Comments in bold addressed to audience members
JR = Julian Rimmer (Resident Boomer and former EM markets pro, turned writer.)
DGG = Dario Garcia Giner (Resident Zoomer and former corporate investigations pro turned meme stock-watcher and in-house drone expert.)
ChatGPT Provided TLDR
- Casual Banter: Julian Rimmer and Dario Garcia Giner engage in banter about various topics.
- Financial Insights: Discussions include Bitcoin fluctuations, copper market dynamics, macroeconomic indicators like CPI, and gold investment suggestions.
- Global Affairs: Touches on Russian politics, Navalny’s disappearance, tensions between Ethiopia and Eritrea, and US-China relations.
- Undersea Cables & Geopolitics: Detailed exploration of undersea cables, their vulnerabilities, and the geopolitical tug-of-war between the US and China over cable development and influence.
- Venezuela-Guyana Conflict: Speculation about the Venezuelan-American moves in Guyana, oil interests, and military involvement.
- Personal Preferences & Heroes: Conversation shifts to personal preferences, wine recommendations, favorite personalities (Geoffrey Holt, Tucker Carlson), and a discussion on heroes and villains.
Good morning, Dario down there in Malaga, partaking of a beaker of the warm south
anyway, as martin amis pointed out, we live in the era of mass loquacity
so let us contribute to that pile
nunc tempus loquendi
tempus fugit
and on this day in 1999
Joseph Heller died. I wrote my university dissertation on Joseph Heller, starting from a point of fandom and then realising halfway through that from Catch-22 onwards it was all downhill.
If you thought a peaceable solution to Gaza conflict is at hand listen to this nice, reasonable, young man
– and think again
Most indicators are still downward-looking, such as a 6% m/m fall in gas and used car prices
But others aren’t – new car prices up, upward pressure from medical care insurance, expected lower discounting on clothing than seasonally typical
expected to create perhaps an ‘upside miss’
While it won’t materially change view inflation is on a downward trend
market risk appetite for a cut has been so pumped that markets may overreact more sharply than justified to such an upward miss
10:39 JR: Gold dipped <$2000 again. If you think central banks will continue buying – I do – then you should be buying the dip
10:41 JR:We discussed copper a few weeks back and how supply stress was building, especially with 1st Quantum mines in Panama.
The outlook is now worsening. A break through $4/lb seems inevitable.
that’s CU
pace MS
In just a fortnight t >500kt of 2024 projected output, or 2.5% of global supply was lost , across First Quantum (Cobre Panama), Anglo American, Rio Tinto and Southern Copper (covered by Carlos De Alba). In certain cases, the volume loss extends well beyond 2024 (e.g. Anglo American), but is far less clear in others such as First Quantum, thus leaving us on the sidelines there.
10:42 JR:
boost the scarcity premium… First Quantum’s and Anglo American’s challenges have likely prompted many investors to look elsewhere for copper exposure, magnifying the scarcity aspects of pure-play equities. As such, the growing pool of capital is now chasing an ever smaller universe of copper-exposed equities, which are perceived to have better line of sight on 2024 volumes. Against this backdrop, the recent equity re-rating impetus may have further room to run.
How to play the theme? Lundin Mining (OW) – our relative pick – ticks all the boxes on attractive leverage to copper, solid operational momentum, growth optionality in LatAm, and cheap valuation at 6.2x 2024 spot EV/EBITDA (16% discount to peers). Antofagasta (EW) offers upside risks too as a pure-play with 2024 volume growth and low jurisdictional risks. Yet, it already prices in a lot: (1) 2024 spot EV/EBITDA of 8.6x (26% premium to peers) and (2) implied copper price of US$4.28/lb (14% premium to spot Cu), while Centinela expansion update (as soon as next week) is a near-term uncertainty. Among diversifieds, Glencore (EW) may benefit vs peers given sizeable copper exposure (30% of 2024 spot EBITDA) while equity valuation is reasonable at 8% spot 2024 FCFY. In contrast, Boliden is our key Underweight on material earnings risks in smelting, operational challenges, lower mined copper exposure, and full valuation. KGHM remains at UW due to its high cost base, negative FCF and above-average gearing, which leave limited room for error
now here’s one from left field
Ethiopia…
looks set to miss an interest payment due later on Monday on its December 2024 dollar bond, becoming the latest emerging-market sovereign to default on debt.
