A inflação está morta?

Muita gente acredita que estamos entrando em uma nova era, marcada por uma permanente baixa inflação nos países desenvolvidos. Há poucos meses, a BusinessWeek, famosa revista americana, trouxe na capa o título “Is inflation dead?”. Estudos tentam provar que a impressão desenfreada de dinheiro da última década pelos bancos centrais não causou a inflação, mas, como já disse em um artigo anterior, eu acho essa premissa errada.  Em primeiro lugar, o conceito de inflação é justamente esse: inflar a base monetária, ou seja, imprimir dinheiro. Uma alta nos preços é consequência da inflação. Segundo, a inflação pode aparecer em diferentes lugares, não somente e necessariamente na prateleira do supermercado. Até o momento, o que vimos foi uma alta absurda nos preços das ações, com as bolsas de valores batendo recordes atrás de recordes. Também vimos altas homéricas no mercado de bonds, assim como no imobiliário e no de artes, por exemplo. O que está subindo, por enquanto, é o preço dos ativos – não dos produtos ou dos serviços que compõem as cestas medidas pelos índices estatísticos oficiais. E por que não estamos vendo uma alta nos preços dos itens de supermercado nos EUA? Podemos citar o efeito Amazon, que consegue manter preços baixos por mais tempo, e a importação de produtos oriundos de países menos desenvolvidos, cujos custos de produção são menores. Mas há ainda uma terceira causa que passa despercebida pela maioria das pessoas: as baixas taxas de juros, além de fazer com que as pessoas poupem mais, também incentivam os maus investimentos. Investimentos em empresas que não dão lucro, nem tem a menor chance, perspectiva ou pretensão de dar lucro, vêm ajudando a reduzir a inflação. O exemplo mais notório dentre os vários existentes, para mim, é a Uber. A companhia dá prejuízo atrás de prejuízo, mas sua receita cresce anualmente. Eu mesmo sou usuário e pago menos pelo serviço da Uber do que pagaria por um táxi. A diferença é paga pelo investidor, que subsidia a mim e vários outros usuários.  Empresas “investidas” por gigantes do setor de private equity ou venture capital, como o SoftBank, recebem aportes milionários, às vezes bilionários, para vender R$1 por R$0,50. É óbvio que elas venderão mais, crescerão suas receitas e ficarão famosas – mas é óbvio também que não existirá lucro num futuro próximo, tampouco longínquo. Aliás, essas “empresas do tipo pirâmide” estão competindo com negócios de verdade e fazendo a vida deles mais difícil – afinal, elas têm dinheiro de sobra para subsidiar os usuários. Nesse cenário, a disputa passa a ser travada entre empresas dispostas a dar cada vez mais incentivos para atrair clientes, algo que descrevem como CAC, Custo de Aquisição de Clientes, para justificar gastos desproporcionais com promoções, descontos e presentes. Como as taxas de juros estão muito baixas e, em alguns casos, até negativas, os investidores jogam dinheiro nos fundos de private equity/venture capital que, em seguida, “investem” em negócios que estão crescendo (sem lucro). A falta do lucro é até uma grande vantagem para elas. Se dessem lucro, seriam avaliadas por um múltiplo qualquer – não dando lucro, elas são avaliadas por algum índice criativo, como eyeballs, usuários, ou algo assim, fazendo com que os aportes não pareçam tão absurdos. Derradeiramente essa onda de taxa de juros negativa deve chegar ao fim, trazendo o estouro da bolha dos fundos de private equity e venture capital. Com a falta de dinheiro no setor, as empresas investidas, que não dão lucro, sofrerão as consequências, já que sem aumentos constantes e sucessivos de capital, elas não conseguem se manter. O prenúncio do que pode acontecer...

