:38:22,400
convexity in a way that it might
get, have make me able to get

664
00:38:22,440 --> 00:38:27,520
exposure and some instruments
that give me the ability to not

665
00:38:27,520 --> 00:38:31,400
only hold on to all of my stocks
if the market drops

666
00:38:31,400 --> 00:38:36,280
significantly, but gives me
actual dry powder to buy more.

667
00:38:36,840 --> 00:38:40,560
Because that is, you know, from,
you know, this is, I don't even

668
00:38:40,560 --> 00:38:43,000
know how you would count the
cycles that I have been through

669
00:38:43,000 --> 00:38:46,760
since I started managing
resource money in kind of 1995.

670
00:38:47,960 --> 00:38:52,240
But the single biggest
differentiator in long term

671
00:38:52,240 --> 00:38:56,240
performance is being able to
hold on to the bottom and being

672
00:38:56,240 --> 00:39:00,040
able to hold on at the bottom
when everybody else is, you

673
00:39:00,040 --> 00:39:03,680
know, basically kind of dry
heaving their their portfolios.

674
00:39:04,360 --> 00:39:07,840
And in the best possible
scenario, you have the ability

675
00:39:07,840 --> 00:39:11,080
to buy there.
And that's what being long

676
00:39:11,080 --> 00:39:14,600
volatility enables you to do if
you do it right.

677
00:39:14,600 --> 00:39:18,400
And look, I haven't gotten it
right every time, but we get it

678
00:39:18,400 --> 00:39:20,000
right more often than we get it
wrong.

679
00:39:21,040 --> 00:39:25,880
And, but the ability to really
compound returns with that sort

680
00:39:25,880 --> 00:39:30,120
of opportunistic, you know,
buying and then harvesting

681
00:39:30,640 --> 00:39:34,840
capital from volatility is just,
it's, it's, it's, it's a game

682
00:39:34,840 --> 00:39:38,240
changer in terms of keeping you
in the game when you need to be

683
00:39:38,240 --> 00:39:42,800
in the game and, and enable you
to, to, to buy more when, you

684
00:39:42,800 --> 00:39:47,400
know, in my case, the 10 or 15%
dividend yields go to 20 or 25,

685
00:39:47,400 --> 00:39:49,720
that's when you really want to
be kind of backing up the truck.

686
00:39:51,280 --> 00:39:56,160
With with 80% returns year to
date and 33.2% returns

687
00:39:56,160 --> 00:39:57,720
annualized since 2020.
I think you're doing.

688
00:39:57,720 --> 00:39:59,520
I think you're doing it right
more often than not.

689
00:40:00,560 --> 00:40:02,880
I can I can neither confirm or
deny those numbers.

690
00:40:06,200 --> 00:40:10,480
How do how do you think about
the, the kind of unpopularity of

691
00:40:10,840 --> 00:40:12,720
of what you kind of do?
I mean, I know we started the

692
00:40:12,720 --> 00:40:16,280
conversation there, but even
here in Australia, which is a

693
00:40:16,280 --> 00:40:20,400
resource kind of focused
economy, we've seen a decline in

694
00:40:20,600 --> 00:40:23,560
the number of fund managers
focusing on the space.

695
00:40:24,080 --> 00:40:27,320
I, I don't have as read an
insight to what that's like in

696
00:40:27,320 --> 00:40:31,280
in the States, but are they sort
of conferences kind of poorly

697
00:40:31,280 --> 00:40:34,040
attended to or I think perhaps
changing in recent years with

698
00:40:34,040 --> 00:40:37,280
generalists starting to come and
and look at the space?

699
00:40:38,760 --> 00:40:42,520
We're starting to see the very
early stages of that in gold.

700
00:40:42,520 --> 00:40:45,960
I asked the, you know, the
sponsors of the last two events,

701
00:40:46,000 --> 00:40:50,080
you know, both Beaver Creek and
Colorado Springs, marginally

702
00:40:50,160 --> 00:40:53,360
more, little more people, but
not what you would expect with

703
00:40:53,440 --> 00:40:56,320
the groups having done well and
energy conferences are have now

704
00:40:56,320 --> 00:40:59,160
been very lightly attended.
You know, one of the things that

705
00:40:59,160 --> 00:41:03,320
I typically do is, and as you
say, fewer number of fund

706
00:41:03,320 --> 00:41:07,600
managers than there used to be.
And I've worked with or shared

707
00:41:07,600 --> 00:41:10,400
meetings with the vast majority
of them, you know, but I spent

708
00:41:10,400 --> 00:41:12,480
some time underneath Tocqueville
Asset Management.