The country’s finance ministry said on Friday, it was “not in a position to pay” the $33 million coupon because of the nation’s “fragile external position.”
nice euphemism
regarding cpi – even a small miss when treasuries are so over-extended could cause a big reversal
that’s the ethiopian birr
Some interesting news coming out of Ethiopia
Looks like Abiy Ahmed is trying to call for a negotiated peace in beleaguered Amhara region rather than violence
the first is an ongoing significant rise in tensions with Eritrea
You’ll recall a few months ago on SML we highlighted that Abiy outlined the intention to take.a red sea port from the Eritrean coastline
“Troubling reports of increased troop movements and aircraft activity near the borders of Ethiopia and Eritrea have started to circulate, raising concerns over a potential resurgence of hostilities in the area.”
Apart from mere rumors and educated speculations, there are concrete indications that President Isaias Afwerki and Prime Minister Abiy Ahmed are gradually growing apart. These developments have sparked anxieties among regional players, foreign diplomats, and analysts, who are warning that both countries seem to be gearing up for a possible conflict.”
This is CRITICAL – as we have been seeing control over the horn of Africa is essential for global shipping, the Houthi blockade makes this even more prominent.
Also – the fourth round of negotiations for the Grand Ethiopian Renaissance Dam begins this month between Egypt, Ethiopia and Sudan
These aim to finally reach a legal agreement over the recently filled Ethiopian dam on the Nile basin
Analysts expect this to be the ‘last chance’ to resolve outstanding differences. If they don’t progress, expect Sudan and Egypt to raise the sabers of conflict
yesterday, i caught Ray Dalio trying to rehabilitate his reputation online after the damaging exposé of life at Bridgewater
Ray Dalio’s principles for applying radical transparency in different areas of your life
just a brief note on Bitcoin which we dont want to obsess about, however, $100mill of Bitcoin longs relinquished last night on a 10% drop for crypto which is all about profit-taking but was triggered by Elizabeth Warren introducing legislation to counteract the misuse of digital currencies in illicit activities.
I’ve been int he red so long this little green stint is terrifying me
Corrections in the BTC market are common, historic bull runs often see 20% corrections before rally’s resumption
That would be the wicks above
There’s something off about this fall, tho
Thankfully, exactly 0 of Warren’s sponsored bills have passed since 2015. As a cheeky member of Twitter said ‘native-americans suck at dealmaking’
elsewhere, the EU commission is set to vote today on a plan to take $15bn of profit from Russian assets frozen in the EU and allocate them to Ukraine.
10:54 JR: it’s the right thing to do IMHO and the only thing wrong with it is they haven’t taken all $350bn
I call these ‘connector economies’ such as MERCOSUR latam, Thailand, India, the Gulf, etc
Opps to draw in cap investment to guarantee no matter the global conflict, these connectors will stay plugged to both sides and continue pumping with unsanctioned cost bases
The EU has chosen to become a protectorate of just one side. Its citizens and industrial fabric will suffer the consequences
Speaking of dismal protectorates, our American frenemies are pegging us in more ways than one
This was after Spanish intelligence services found they’d been bribing Spanish agents to get their hands on classified info
Classified info the Spanish services always hand over – meaning the Americans broke it cause they felt like it not cause they had to
It reminds me of an old joke – why is there never a coup in the US? Because it doesn’t host a US embassy
What do you know about submarine cables Julian
Smarter experts than us (of which there are many) have been pointing out that a ‘hot war in cold places’ – like space and the undersea domain, have been happening for almost a half-decade
Notably, Pippa Malmgren
“There is also Hot War in Cold Places – Space, the Arctic and in the cold oceans. Satellites have been damaged and destroyed, the subsea cables that allow them to connect to Earth have been cut, and many undersea internet cables (Svalbard) and subsea energy infrastructure have been attacked in the high North (Nordstream II and Balticonnector). “
There are several ways to damage or intercept these subsea cables
Despite their importance, they are about the width of a garden hose
One even the most determined marine corps private wouldn’t be able to suck a golf ball through
A chinese ship, the Newnew Polar Bear, and a Russian cargo vessel, the Sevmorput, are suspected of intentionally using their anchor to destroy a subsea cable connecting to Finland and Estonia.
