While cheerleaders of the “green economy” would have you believe that you’re either out of your mind to invest in coal… or a reader of ours (or both), this is happening in the world.
You really can’t make this sh*t up. The thing that should be as exciting to you as being elected to judge a wet t-shirt contest featuring Scarlett Johannson is the fact that, while coal prices have been doing what we promised they’d do (go higher), coal equities, while having doubled (roughly), still have a looong way to run.
ESG & THE NEXT LEHMAN MOMENT
Bizarre as it is, the above hiccup is just one tiny piece of a massive global energy puzzle. To really understand what lies ahead, our buddy Kuppy summed up the current ESG craze (and the opportunities it brings) way better than we ever could. Here’s an excerpt:
I am increasingly convinced that we’re about to have a global energy crisis. Almost every day, we hear of a different policy plan to reduce energy production. We learn of new mandates, new taxes, more cancelled pipelines, more cancelled permits, and more penalties. What we don’t hear about is where the replacement energy comes from. The wind doesn’t always blow and sometimes it is cloudy. My car won’t drive on unicorn farts and billions of people in developing economies want a Western standard of life—complete with a Western level of energy consumption. These people refuse to pay for “green energy,” especially when the “carbon economy” is so affordable. Or maybe, they have the pragmatism not to build “green energy” while the technology isn’t fully proved-out.
If you skip the rest of this email, take a few moments and read Kuppy’s thoughts here.
ENERGY: TOO GOOD TO IGNORE
With all the above in mind, it was a breath of fresh ear to see the following from Peter Garnry, Saxo’s head of equity strategy, in MarketWatch this week:
I think at one point, the mining and energy sector will be too attractive in terms of cash flow, that I think more investors will just put the ESG focus on standby and go all in on the energy and mining sector.
As you can see, as in 1995, we are still at very, very low relative levels. I think there is so much room and potential for the energy sector here. You are trading at something that looks like a 60% to 70% discount on forward valuations and the dividend yield is more than twice as high for the energy sector as it is for the MSCI World.
It’s almost as if Peter is an Insider subscriber. Either way, it’s refreshing to see more and more institutional investors waking up to the generational opportunities in the energy sector.
OPPORTUNITIES IN THE LAND OF TANGO
Ok, enough about energy. By now, you probably know we are always on the lookout for investment ideas in places that no one else would dare to look, let alone venture. Mention them to anyone, and they will likely run a mile, possibly even call the cancel police.
One place that definitely ticks all those boxes in the eyes of most investors is the land of tango and vino — Argentina.
Argentina tends to have little windows of time when it does very well, only to be dragged back into the socialist morass of its political class. It seems like we may be entering a time when one of these “windows” opens up. We’ll have more for you in future missives, but as an appetizer, here’s a long-term chart of the Argentine stock market.
A BRUTALLY HONEST TAKE ON POLITICS
One of the best (or worst) things about kids is their brutal honesty. When it comes to politics, kids seem to have a better understanding than many adults.
Have a great weekend!