709
00:41:12,960 --> 00:41:16,920
So I got to know, you know, John
Hathaway, who's, you know, one

710
00:41:16,920 --> 00:41:20,200
of the great grand Deans and one
of the real true gentleman in

711
00:41:20,200 --> 00:41:23,440
this business.
And you talk to someone like

712
00:41:23,440 --> 00:41:26,000
that or some of the guys who
have run, you know, really good

713
00:41:26,000 --> 00:41:28,880
mutual funds in the sector for
10 or 15 years, or some of my

714
00:41:28,880 --> 00:41:30,760
former colleagues who are
running some of the closed end

715
00:41:30,760 --> 00:41:33,600
funds.
No one's getting inflows, you

716
00:41:33,600 --> 00:41:37,080
know, and that's, this is for
gold managers, resource managers

717
00:41:37,080 --> 00:41:40,960
as a whole are getting outflows.
So it's like it's, it's kind of

718
00:41:40,960 --> 00:41:45,040
like we've been de platformed.
And so for us in the US where

719
00:41:45,040 --> 00:41:48,600
all the capital is gravitated to
is the pod shops, you know, is

720
00:41:48,600 --> 00:41:52,800
to the millenniums and ballet as
he's in .70 twos and those sorts

721
00:41:52,800 --> 00:41:56,400
of platforms where, you know,
they provide an infrastructure

722
00:41:56,400 --> 00:41:59,320
for people to run a very
specific kind of resource

723
00:41:59,520 --> 00:42:03,720
portfolios where they need to be
very big liquid stocks, they

724
00:42:03,720 --> 00:42:07,360
need to be very balanced books
and they're trying to eke out,

725
00:42:07,440 --> 00:42:11,320
you know, mid single digit
returns that they can then lever

726
00:42:11,320 --> 00:42:15,560
up five, 6-7 times and generate
a return stream that way.

727
00:42:15,560 --> 00:42:18,600
That's a very different beast.
And and I think that goes back

728
00:42:18,600 --> 00:42:21,120
to what you're talking about in
terms of embracing volatility.

729
00:42:21,560 --> 00:42:24,800
Those managers, even though they
run huge, they run huge amounts

730
00:42:24,800 --> 00:42:29,200
of money on a levered basis, but
they can't own these little

731
00:42:29,240 --> 00:42:33,160
eclectic, you know, and by
little, I mean, you know, a

732
00:42:33,160 --> 00:42:36,200
billion, two billion, $3 billion
market cap companies, if they

733
00:42:36,200 --> 00:42:39,040
don't trade at least 15 or 20
million bucks a day, they're not

734
00:42:39,040 --> 00:42:42,880
going to own them.
So those are outside the realm

735
00:42:43,200 --> 00:42:47,000
of the majority of resource
allocated resource investment

736
00:42:47,000 --> 00:42:49,920
dollars going on today.
I also think a lot of the

737
00:42:49,920 --> 00:42:53,520
generalists have just disbanded
whatever sort of segments of

738
00:42:53,520 --> 00:42:55,160
their resource teams that they
had.

739
00:42:55,160 --> 00:42:58,200
I mean, when I was coming up in
this business in the, you know,

740
00:42:58,200 --> 00:43:02,520
mid to late 90s or the early
2000s, you know, you would the

741
00:43:02,520 --> 00:43:06,960
Black Rocks and the Fidelities
and stuff, they'd have fleets of

742
00:43:07,000 --> 00:43:10,000
analysts coming to, you know,
every one of the conferences.

743
00:43:10,640 --> 00:43:14,200
You just don't see them anymore.
And even the good, you know,

744
00:43:14,200 --> 00:43:18,120
sort of single strategy hedge
funds, you know, now 90% of

745
00:43:18,120 --> 00:43:23,320
their teams are effectively, you
know, tech, AI, you know, maybe

746
00:43:23,320 --> 00:43:24,920
some healthcare, maybe some
financials.

747
00:43:24,920 --> 00:43:29,640
But given the shrinkage in
resources as a percent of the

748
00:43:29,640 --> 00:43:32,760
total market cap and the
relative diminishment of

749
00:43:32,760 --> 00:43:35,960
liquidity there, you know,
they're just, they're not there.

750
00:43:36,360 --> 00:43:40,360
The good news is that if we come
through a period where the group

751
00:43:40,360 --> 00:43:43,600
is starts to get back in favor
again and the market caps grow

752
00:43:43,600 --> 00:43:46,720
and you get new issuance and all
of a sudden, you know, all of a

753
00:43:46,720 --> 00:43:48,080
sudden they're going to be
interested.

754
00:43:48,080 --> 00:43:51,240
But it probably is at levels 50
to 100% higher than where we are

755
00:43:51,240 --> 00:43:54,600
today.
Where do you think the world

756
00:43:54,600 --> 00:43:57,280
kind of goes with, as you
mentioned, the, the millenniums,

757
00:43:57,280 --> 00:44:01,120
the .70 twos, the, the citadels
of, of the world?

758
00:44:01,120 --> 00:44:04,680
I mean, these strategies have
grown enormously and they're

759
00:44:04,680 --> 00:44:07,200
kind of swallowing the, the
market in a way.

760
00:44:07,200 --> 00:44:11,600
But you, you had a great quote
at one point where you know, you

761
00:44:11,600 --> 00:44:16,680
sort of said some not that these
funds can't work in, in the long

762
00:44:16,680 --> 00:44:20,040
term, but the strategy of
eradicating volatility as as you

763
00:44:20,040 --> 00:44:24,640
sort of said, you know that they
haven't faced that massive GFC

764
00:44:24,640 --> 00:44:27,520
type moment or anything in a, in
a substantial way.

