When it comes to stocks and cars, I’m a value investor. This week the Ruff Wagon, my beloved Honda CRV, started leaking multiple fluids and making suspicious grinding noises (in addition to the normal leaks and grinding noises).

As I dropped her off at the mechanic, I reflected back on this car thinking it might be the last time I saw it. Just 110,000 miles young, she smelled like running shoes and still had half a tank of gas. Sentimental bumper stickers lovingly covered up her rust-spots and my kids covered most of the interior with crumbs and grubby handprints. Thanks to the semiconductor shortages, the used car market is currently very tight and prices are crazy. Since the Ruff Wagon’s Kelley Blue Book value is approximately $0, trading this car in was going to be like buying a hot tech IPO.

This morning, I got a call from the mechanic this morning. A small $200 repair and the Ruff Wagon rides again. HUGE WIN!

Copper Production Part 1 and Part 2

The Largest Copper Mines in the World by Capacity

Copper discovery cupboard bare.

Thanks to its close relationship with economic growth, copper is known as the commodity with a PhD in economics. Copper also plays a key role in several secular themes including EVs, the rising global middle class, and renewable energy. Time spent understanding copper is time well spent.

Production is very centralized into a few key countries and a few key mines

  • The top 5 copper producing countries account for about 60% of global production. Chile alone is almost a third of global copper production.
    • An interesting datapoint to follow in the coming weeks- Chile’s national elections are on November 21st. Gabriel Boric, a 35 year old leftist is polling surprisingly well. He favors increasing taxes on international mining companies. This could put further pressure on copper supply growth.
  • The top 10 copper mines account for almost 30% of global production. New copper supply is concentrated in just 5 mines.

Facing a challenging commodity environment, mining companies have reduced capital expenditures, in particular exploration. While this has helped cash flow, it does not bode well for future supply. Especially since it can take over a decade for a mine to progress from discovery to meaningful production.

There is also evidence of falling ore grades. This suggests that copper miners are focusing their efforts on the highest quality reserves (which makes sense) and leaving the lower-quality ore. The problem is that mining companies will be hard-pressed to expand supply in the face of falling ore grades.

The copper industry also represents some ethical dilemmas. For example, the Democratic Republic of the Congo was all-too-accurately described by The Onion as “like a zoo you get killed at”. How will ESG investors weigh renewable energy investments that depend on mining labor in the Democratic Republic of the Congo.

For all the talk about economic growth, infrastructure, and renewable energy, are the physical limitations of raw materials (like copper) being adequately considered by consensus?

How to Protect Against Inflation (GMO)


  • Treasury Inflation Protected Securities (TIPS)- current cost is about 1% and also suggests an inflation rate of 2.4% over the next decade.
  • Inflation Cap Derivative – derivative instruments that pay out if inflation is above a certain amount. “At the 5-year horizon, the current market price suggests there is a 40% probability of inflation being greater than 3%
  • Commodities- Not a great store of value. Also, wide dispersions between commodities such as oil, agricultural, etc. Oil is probably the best hedge due to its inclusion in CPI.
  • Gold- Can be a very good store-of-value but unlike TIPS, it’s impossible to understand what expectations are embedded in the gold price.
  • Bitcoin- GMO are not bitcoin bulls… the value of fiat currencies is because they are needed to pay taxes.
  • Real Cheap Assets- AKA Value Stocks- Perform surprisingly well in the face of inflation.

Overall conclusion is that buying cheap, real assets (value stocks) is probably the best option for managing inflation risk.

On This Week in History

Someone blew up a whale. It did not go well.

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