“The Newnew Polar Bear has subsequently become the focus of the investigation. After departing the Baltic Sea, the ship was photographed arriving in the Russian port of Arkhangelsk with its port side anchor apparently missing on 22 October.
Two days later, the Finnish National Bureau of Investigation announced that they had retrieved an anchor embedded in the seabed next to the damaged pipeline in co-operation with the Finnish Navy and Finnish Border Guard. According to the Fins, the Newnew Polar Bear is the prime suspect for the incident.”
Another method is to intercept the repeaters
And the issue is that the market for these undersea cables and repeater manufacturing, cable laying and maintenance is TINY TINY TINY
For example only 40 ships worldwide exist for such tasks – so cross-country collaboration was very much the norm
China saw this as a gerat opporutnity – it launched the ‘digital silk road’ in 2015 to expand its network together with Huawei Marine and rapidly captured 15% of the global submarine cable market by 2019
Yes, Caspian Report is just ok now – he used to be a whole lot better. I have to wipe off the American bias in all of his analyses these days
It pushed the American administration to do the opposite – Since 2015 google Meta and Microsoft have spent $2bn in undersea cable development, with $4bn to be spent over the next 3 years.
And it has unintended consequences for, you guessed it, EU
Or was suposed to anyway
A Chinese company, HMN Tech, was almost going to build it for 1/3rd of the asking price
Then the Americans threatened the project with sanctions, and forced the Chiense contractor out, and put in their own – Subcom
Subcom is a spooky NJ firm with contract with the DoD and Silicon Valley giants, and is the exclusive contractor for spying on the Chinese navy for the us military
I would rather have cheap cables and Chinese spying voluntarily than involuntary expensive cables with American spying
call me old fashioned but I take this as a violation of our sovereignty
Thankfully France is similarly old fashioned
Notice anything about the route?
the same as the SEAMEWE – but without American extortion
for generalities:
“The global submarine cable system market is expected to grow from $14.40 billion in 2021 to $16.15 billion in 2022 at a compound annual growth rate (CAGR) of 12.16%. The growth is mainly due to the companies resuming their operations and adapting to the new normal while recovering from the COVID-19 impact, which had earlier led to restrictive containment measures involving social distancing, remote working, and the closure of commercial activities that resulted in operational challenges. The market is expected to reach $26.10 billion in 2026 at a CAGR of 12.76%.”
The major players are:
“ZTT, The Okonite Company, TE Connectivity, SubCom, Saudi Ericsson, Prysmian Group, NKT A/S, Nexans S. A. , NEC Corporation, JDR Cable Systems Ltd.”
But well worth the effort, I suspect
11:06 JR: net quarterly outflow of FDI first time since records began.
Is this a sign of broader macro trends, Western finance re-shoring industrial capacity elsewhere, or is it about global economic malaise, or of a Chinese economic slowdown?
The crackdown on business leaders, fraught relations with the US, deglobalisation theme, the slump in property and the attendant crisis this is causing in banks.
The first was a surprising announcement that a new proposal means the US will share certain launch secrets of its missiles with China
“The U.S. is considering a deal with China that will see the two countries warn each other before they launch any missiles, according to the Japanese press.