765
00:44:27,520 --> 00:44:30,080
And like the, the ones that did,
they were much smaller back then

766
00:44:30,080 --> 00:44:32,400
and they almost got wiped out.
Some of them did kind of get

767
00:44:32,400 --> 00:44:35,200
wiped out.
So how do you think about the

768
00:44:35,280 --> 00:44:39,000
the size of those funds in the
market in 10 years time, in 15

769
00:44:39,000 --> 00:44:42,160
years time?
Yeah, that's a super tough call

770
00:44:42,240 --> 00:44:45,080
because look, the return streams
that they have generated for

771
00:44:45,080 --> 00:44:49,880
their investors, even though
they charge enormous fees

772
00:44:49,920 --> 00:44:54,040
between A&B, the return streams
to investors have been great.

773
00:44:54,360 --> 00:44:59,040
Assuming the investors want that
sort of T bill on steroids, you

774
00:44:59,040 --> 00:45:03,120
know, give me my one 1 1/2
percent a month and with very

775
00:45:03,120 --> 00:45:05,440
limited draw downs and they're
perfectly happy.

776
00:45:07,200 --> 00:45:12,000
You can do that as a, you know,
couple $100 billion industry.

777
00:45:12,360 --> 00:45:14,920
It's hard to do.
It's hard to see the multi

778
00:45:14,920 --> 00:45:19,400
managers as like a 500 billion
or a trillion dollar industry.

779
00:45:19,400 --> 00:45:21,920
Then if you're talking the
leverage on top of it, it's like

780
00:45:22,120 --> 00:45:25,360
it you just it I, I don't think
the math works in terms of the

781
00:45:25,360 --> 00:45:27,520
underlying liquidity in the
markets where they're really

782
00:45:27,520 --> 00:45:29,080
generating most of their
returns.

783
00:45:29,800 --> 00:45:32,360
So I don't think they can grow
as much as they have.

784
00:45:32,360 --> 00:45:35,440
It doesn't mean that they're
they're doomed or that they

785
00:45:35,440 --> 00:45:38,600
won't continue to generate, you
know, very attractive returns

786
00:45:38,600 --> 00:45:40,200
for a certain kind of investor
set.

787
00:45:41,280 --> 00:45:44,640
But you bring up a good
question, which is, you know,

788
00:45:44,760 --> 00:45:49,160
it's the taller, the, the taller
the pyramid get or the taller

789
00:45:49,160 --> 00:45:52,840
the, you know, sort of the tree
gets, the bigger the noise it

790
00:45:52,840 --> 00:45:54,480
makes when you knock it over,
right?

791
00:45:54,480 --> 00:45:57,680
And the more damage it causes.
And so I think we're in a spot

792
00:45:57,680 --> 00:46:02,560
where if you see some of the
wonky stuff going on in private

793
00:46:02,560 --> 00:46:05,840
credit, which to me has kind of
been the duct tape and baling

794
00:46:05,840 --> 00:46:09,760
wire that's held together,
private equity, venture capital,

795
00:46:09,760 --> 00:46:12,560
commercial real estate, and you
know, even some other facets of

796
00:46:12,560 --> 00:46:14,640
the market.
You know, you start to see that

797
00:46:14,640 --> 00:46:17,800
liquidity drain coming out at
the same time that you see

798
00:46:17,800 --> 00:46:22,680
broader liquidity start to dry
up a little bit as well.

799
00:46:22,680 --> 00:46:27,160
And you know, combine on that,
you know, the, the fact that

800
00:46:27,400 --> 00:46:30,200
passive flows, I'm not sure how
much that keeps going.

801
00:46:30,200 --> 00:46:33,920
If you keep firing 250, you
know, US passive flows that are

802
00:46:33,920 --> 00:46:36,120
highly dependent on 4O1K
contributions.

803
00:46:36,640 --> 00:46:41,120
If you start to fire a bunch of,
you know, 250 or $300,000 a year

804
00:46:41,120 --> 00:46:44,520
programmers, you know, firing
one person like that is like

805
00:46:44,520 --> 00:46:47,280
firing 5 people who make $50,000
a year.

806
00:46:47,280 --> 00:46:51,040
And the impact on 4O1K flows is
not insignificant.

807
00:46:51,360 --> 00:46:55,680
So there's some dynamics in
place where we may get that kind

808
00:46:55,680 --> 00:47:00,440
of risk off sort of environment.
And you know, I'm just happy

809
00:47:00,440 --> 00:47:03,800
that volatility has been on sale
and that the VIX has come down

810
00:47:03,800 --> 00:47:09,440
considerably both in equity and
in rates and also in, you know,

811
00:47:09,440 --> 00:47:12,720
in broader, you know, kind of in
courtesy ball.

812
00:47:13,520 --> 00:47:18,280
So that to me is a healthy
allocation for us.

813
00:47:19,280 --> 00:47:24,640
And look, I don't wish I'll on
anybody, but there's, there's a

814
00:47:24,640 --> 00:47:28,360
part of me from a purely selfish
standpoint that would love to

815
00:47:28,360 --> 00:47:34,600
see a really inconvenient fourth
quarter of 2025, you know, shock

816
00:47:34,600 --> 00:47:37,680
to the system that takes the
market down another, you know,

817
00:47:37,720 --> 00:47:40,720
takes the market down five,
1015%.

