🎙️ NEW PODCAST WITH CHRIS AND BRAD
Chris and Brad joined Danny on the CapitalCosm present to speak in regards to the power market and the alternatives they’re seeing proper now.
Right here’s only a smattering of the subjects the gents have touched on:
- With oil down virtually 50% over the past 36 months, how did fundamentals change and the way do Chris and Brad really feel in regards to the oil and fuel investments right this moment?
- The good European blackout: what was behind the worst energy failure in fashionable instances.
- As main tech gamers like Microsoft, Amazon, Meta, and others are actually getting straight concerned in nuclear to energy AI knowledge facilities, what do these shifts imply for the power market?
- The Youtube indicator for locating contrarian alternatives.
- China vs. US: what alternatives does an AI arms race between the world’s prime 2 economies open up for traders?
- Why the worth of pure fuel is a key indicator within the power market.
…and way more. You may take heed to your entire dialog on Youtube right here.
💨 GOT GAS?
Whereas on the subject of power…
The next chart caught our collective eye.
As you’ll be able to see, knowledge facilities already devour extra electrical energy than France — the world’s seventh largest financial system. And with power-hungry AI knowledge facilities now being added into the combo, this demand is on observe to triple over the subsequent 5 years.
That’s an “isht” ton of latest power that must come from… someplace. Now we have been saying for years that one of the best ways to play the AI growth isn’t to load up on NVIDIA and the likes… however to purchase coal, pure fuel, and uranium.
And lookie right here…
From the article:
President Donald Trump signed a collection of government orders Might 23 meant to overtake the regulation of economic nuclear reactors and velocity the method of constructing and deploying nuclear energy.
Throughout the signing, which was attended by the CEOs of main nuclear-related firms, Trump argued the “expertise has come a good distance, each in security and price.” The orders notice a long-held Republican purpose of deregulating nuclear energy.
In line with a senior White Home official, the 4 government orders goal to expedite reactor analysis & improvement, streamline rules to permit the Pentagon and different businesses to construct reactors on federally owned land, change the Nuclear Regulatory Fee and units new timelines for its consideration of development permits, and develop home uranium manufacturing and enrichment capabilities.
That is yuuuge for uranium. However earlier than you pull up your Interactive Brokers app to purchase uranium shares, take into accout it would take 5 years to deliver any extra nuclear capability on-line (and that’s being very beneficiant).
This further provide must come from both coal and/or pure fuel. And since within the west, coal is as welcome as a fart in a crowded elevator, this leaves us with pure fuel.
Our view is that demand for it’s set to extend dramatically within the coming years — double from right this moment’s ranges, in line with this chart (h/t @Josh_Young_1).
Maybe that’s why “natty” fuel shares have been on a tear currently (as an example, one place in our Insider portfolio is up some 200%, although it has been a marathon of persistence — with a number of 30+% pullbacks alongside the way in which).
⚖️ POSITION SIZING MATTERS
This interview with Morgan Stanley’s analysis head, Michael Mauboussin, is nicely price your time. The next part on place sizing is especially price highlighting:
There’s one different factor [Druckenmiller] talked about and it was about place sizing. Broadly talking whenever you’re making an attempt to maximise your returns, you want two issues. One is you want some form of an edge. Edge means you’ve a perception or a mathematical benefit that’s not mirrored within the present odds or out there worth. The second factor is how a lot you’ll be able to guess on that when you’ve that benefit. And the instinct is kind of easy. If you happen to had good data, you knew your guess was going to make you cash. You’d guess all the pieces you would, proper?
After which there are levels of certainty about that. So there’s this relationship between edge and betting dimension, and that results in your complete skill to generate extra returns. He has this form of zinger, the place he says, individuals stated, what did you be taught from Soros? And he stated, the principle factor that he realized from Soros was that place sizing was 70 to 80% of the sport. The explanation that struck me is as a result of, initially, purportedly George Soros made cash on fewer than 30% of his trades. And that alone is price letting settle in a bit. And he’s one of many nice traders of our time. So what does that imply?
It implies that he made loads of investments that misplaced cash. They most likely didn’t lose a lot cash. And when he did earn a living, he made some huge cash, each by betting some huge cash and by letting it run concurrently. That I assumed was a extremely attention-grabbing lesson.
Place sizing is a subject we harp on about loads right here at Capitalist Exploits HQ. Profitable (uneven) investing is a matter of weighing possibilities and sizing your trades appropriately.
Maintain your place sizing sufficiently small that you simply don’t give an isht if a commerce turns towards you (just like the pure fuel commerce we talked about earlier), however sufficiently big that it may well transfer the needle in your portfolio.
🏃♂️ GOLD: RUNNING LIKE THE POLICE ARE AFTER IT
Talking of “needle-moving” investments, try this chart (h/t @MikeZaccardi)…
Not one thing most individuals would’ve anticipated — particularly on condition that progress shares like NVIDIA, Microsoft, Tesla, and many others. make up a very good chunk of the S&P 500.
And whereas gold was operating just like the police was after it over the latest months, gold miners have been a wholly completely different story.
For a looong time, they went nowhere (regardless of the favorable fundamentals being there all alongside), and we had nothing to point out for it. As an apart, a sensible lesson in place sizing — we solely had a 5% preliminary place dimension in gold miners. If that was a 20% place dimension, we most likely wouldn’t have been in a position to maintain that place for the size of time we did.
However up to now this yr, gold miners have been beating the pants off gold. Right here’s the gold miners ETF (GDX) towards gold.
In line with a latest Wall Avenue Journal article, gold-mining margins are at the moment sitting at a 50-year excessive. However sarcastically (although not surprisingly), most traders nonetheless couldn’t care much less about gold or gold miners.
Living proof, Tavi Costa (@TaviCosta) shared this chart about how household workplaces are positioned. You need to squint to even see the gold chunk. Gold and different treasured metals make for simply 2% of household workplace portfolios whereas they’ve lower than 1% in commodities.
Our hunch is that this can change materially if gold and gold shares carry on operating.
🤣 WEEKLY HUMOUR
Some ESG-compliant humour (from Insider member Patrick):
And lastly, if in case you have no plans for the weekend, right here’s an thought (courtesy of Insider member Clint)…
Wishing you a fantastic weekend!