Details of the proposals were reported byNikkei Asia, which quoted an unnamed senior U.S. State Department official in an article published on Monday. That source claimed it was hoped that the two nations “would have a reciprocal obligation to clarify what we’re doing,” and added that the pact would be similar to an existing arrangement between the U.S. and Russia.”
every deal that drives towards peace – however uneasy – is a good one
In other China news, alibaba continues its mediocre plodding
Ntoably – Pinduoduo – who are behind the American shopping app Temu. The company has now become the largest e-commerce company in China by market cap – $184bn versus Alibaba’s $183bn
four pandas more like
Venezuela…?
Most recent news have been-
Lula da Silva is urging to mediate the dispute, while VNZ has started granting identity documents to individuals near the disputed area in Essequibo
In the meanitme, the americans have been fulfilling blinken’s promise of ‘unconditional support’ made in Georgetown, Guyana on Dec 6
American warplanes conducting aerial exercises with guyanese military, establishing military bases, sending footsoldiers, etc
Tentatively, Julian, I think I’ve figured out whats going on
11:13 DGG: You can’t just see Russians around every corner Julian!
11:14 DGG: lmao
So I’ve always found this conflict odd for the reason of timeline
Pre-2023 – Venezuelan Essequibo claims silent, Guyana quietly discovers oil
mid-2023 – Venezuelan relationship with Americans unfrozen, conditional to fair elections in Venezuela next spring. In the summer, Venezuela announce intention to annex Essequibo after a referendum. Guyanese oil exploitation by American giants begins
Lte-2023 – venezuelan referendum approves annexation threat, american military moves into Guyana in response
Do you see what’s off about this? It feels like the Venezuelan moves have clearly been in tandem with an American unfreezing
Let’s see this from the American perspective
What better way to guarantee your investment in a tinpot country than the establishment of close security ‘guarantees’ and military bases?
The Americans want to have their cake and eat it too
Take control of Guyanese oil reserves
While at the same time trying to topple the Maduro regime by making him fail to keep his electoral promises
(is german anthrax rock a thing?)
@helmholtz – im with you
Mas de Daumas Gassac Rosé Frizant
It’s light, playful, fruity and perfect for the idyllic summer’s evening of the imagination which so rarely transpires in the real world. Definitely one for the girls but real men drink rosé too.
Mas de Daumas Gassac is considered the ‘first growth of the Languedoc’ with good reason
and just to answer a question I received yesterday, the person in the photo frame behind the wine is Philip Larkin
nine minutes remaining for Dario to select another hero for 2023 although I could easily eat up the whole time by explaining why I hate my villian like I do
Tucker Carlson: how do I hate thee? let me count the ways?
his presidential (or vice to start with) ambitions are clear and he’s simply spouting whatever he thinks may get him a seat at the table
rather than wondering what might be happening to all those people suffering unnecessarily in Ukraine. My greatest fantasy is to put him in a Ukr trench for a day and see how much he likes Putin then
My hero is one Geoffrey Holt!
He was shy, quiet, and preferred to take his days puttering around the trailer park he lived in – he never used his old car
But residents of the tiny 4,000 person town woke up to a surprise when Holt, 82, passed away this june
It turns out the quiet and shy man who lived in a tiny mobile home, left his inheritance of almost $4mn to the town
“I just immediately think, that’s that story that you hear all the time,” Kathryn Lynch, Hinsdale’s administrator, told The Washington Post. “The millionaire next door. Somebody that you would never, never think.”
For giving us the joy of a heartwarming story, and reminding us that some people are still humble enough to be generous without expecting anything in return other than good wishes, Holt is in my Hero’s list for the year
You can also follow me on Twitter – it’s a great place to stay up to date
That goes to you, Julian, whom I followed a month ago and still hasn’t followed me back
and on that misanthropic note, nunc tempus taciendi