818
00:47:40,840 --> 00:47:43,360
Because the other part of this
is that a, much as I'd like to

819
00:47:43,360 --> 00:47:46,840
be a buyer of volatility when
it's cheap, there are a number

820
00:47:46,840 --> 00:47:49,920
of entities out there that had
been pretty rabid sellers of

821
00:47:49,920 --> 00:47:53,680
volatility into every decline.
And when you're a seller

822
00:47:53,680 --> 00:47:55,960
volatility, you're kind of
picking up nickels in front of

823
00:47:55,960 --> 00:47:59,000
steamrollers.
And it's worked, but that

824
00:47:59,000 --> 00:48:01,600
doesn't work forever.
And if, you know, there's a

825
00:48:01,600 --> 00:48:04,920
great old New Yorker cartoon,
there's a guy, you know, it

826
00:48:05,040 --> 00:48:08,120
looks like a guy in a tattered
suit sitting on a street corner,

827
00:48:08,480 --> 00:48:11,600
and he's holding up a sign with
a little cup looking for people

828
00:48:11,600 --> 00:48:14,680
that, you know, donate to him.
And he said, I bought the dip.

829
00:48:15,120 --> 00:48:19,720
And then there was another dip.
So that's the kind of thing that

830
00:48:19,720 --> 00:48:22,400
if you're a volatility seller,
and that's what they've been

831
00:48:22,400 --> 00:48:26,720
Pavlovianly trained to do, is
sell Vol into every sell off.

832
00:48:26,720 --> 00:48:29,680
They did it during COVID, they
did it during the taper tantrum,

833
00:48:29,680 --> 00:48:32,640
they did it during, you know,
Volmageddon back a couple years.

834
00:48:33,440 --> 00:48:36,960
You get that second leg down and
all of a sudden someone who's

835
00:48:36,960 --> 00:48:41,320
selling, you know, 25 or 30
basis points of volatility in

836
00:48:41,320 --> 00:48:43,560
their portfolio and thinking,
hey, this is a great way to pick

837
00:48:43,560 --> 00:48:47,240
up a little bit of yield.
And that triples or quadruples

838
00:48:47,240 --> 00:48:48,600
on them.
And they're trying to figure out

839
00:48:48,600 --> 00:48:51,920
how to tell their investment
committee they lost 150 basis

840
00:48:51,920 --> 00:48:55,640
points in three days in a market
where all the rest of their

841
00:48:55,640 --> 00:48:58,320
stuff is melting down.
That's a very different

842
00:48:58,320 --> 00:49:01,240
argument.
And I think you could see the

843
00:49:01,240 --> 00:49:05,280
pucker factor come pretty
rapidly if we get that dip, then

844
00:49:05,280 --> 00:49:08,480
a second dip.
And so, you know, there's,

845
00:49:08,520 --> 00:49:12,280
there's I think there's going to
be value to lung volatility

846
00:49:12,280 --> 00:49:13,960
here.
Whether it happens this year or

847
00:49:13,960 --> 00:49:17,400
not, I have no idea.
But at some point over the next

848
00:49:17,920 --> 00:49:22,160
12 to 18 months, I think a
market as richly valued as it is

849
00:49:22,160 --> 00:49:26,960
right now and as I think fragile
from an incremental flow

850
00:49:26,960 --> 00:49:31,040
standpoint and built on a, you
know, layer after layer of kind

851
00:49:31,040 --> 00:49:34,480
of opaqueness in these private
credit instruments where we just

852
00:49:34,480 --> 00:49:37,640
don't have a lot of visibility.
And we're seeing that now with a

853
00:49:37,640 --> 00:49:40,120
couple things that happened in
the US with First Brands and a

854
00:49:40,120 --> 00:49:44,400
few others where, hey, you know,
we said there was collateral

855
00:49:44,400 --> 00:49:46,400
here, but actually sorry,
there's not.

856
00:49:46,640 --> 00:49:50,640
And so that that calls into
question the entire underwriting

857
00:49:50,640 --> 00:49:53,000
standard of the whole industry.
And I don't think the whole

858
00:49:53,000 --> 00:49:55,880
industry is a fraud, but I do
think there had been some bad

859
00:49:55,880 --> 00:49:58,640
credits underwritten.
And the question is how much

860
00:49:58,640 --> 00:50:01,000
more of those, you know, dead
fish are going to flow to the

861
00:50:01,000 --> 00:50:03,440
surface here over the next, you
know, couple three months?

862
00:50:04,480 --> 00:50:07,000
You, you've got great insight,
which I think might be a bit,

863
00:50:07,640 --> 00:50:10,960
you know, minimized by some
people here when you talk about

864
00:50:10,960 --> 00:50:14,120
like investment committees and
how these bigger investing

865
00:50:14,120 --> 00:50:17,560
operations around the world
manage themselves in the time it

866
00:50:17,560 --> 00:50:20,280
takes to, to, to kind of get
things done.

867
00:50:20,960 --> 00:50:23,400
When, when you talk about that
kind of bearish sense of the

868
00:50:23,400 --> 00:50:25,680
market.
I think a lot of us here are

869
00:50:25,680 --> 00:50:28,440
sitting pretty confident because
resources have started to work

870
00:50:28,720 --> 00:50:31,280
for a little while now.
But I'm, I'm really curious to

871
00:50:31,280 --> 00:50:34,440
hear from you, Rob, what, what
is the world in which you know,

872
00:50:34,440 --> 00:50:37,240
things don't quite go well for
all of us in, in this end of the

873
00:50:37,240 --> 00:50:41,200
market like what's the, the bear
bear case perhaps in the in the

874
00:50:41,200 --> 00:50:43,920
medium term for, for all the
names we're looking at.