read more

History does not repeat, but it does rhyme

In 2000, one of the biggest discoveries in the oil sector was made, the Kashagan field in Kazakhstan. This discovery is considered the largest in over 30 years, as the field has estimated reserves of 13 billion barrels of oil. Following this discovery, several industry consultants believed the world would be flooded with cheap and plentiful oil from Kazakhstan, and OPEC members reduced CAPEX substantially in their fields. For sure, if a big producer were to step in and make prices go down, it makes no sense to invest to increase production. Unfortunately, this field only started to produce in late 2013, many years after those expert’s estimates. Technical and operational difficulties caused a much longer delay than many thought possible. The lack of investments in CAPEX was one of the causes that contributed to the rise in oil prices between 2005 and 2008. I always hear people say that they are going to renovate their houses and expect to complete the work in X amount of time and have a budget of $Y. In the end, the time ends up being 2X longer than forecasted and the actual spending 3$Y or more. This in a residence, which is a controlled environment and people have extensive knowledge of the details of the place. Now imagine a mine. Mines are famous for taking much longer than expected (and also costing way more than forecasted). The example of Cigar Lake is important. Cigar Lake is one of the largest uranium mines in the world and was discovered in 1981. Production start-up was estimated for 2007, then 2008, then 2010, then 2011, 2013 and finally, in 2014, the mine actually started operating – a delay of 7 years! There are no major uranium projects expected to come online in the next few years, but industry consultants are still talking about Arrow and more Kazakh product. As a result, several uranium producers are drastically reducing CAPEX, which will impact production in a few years. Even Kazatomprom is cutting down spending. Today less than 140 million pounds of uranium is produced per year, while more than 190 million pounds is consumed. The situation is unsustainable and we are seeing several consultants discouraging investment in the industry by saying that new mines can come to production very soon and there will be no surprises. We have seen already this movie with oil a few years ago. As the old adage goes, history does not repeat, but it sure...

read more

Uranium Presentation Slides ausIMM

Uranium 2019 Presentation AdelaideBaixar

read more

IMF

The markets are back at or close to all-time highs and selecting investments at this point is becoming quite tricky, especially for a fundamentalist and contrarian investor, like me. Also, trying to follow the macro tourists into which sector is poised to go up can prove itself a very difficult task – or, as experience shows us, equivalent to flipping a coin. But I believe I have stumbled onto something that could be a real opportunity at the moment: IMF – and I am not talking about the one led by Christine Lagarde. IMF Bentham is a litigation funding company providing funding to plaintiffs in Australia, New Zealand, Hong Kong, Singapore, United States and Canada. The name stands for Insolvency Management Fund and it is related to its initial target – insolvency-related issues. The company has its origins at the beginning of this century, did a back-door listing in Australia and it is traded now on ASX under the ticker IMF. IMF has been in the ASX top 300 companies since 2009. They simply finance litigation cases and do not provide investment advice. Up until 2015, the company used to invest its own money on the litigations it funded. This brought some idiosyncratic risk that the Board decided to diversify away from. Also, the earnings were a bit lumpy and the company was restrained by its own capital to grow. Hence, from 2016 onwards, the company changed its business plan and decided to raise funds, in which it also invests, alongside investors, to finance growth and diversify risk. So, in February 2017, the first fund, focused on the US, was launched. Soon after, in October 2017, the second fund, for the rest of the world, was launched. Today the company is already launching its 5th fund (the 4th fund is already closed and it was a success in terms of capital raising) and it is already oversubscribed. The due diligence process of the investors is still going on, but commitments have been made. Both the 4th (focused on the US) and the 5th fund (rest of the world) will be a US$500 million fund each. IMF is transacting from a risky venture to a more asset management company venture, with a little spice (it invests in its own funds 20% of the fund’s target capital raising) and still has a few investments on its balance sheet. This explains why the company holds so much cash on hand. Once fully invested, IMF has to put US$200 million of its own capital on its 4th and 5th funds, not accounting for the option they have to double the size of these funds. The funds are similar to private equity funds, with capital calls and management fees and performance fees (which varies according to the IRR). Fund 1 still needs to make commitments and Fund 2 & 3 have only 10% of capacity left. Fund 4 is already being invested and Fund 5 should close by July 2019. Funds 4 & 5 are considered to be “new generation” funds, and they charge a quarterly management fee and performance fee. Funds 4 & 5 have an option to raise another US$500 million, so after investing 75% of the proceeds of the funds, IMF will most likely exercise the option to raise series II and double the size of the funds. IMF has 50 investment managers that are litigation specialists. The cases are brought to them and these investment managers select the ones they really like. From there, they sign a non-binding term sheet which gives IMF exclusivity for 30-45 days so they can...

