How to Profit in a Crash or a Boom ft. Louis-Vincent Gave & Harris Kupperman
Oct 7, 2023
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Louis-Vincent Gave and Harris Kupperman discuss the emerging bull market in emerging markets, the debasement of Western currencies, and the underinvestment in energy leading to a structural energy crisis. They also explore the investment thesis on the energy sector, focusing on uranium, and discuss the significant net migration to Florida and the reasons behind it. The podcast ends with a discussion on China's strategy and upcoming episodes on macro energy and industrial material connections.
Emerging markets, excluding China, are outperforming Western markets in currencies, bonds, and equity markets.
Western currencies, including the US dollar, are being debased due to unsustainable fiscal and monetary policies enacted during the COVID crisis.
Investing in energy services companies, particularly in the offshore energy sector, can offer attractive long-term opportunities.
Deep dives
Emerging markets as a deep structural trend
Emerging markets, excluding China, are experiencing a structural bull market. Countries like India, Indonesia, Brazil, Mexico, and Argentina are outperforming Western markets in various aspects, like currencies, bonds, and equity markets.
Debasing of Western currencies
Western currencies, including the US dollar, are being debased due to unsustainable fiscal and monetary policies enacted during the COVID crisis. The US, for example, has a significant share of global budget and current account deficits, which cannot be sustained in the long term.
Shift towards energy crisis and volatility
The under-investment in energy over the past decade has led to a structural energy crisis, and rising energy prices are contributing to weaker productivity across economies. The interconnection between these trends suggests a future characterized by volatility and potential economic challenges.
Investing in Energy Services Companies
Investors who are interested in the energy sector should consider investing in energy services companies. These companies, particularly those in the offshore energy sector, offer attractive opportunities for long-term investment. Offshore energy equipment, which can be obtained at a fraction of its replacement cost, shows considerable potential for growth. Additionally, these companies typically have low cash flow multiples and strong balance sheets. Despite potential volatility in the sector, owning these energy services companies is a strategic move for investors looking for opportunities in a cash-starved world.
The Energy Infrastructure Boom in Emerging Markets
Emerging markets, particularly countries like Latin America, the Middle East, Southeast Asia, and India, are experiencing a significant infrastructure spending boom. These regions are rapidly growing their financial centers and investing in building roads, airports, power plants, and more. This surge in infrastructure spending is driven by the availability of commodities in local currencies, which removes traditional constraints for these economies. As more people in these regions become wealthier, the demand for automobiles and other consumer goods increases, leading to a rise in energy consumption. The trend toward nuclear energy also contributes to the potential for higher demand in emerging markets. Investing in emerging market equities, government debt, and corporate debt, as well as exploring opportunities in nuclear energy and commodities, can be lucrative in this environment.
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In part 8 of our Crash or Boom series, Ash Bennington welcomes Harris “Kuppy” Kupperman, founder and CIO of Praetorian Capital, and Louis-Vincent Gave, CEO of Gavekal Research to learn their global economic outlook and why they think a boom is coming for emerging markets and uranium.