875
00:50:45,200 --> 00:50:49,880
So I think what's driving the,
you know, broader reach towards

876
00:50:49,880 --> 00:50:53,320
tangible assets is the
realization that, you know, kind

877
00:50:53,320 --> 00:50:56,000
of excessively spending
governments and government

878
00:50:56,000 --> 00:51:00,400
budget deficits and having to
fund these things is having a

879
00:51:00,400 --> 00:51:03,760
really adverse impact on the
credit side of the global

880
00:51:03,760 --> 00:51:06,040
marketplace.
And so, you know, what could

881
00:51:06,040 --> 00:51:10,080
potentially improve that?
OK, Look, if AI is wildly

882
00:51:10,080 --> 00:51:14,400
successful in increasing
productivity to the point where

883
00:51:14,400 --> 00:51:17,960
companies get way more
profitable and taxes increase,

884
00:51:17,960 --> 00:51:20,840
and so you start to get
something closer to, you know,

885
00:51:20,840 --> 00:51:23,800
kind of balanced budgets or
deficits at least go down.

886
00:51:24,520 --> 00:51:29,360
That drives an excitement that
might not be great for 50 or 60%

887
00:51:29,360 --> 00:51:32,000
of the companies in the S&P 500,
but it doesn't matter because

888
00:51:32,000 --> 00:51:35,840
all the market caps in the top,
you know, 25 or 30 names anyway.

889
00:51:36,640 --> 00:51:42,000
So that in theory, you know,
could drive a reversal of what

890
00:51:42,000 --> 00:51:45,960
we've seen this year, which is a
little bit of a growth to value

891
00:51:45,960 --> 00:51:48,600
rotation.
And that's what and AUS to

892
00:51:48,600 --> 00:51:51,360
global rotation.
And those two things typically

893
00:51:51,360 --> 00:51:56,160
happen at the same time.
That feels really good to us.

894
00:51:56,520 --> 00:52:00,240
You know, could that reverse?
Absolutely, you know, but you

895
00:52:00,240 --> 00:52:03,200
know, you given if, if if you've
got great news on budget

896
00:52:03,200 --> 00:52:06,840
deficits, if you've got a
calming down of geopolitical

897
00:52:06,840 --> 00:52:11,280
tensions, if you all of a sudden
have the US, China and Russia

898
00:52:11,280 --> 00:52:14,280
sit down and say Kumbaya, we're,
you know, we're all buddies

899
00:52:14,280 --> 00:52:17,960
again and we don't have to worry
about, you know, re establishing

900
00:52:17,960 --> 00:52:19,520
supply chains all over the
world.

901
00:52:19,520 --> 00:52:22,600
So those incremental costs are
going to go away and the tariffs

902
00:52:22,600 --> 00:52:25,640
are going to go away way.
And yeah, you know, that's I, I

903
00:52:25,640 --> 00:52:29,080
think that's a, that's a not,
it's not a 0 probability.

904
00:52:29,320 --> 00:52:31,360
I think it's a pretty low
probability, but I don't think

905
00:52:31,360 --> 00:52:33,680
it's zero.
That would be the environment

906
00:52:33,680 --> 00:52:36,280
where I think you could sell
ACSL off in everything that we

907
00:52:36,280 --> 00:52:38,480
do.
Flip side of the not the flip

908
00:52:38,480 --> 00:52:41,280
side.
The other thing that you have to

909
00:52:41,280 --> 00:52:44,600
kind of worry about is, you
know, what if we have this

910
00:52:44,600 --> 00:52:49,560
massive structural risk off kind
of move, in which case most of

911
00:52:49,560 --> 00:52:51,000
our stuff's going to go down
too.

912
00:52:51,920 --> 00:52:55,280
I think in particular to gold, I
think it will go down less and

913
00:52:55,280 --> 00:52:57,920
it will recover the fastest.
You know, we've done a lot of

914
00:52:57,920 --> 00:53:00,840
work.
The last five major corrections

915
00:53:01,040 --> 00:53:05,240
of the US 6040 portfolio, you
know, gold on average has had

916
00:53:05,240 --> 00:53:09,560
half the draw down and has
recovered about 70% faster.

917
00:53:10,040 --> 00:53:13,480
You know, you could look at that
very linear linearly around the

918
00:53:13,480 --> 00:53:17,720
tariff tantrum.
You know, gold fell roughly, you

919
00:53:17,720 --> 00:53:21,600
know, I think 110th as much as
the broader market and had

920
00:53:21,600 --> 00:53:25,600
recovered its old high in two
days after the bottom was met.

921
00:53:25,880 --> 00:53:27,680
And this is bullion, not the
equities.

922
00:53:28,000 --> 00:53:32,360
So that's bullion and and so and
the, and the, and, but the

923
00:53:32,360 --> 00:53:35,440
equities quite frankly weren't
super far behind.

924
00:53:35,440 --> 00:53:38,680
They, they kind of followed and
they were back to highs, you

925
00:53:38,680 --> 00:53:41,280
know, within, you know, probably
less than a month.

