“Don’t look for the needle in the haystack. Just buy the haystack!”
— John Bogle, not referring to Elon Musk
Dear Reader,
It’s Good Friday. The markets are closed. And all the air has been sucked out of the news cycle by inflation, Elon Musk and Jesus. (Or do we repeat ourselves?)
“The Lord said,” we quote a reader mail addressing these topics in reverse order. “’My grace is sufficient for you, for my power is made perfect in your weakness’. 11 Corinthians 12:9.” If you’re a Christian, we hope you have a splendid Holy Weekend.
The Twitter board says it was reviewing Musk’s cash offer amounting to $43 billion. Musk’s motives are the object of much ink, speculation and mental bandwidth today.
The world’s richest man has been accused of using the “de facto townhall” to manipulate shares in Tesla and SpaceX, companies he founded. He told a TEDx forum last night his motives are more pure: He wants to preserve free speech within the confines of the law.
If Musk had accepted the board seat offered to him, that would have capped his ownership stake at 14.9%. Whatever the board decides about his all-in offer, we can confidently say it will be hard to avoid the speculative hoard that’ll follow his every move hence. Vanguard, the giant fund company, has also levied a bid.
Inflation clocked in at 8.5% on the consumer price index (CPI) in March. Producer prices (PPI) rose at an 11.2% rate – the highest jump in prices since the government began publishing the number in 2010.
“At that pace,” Bill Bonner commented blithely yesterday as his custom, “the real value of the government’s $30 trillion trash pile of debt will be reduced by $3 trillion this year. And the money shufflers in Washington get to keep on shuffling the cash to their friends, clients… and most important… to themselves.”
As we have laboriously detailed, the Fed has one hand tied behind its back. The other is wedged between a rock and hard place of their own mechanition.
“The usual guidance to fight a rising cost of living is to buy precious metals,” Dave Gonigam advises in the 5 Min. Forecast, “which the late John Pugsley thought was a fine idea… but he preferred to attack the problem at the source.” Dave offers a comprehensive work up of Pugsley’s Alpha Strategy that is worth your time to read.
For our purposes today, let’s look at the gist:
By 1980, gold was climbing down from an $800 high that wouldn’t be seen again for 27 years. Pugsley refined his guidance in a pathbreaking book called The Alpha Strategy: The Ultimate Plan of Financial Self-Defense. Alpha is the first letter of the Greek alphabet, and Pugsley defined the Alpha Strategy as “the first plan for any individual to protect his wealth.” Pugsley’sAlpha Strategy entailed three levels…
- Invest in production. If it’s something you need to make a living — education, a skill set, tools — this takes priority over anything else.
- Save consumables. This is the stuff you use on a day-to-day basis — razor blades, pasta, tires — if you use it up and it has a decent shelf life, it falls under Level 2.
- Save real money. If after Level 2 you still have savings left, then you can put it into precious metals and other tangible assets.
Again, Dave’s entire issue today is dedicated to the late great Mr. Pugsley.
Coming back around to Elon Musk in a roundabout way… our Wiggin Sessions this week, James West, editor of the Midas Letter, is big into Lithium right now and for the second time, because of the rise in demand for batteries in electric cars.
“I started the newsletter in 2008,” James says, “It has become a platform by which I take the opportunity to interview CEOs as a result of building relationships in the mining industry in Canada.” James says he’s “very thematically oriented. I go where the money’s at.”
Mr. West on lithium and going where the money’s at:
Take the commodity lithium. I flew to Argentina and traveled throughout Argentina and Chile visiting lithium sites, lithium brine sites, and meeting the management teams there and subsequently writing about it in the newsletter, but then the price of lithium fell out of bed in 2017 and the cannabis industry came along.
Without any compunction whatsoever, I abandoned lithium, I abandoned mining and went whole hog into cannabis for three years. That served me very well. Now cannabis is basically proving to what I always knew it was, it’s called a weed for a reason. There’s no public companies trading on the sole price action of canola, for example. It’s just a commodity, it’s a product input. I don’t believe that there’s longevity in industry for investors.
Now we’ve seen the price of lithium increase by fivefold since the beginning of 2021. Obviously, that’s being driven by the explosion in electric vehicle production from not just Tesla, but also the major manufacturers. Volkswagen and Ford have teamed up. Volkswagen has said after 2035 they won’t produce any combustion engine vehicles. I go where the money is, where the action is.
“I try to deploy my capital in a capital efficiency model,” James sums up his strategy, “where it goes in and comes out at a profit in a short as possible timeframe. That way I get to recycle a lot of the capital. That’s why I’m following the themes all of the time and I stay focused on whatever is currently hot.”
Right now, that’s lithium.
You can view the entire interview with James West, including his favorite lithium plays, right here.
Enjoy your weekend. Monday we’re going to dive into an entirely new way to understand the social media and global network paradigm with John Robb of Global Guerillas. It’s a brave new world, and we fight brave new wars…
Follow your bliss,
Addison Wiggin
Founder, The Financial Reserve
P.S. We met the late John Pugsley very early in our career at The News Orleans investment conference. We had just published Financial Reckoning Day and it was sitting at #1 on the New York Times business list. John and Doug Casey were loitering about our conference booth table watching as attendees came up to discuss the book.
Some wanted the book signed. I tapped my pockets… checked my jacket… looked around the table.
When I turned around, John was calmly extending his arm to me, a pen in his hand. “You’re a best-selling author now Addison,” he said with a wry, but confident smile, “you’ll always need one of these.”
P.P.S. Tomorrow is Easter. Did you know it’s also World Malbec Day? Yummy.
In honor of such a fine day, Bonner Private Wines has a truly unique offer: “We’re releasing a rare extreme altitude malbec on World Malbec Day,” Will Bonner writes to me, “Along with a few other popular malbecs. The new release malbec is from about 10,800 ft. and aged in a mine at 12,000 ft. Really unique wine from a winemaker who is so remote he gave us a handwritten note as an invoice.“
Celebrate World Malbec Day with Bonner Private Wines, right here!