read more

End of the Year Newsletter

As usual, I would like to begin this letter thanking all our partners for the support and trust and our employees for the excellent year we had. Despite all the challenges in 2018 – perhaps the most complex year of the last 10 – L2 Capital has managed to grow and reach new heights. This year we started our first international fund, the L2 International Opportunities Fund. The goal, as the name itself already suggests, is to look for opportunities in the marketplace to deliver capital gains in the medium and long term. We always look for assets that are being traded at a value well below their intrinsic value (in the case of longs) or too high (for shorts) to make high conviction allocations. The great opportunity of the moment, according to our models, is in the uranium sector, in which we have focused and conducted a thorough due diligence. We expect strong returns on this investment and we will report every 3 months to our partners. As always, I will make my only prediction for the new year: all analysts, economists and strategists will miss the predictions for this coming year. Last year, experts predicted Brazilian GDP growth in 2018 of 2.68% and it will be at around 1.4%. The exchange rate, which was to stay at 3.32, ended the period close to 4. We will not get any specific bank or brokerage report, but according to the Focus report, which meets the median of expectations, for 2019 it is projected an inflation rate of 4.03%, dollar to 3.80 and GDP growth of 2.55%. We will follow the development in a year’s time. Once again, we managed to deliver good results in our international portfolios, our investment focus. The average portfolio rose about 8% this year – far short of what we have been delivering in recent years, but still a far superior result than most players on the market. We suffered a little towards the end of the year because of our exposure to uranium, which we will mention later. On the Brazilian side, we had an important election in 2018 with the victory of candidate Jair Bolsonaro. Among other proposals, Bolsonaro has brought a leading economist to become the Finance Ministry, and the market is awaiting major reforms, including the pension reform, which is of major importance and urgency. We will be happy if a real pension reform is approved and we believe it is of real value for the country. Without it, the debt-to-GDP ratio will explode, generating serious negative repercussions on the economy. Of course we are excited about the new government and the proposals being discussed, but we believe that the market is partially pricing this reform and we think it prudent to wait a little longer. There was some renewal in Congress, but not to the point of inspiring full confidence in the adoption of measures that are essential to fiscal rebalancing and the resumption of growth. Moreover, Brazil is part of a globalized world and risks from other places can – and normally do – reach these shores. Our decision to take the foot off the accelerator at the end of last year and start stepping lightly on the brakes proved to be right, and we were able to deliver good results on the international front. Most of the investments made this year were concentrated in the uranium sector, and despite a significant 40% increase in the price of the commodity since the lows in 2018, many stocks in which we invested rose but returned the gains at the end...

read more

Australia Trading Journal – Part 6

Since our last update, on June 5th, we kept our NCM position without selling calls, as we expected gold prices to go higher. Our expectations were confirmed and the metal price rose nearly 10% in less than a month in USD. NCM shares have risen by 28% since we bought them on May 09th. We decided to write more covered calls: Trade Sell (Call) Security: NCMGZ7 Price (AUD):1.11 Date: July 12th Strike (AUD): 26.50 Expiration date: July 28th In case of being exercised on this option, we expect to get a 36% return in less than 3 months. If the option expires worthless, we may have to analyze markets conditions to decide whether to sell more calls or to simply carry the shares, as we did last month. We will be releasing a new report as soon as we decide to do any other moves regarding this...

read more