926
00:53:41,720 --> 00:53:44,560
It took almost three months for
the broader S&P to get back to

927
00:53:44,560 --> 00:53:46,480
flat.
But if you look at that analysis

928
00:53:46,560 --> 00:53:50,600
across the last five major, you
know, draw downs for the 6040

929
00:53:50,600 --> 00:53:55,280
portfolio, that's, you know,
that consistently gold has, you

930
00:53:55,680 --> 00:53:59,640
know, we know the playbook is if
markets are rough, the central

931
00:53:59,640 --> 00:54:03,200
banks will print eventually.
And, you know, and when they do,

932
00:54:03,200 --> 00:54:05,040
gold's going to be the primary
beneficiary.

933
00:54:05,040 --> 00:54:09,240
It's sitting closest to the door
when the you know, when the when

934
00:54:09,240 --> 00:54:11,440
the when the appetizers start
getting served out of the

935
00:54:11,440 --> 00:54:14,320
kitchen, you know gold is the
one right next to that door, and

936
00:54:14,320 --> 00:54:15,680
they started gobbling it up
first.

937
00:54:17,560 --> 00:54:19,320
We, I mean, we haven't even
asked you yet.

938
00:54:19,360 --> 00:54:23,320
You, you talk about the, the,
the type of tantrum, the impact

939
00:54:23,320 --> 00:54:25,760
of tariffs and, and what the Fed
might do.

940
00:54:26,680 --> 00:54:29,880
Something the the US government
has been doing is writing checks

941
00:54:29,880 --> 00:54:34,720
to resource companies, MP
Materials, US Antimony Corp and,

942
00:54:34,720 --> 00:54:37,480
and these sorts of things.
How are you kind of digesting

943
00:54:37,480 --> 00:54:40,000
that and what are you making of
some of the valuations?

944
00:54:40,000 --> 00:54:42,280
I mean, some of the stuff we
kind of see here for, for

945
00:54:42,280 --> 00:54:46,480
Mountain pass neurology plays
and the like are absolutely

946
00:54:46,480 --> 00:54:48,040
astounding.
They're just gobsmacking for

947
00:54:48,040 --> 00:54:50,160
companies that have nothing but
moose pastures.

948
00:54:50,160 --> 00:54:52,120
So how do you digest all of
that?

949
00:54:53,400 --> 00:54:58,120
So the lesson from all of this
is anything that sits in this

950
00:54:58,120 --> 00:55:00,640
kind of realm, you just can't be
short.

951
00:55:00,920 --> 00:55:05,320
And so I, this is speaking as
someone I was short MP materials

952
00:55:05,320 --> 00:55:09,000
into the cause.
Look, the, the business is

953
00:55:09,000 --> 00:55:11,280
they're, they're, you know,
they're processing business.

954
00:55:11,520 --> 00:55:15,600
It's, it's, it's not a good
business and never has been.

955
00:55:15,600 --> 00:55:17,280
And without government support,
it never would be.

956
00:55:17,960 --> 00:55:21,280
So it it tells you you can't be
short.

957
00:55:21,280 --> 00:55:24,120
It tells you that if you're
going to play in that realm, at

958
00:55:24,120 --> 00:55:26,160
least try and find the quasi
real businesses.

959
00:55:26,160 --> 00:55:29,520
The tough thing about this is,
and this is coming both from

960
00:55:29,520 --> 00:55:35,480
industry and from people that I
know who are kind of close to,

961
00:55:35,920 --> 00:55:39,120
you know, various government
agencies in the contacts that

962
00:55:39,120 --> 00:55:45,600
they have there is that it's not
the best companies that are

963
00:55:45,600 --> 00:55:49,440
getting the deals right, that
are getting the support.

964
00:55:50,240 --> 00:55:54,200
It tends to be a little bit
more, you know, who's, you know,

965
00:55:54,200 --> 00:55:56,880
who's the the most politically
connected, who has been the most

966
00:55:56,880 --> 00:55:59,760
effective lobbier of the current
administration.

967
00:56:00,560 --> 00:56:04,080
And so look, I wish the money
was being spent better.

968
00:56:04,920 --> 00:56:09,600
But that said, it does mark a
quantum shift in the way that

969
00:56:09,600 --> 00:56:13,920
resources are viewed as a
strategic imperative for

970
00:56:14,000 --> 00:56:16,400
governments.
And, and I think inherently that

971
00:56:16,400 --> 00:56:21,360
is a good thing because if we
continue to go down the path

972
00:56:21,360 --> 00:56:24,760
that we were going down, you
know, we didn't have the ability

973
00:56:24,760 --> 00:56:28,160
to have a functioning military
for longer than 5 or 6 weeks.

974
00:56:28,160 --> 00:56:31,840
If the Chinese decided to cut
off the, you know, various, you

975
00:56:31,840 --> 00:56:34,640
know, whether it be germanium or
rare earths or all the sorts of

976
00:56:34,640 --> 00:56:38,080
things that they both produce
and refine, You know, we had

977
00:56:38,360 --> 00:56:42,920
backed ourselves unknowingly
into a wildly indefensible and

978
00:56:42,920 --> 00:56:45,640
vulnerable corner.
And so now we're starting to get

979
00:56:45,640 --> 00:56:47,920
out of it and we realized we
have to do so with some sense of

980
00:56:47,920 --> 00:56:51,000
urgency.
So fuck, I get it.

981
00:56:51,160 --> 00:56:53,680
If I was in their seat, I'd be
spraying the money hose a little

982
00:56:53,680 --> 00:56:56,680
bit differently.
But that doesn't change the fact

983
00:56:56,680 --> 00:56:58,240
that the money hose is in their
hands.

984
00:56:58,680 --> 00:57:01,640
And so, you know, kind of put
yourself in the way.

985
00:57:01,920 --> 00:57:04,680
We don't do a lot of that stuff
because none of it is high free

986
00:57:04,680 --> 00:57:07,640
cash flowing and very little of
it is in capital return mode.

987
00:57:08,320 --> 00:57:11,600
That said, you know, we're,
we've got a little basket of

988
00:57:11,600 --> 00:57:14,960
kind of critical metals and
strategic metals where you know,

989
00:57:15,080 --> 00:57:19,640
real underlying assets and
businesses that yes, we are

990
00:57:19,640 --> 00:57:22,040
paying a lot more than we would
normally like for.

991
00:57:22,560 --> 00:57:26,240
But that is the nature of the
game today is that, you know,

992
00:57:26,280 --> 00:57:30,400
the, the we're not going to get
these things at, you know, .4

993
00:57:30,400 --> 00:57:36,280
times NAV anymore.
I I can't I can't, Yeah, let you

994
00:57:36,280 --> 00:57:40,400
go without without just sharing
your thoughts on on uranium as

995
00:57:40,400 --> 00:57:42,840
well.
Rob, I understand because other

996
00:57:42,840 --> 00:57:47,000
problems you preferred way to to
to be long uranium, but someone

997
00:57:47,000 --> 00:57:51,880
that's yeah like clearly follows
super closely energy markets the

998
00:57:51,920 --> 00:57:54,840
the the ENP world.
Like how do you think of the the

999
00:57:54,840 --> 00:57:56,560
uranium valuations in space
right now?

1000
00:57:58,120 --> 00:58:03,880
So the way I typically quantify
this is I, I rank my zealots on

1001
00:58:03,880 --> 00:58:07,600
a scale of 1 to 10 in the
resource Spectre in the resource

1002
00:58:07,600 --> 00:58:11,400
spectrum.
So, so like, so gold zealots, I

1003
00:58:11,400 --> 00:58:13,320
think kind of weigh in at about
a six.

1004
00:58:13,320 --> 00:58:16,200
Yeah, yeah, yeah.
Silver zealots are probably like

1005
00:58:16,200 --> 00:58:19,440
an 8 1/2 or 9.
And the uranium, yeah.

1006
00:58:19,440 --> 00:58:21,680
And they're, and the uranium
guys are like a 12.

1007
00:58:22,920 --> 00:58:24,520
They are off, they're off the
end.

1008
00:58:24,520 --> 00:58:27,280
If you've ever seen Spinal Tap,
it's like it goes to 11.

1009
00:58:27,640 --> 00:58:29,720
So that's that, that's, that's
the uranium bulls.

1010
00:58:29,720 --> 00:58:32,720
And unfortunately valuations
have followed.

1011
00:58:32,720 --> 00:58:36,040
So it's super hard for a guy who
pays attention to Navs and free

1012
00:58:36,040 --> 00:58:37,480
cash flow yields and that sort
of thing.

1013
00:58:37,480 --> 00:58:41,320
So, you know, I'm not, I've got
a couple of small positions in

1014
00:58:41,320 --> 00:58:45,080
the space where I think we've
got some assets that offer

1015
00:58:45,280 --> 00:58:49,800
wildly higher convexity.
So like you know, a one or 2%

1016
00:58:49,800 --> 00:58:54,000
position that if we're really
right can act like a four or 5%

1017
00:58:54,000 --> 00:58:57,440
position, but it's hard for me
to own our exposure there is

1018
00:58:57,440 --> 00:59:00,880
actually via the same, you know,
our biggest position in gold

1019
00:59:00,880 --> 00:59:03,000
which is is Sprott.
And when you've got an asset

1020
00:59:03,000 --> 00:59:07,160
manager that's now a third of
their book is uranium, whether

1021
00:59:07,160 --> 00:59:11,120
it's flute through the physical
uranium trust or whether it's

1022
00:59:11,120 --> 00:59:15,240
the actively managed Sprott ETS
or the passively managed ones,

1023
00:59:15,880 --> 00:59:19,000
you know that's that's a 10 plus
billion dollar asset manager.

1024
00:59:19,240 --> 00:59:23,520
So I think if that part of
Sprott traded separately, I

1025
00:59:23,520 --> 00:59:26,200
would love to see the multiple
that the uranium, you know,

1026
00:59:26,200 --> 00:59:29,320
yahoos would put on it.
So I mean, I'm sure, I'm sure

1027
00:59:29,320 --> 00:59:31,840
it'd be trading for probably
double what the entirety of

1028
00:59:31,840 --> 00:59:35,680
Sprott trades at today.
So maybe, maybe they'll get the

1029
00:59:35,680 --> 00:59:37,720
notice and, and, and buy a
little bit of that.

1030
00:59:37,720 --> 00:59:40,680
So I, I love the theme.
It makes all the sense in the

1031
00:59:40,680 --> 00:59:42,800
world.
If you really care about carbon

1032
00:59:42,800 --> 00:59:45,240
emissions, you've got to care
about uranium.

1033
00:59:45,240 --> 00:59:47,320
I love, I love me some yellow
cake.

1034
00:59:47,600 --> 00:59:51,720
It's just hard for me to express
from a from an equity standpoint

1035
00:59:52,040 --> 00:59:55,280
and really feel like I'm giving
my investors a margin of safety.

1036
00:59:55,960 --> 00:59:58,200
Maybe just as a thought
exercise, but do you see a

1037
00:59:58,200 --> 01:00:04,080
similar type U.S. government
handout if you like to a uranium

1038
01:00:04,080 --> 01:00:07,440
project or uranium company
within the states like a

1039
01:00:07,440 --> 01:00:11,720
mountain pass type deal?
If you look at a lot of the US

1040
01:00:11,760 --> 01:00:14,920
uranium stocks, they seem to be
already discounting something

1041
01:00:14,920 --> 01:00:17,440
like that.
You know, some of them have got,

1042
01:00:17,440 --> 01:00:21,040
you know, as, as, as they say
out on the ranch in, in West TX,

1043
01:00:21,320 --> 01:00:24,640
you know, they've already gotten
their giddy up and that's, you

1044
01:00:25,160 --> 01:00:28,080
know, so I, I think that would
not be a surprise.

1045
01:00:28,080 --> 01:00:29,800
Would all the stocks go up on it
again?

1046
01:00:29,800 --> 01:00:34,160
Yes, they I'm sure they would.
But you know, with stuff trading

1047
01:00:34,160 --> 01:00:41,440
it, you know, now kind of, you
know, 2 1/2 to 4 times NAV on

1048
01:00:41,440 --> 01:00:44,960
current spot prices, you really
got to believe in kind of

1049
01:00:44,960 --> 01:00:50,200
$150.00 US uranium to make a lot
of this stuff work.

1050
01:00:50,200 --> 01:00:54,320
And yeah, we'll, I, I, I have no
doubt that we'll get there, you

1051
01:00:54,320 --> 01:00:56,480
know, over the course of the
next three to five years.

1052
01:00:56,480 --> 01:00:58,520
I just I'm reluctant to pay for
it today.

1053
01:00:59,720 --> 01:01:02,640
Absolutely, Rob, I could, I
could chat with you for, for

1054
01:01:02,640 --> 01:01:05,120
hours and just, and just sort of
listen and and learn from, from

1055
01:01:05,120 --> 01:01:06,880
your perspectives and your
experience and how you think

1056
01:01:06,880 --> 01:01:09,200
about the market.
So thanks a lot for coming and

1057
01:01:09,200 --> 01:01:10,400
and joining us on the show
today.

1058
01:01:11,400 --> 01:01:14,400
Oh God, this is a real treat.
Look, I've been an admirer of

1059
01:01:14,400 --> 01:01:17,120
your work and you've had some,
some people on, you know,

1060
01:01:17,600 --> 01:01:20,960
incredibly great people in your
recent shows in particular that

1061
01:01:20,960 --> 01:01:25,040
I've really learned a lot from.
So to be now amongst the, you

1062
01:01:25,040 --> 01:01:28,440
know, amongst the people who
you've had a chance to to speak

1063
01:01:28,440 --> 01:01:29,920
with.
I'm I'm honored.

1064
01:01:29,920 --> 01:01:32,160
And at whatever point you feel
like you want to hear a little

1065
01:01:32,160 --> 01:01:34,560
bit more from me, just let me
know and I'd be happy to come

1066
01:01:34,560 --> 01:01:37,080
back on.
That's very intrigued to to to

1067
01:01:37,080 --> 01:01:39,720
eventually learn what stock
you're going to be pitching at

1068
01:01:39,720 --> 01:01:43,480
either Heart Song and Mind
Conference in November in

1069
01:01:43,480 --> 01:01:46,080
Sydney.
November 14th in Sydney.

1070
01:01:46,640 --> 01:01:47,760
We'll be watching.
Awesome.

1071
01:01:47,760 --> 01:01:49,360
Thanks, Rob.
Here we go, mate.

1072
01:01:49,520 --> 01:01:51,960
Rob Mullen an abundance of
knowledge.

1073
01:01:52,360 --> 01:01:55,680
I am very stoked we finally got
him to share his thoughts on

1074
01:01:55,720 --> 01:01:59,520
money of mine and all that's
made possible by our fantastic

1075
01:01:59,520 --> 01:02:02,360
supporters at Sandvik Ground
support focus the platform by

1076
01:02:02,360 --> 01:02:05,360
market tech and I mark
conference coming up very soon.

1077
01:02:05,360 --> 01:02:06,600
Get your tickets.
We'll be there.

1078
01:02:06,680 --> 01:02:08,120
Investors go free.
Hudu Rudu.

1079
01:02:08,320 --> 01:02:11,600
Rudu.
Now remember, I'm an idiot.

1080
01:02:11,880 --> 01:02:14,320
JD is an idiot.
If you thought any of this was

1081
01:02:14,320 --> 01:02:16,880
anything other than
entertainment, you're an idiot

1082
01:02:17,200 --> 01:02:18,400
and you need to read out a
disclaimer.