Portfolio Update

Greetings and welcome - we’re updating our Trade positions, narrowing focus and consolidating.
This brings with it some risks and many benefits.

To recap. Our positioning has long been identifying multiple deep value opportunities globally.
Structure a portfolio diversified both geographically and across sectors.

The changes we’re making are quite simply due to the current crisis which is changing the shape
of the world as I write this and we believe it a prudent time to go deeper and narrower. To pare
some of the fruit trees and focus more intently than ever before. The economic destruction being
wrought on the global economy by shutting it down is nothing short of mindblowing, and the
resultant policy and central bank actions being taken...and to be taken (see the recent MMT special
report) will we believe bring about an incredible and what seems to be (unless some miracle takes
place) a violent shift in wealth.

First, let us define Buy, Hold, Sell:

• Buy - if you haven’t already got you can buy at current levels
• Hold - if you already have the positions then hold. If you don’t have them then refrain
from buying.
• Sell - if you have the positions then sell.

By simplifying the themes in our portfolio we hope to make it easier for our subscribers and
especially a number of new ones who recently joined, so making it more focussed will be easier to
manage as well as being intensely focussed on the outcomes. For those who have been following
us since we first began publishing in 2016 it isn’t such an issue. Personally we’re holding what we’ve
discussed and where we aren’t we’ll mention below. But for those who have recently subscribed
to the Insider my concern is it may be somewhat confusing and overwhelming. So let’s take a step
back and simplify.

AUSSIE REAL ESTATE

Sell - closing all trades

We remain bearish on the Aussie Real Estate market. Real Estate prices in Aussie remain one of
the most expensive in the world and Aussie consumers are over leveraged as a result. The onset
of Wuhan Zombie flu (WZF) is already causing problems in the repo market where collateral is
increasingly difficult to value, which in turn causes liquidity issues. We know all that and on the face
of it none of it is bullish for leveraged assets. Which makes our bank trade look positively smart as
hell. Thing is the central banks know this and are throwing everything and the kitchen sink at it. The
crux of the matter is that the consequences to the actions being taken are now so overwhelmingly
important to us (the biggest macro trade of our lifetimes) that we’re going to focus on that and that
almost solely.
The other problem we always had was expressing a bearish view on Aussie real estate. For us the
logical trade was to do long short trades on Aussie Banks, long foreign banks and short Aussie
banks against the long positions with the view that Aussie banks would go down by more than
foreign banks or go up by less. We figured that if the central bank (RBA) held rates artificially low
things could hold up real estate values in nominal terms (in AUD) but if this transpired the currency
would get treated to a thrashing...and hence a long USD short AUD position both synthetically via
the bank trade as well as us mentioning doing so directly in the FX markets (long USD/AUD).

We didn’t know which would happen though there was always a possibility both would take place
and we’d feel like Gods amongst men, which my wife tells me is not true. When we put out our alert
the AUD was trading around 80 cents to the greenback so it’s worked out on that front though to
be fair the entire dollar trade has more to do with many other factors than the Ozzie setup. We’re
still long USD broadly via UUP and call options on UUP.

One problem with this trade, at least for Insider members, has been that many members aren’t
familiar with long short trading and/or they are unable to execute them in their portfolios. It’s
all very well to have fancy trade but if it’s a tricky one to implement and manage then it loses its
appeal. After all I don’t want to give you some great idea without an effective way to execute on
that.

So with the idea of simplifying our portfolio we are closing the Short Aussie Real Estate trade.

If you own it...as we do then by all means keep it. We are. We’re just simplifying things for Insider.

BATTERY METALS
• Buy nickel producers - Panoramic, Mincor, Western Areas, Poseidon

• Hold nickel developers - GME Resources & Ardea Resources.

• Hold cobalt developers - Cobalt Blue, Jervois, & First Cobalt
• Hold vanadium - Australian Vanadium, Largo Resources, Capstone Turbine, King River
Resources

We started talking about “battery metals” back in 2017 and we produced trade alerts on:

• Cobalt
• Vanadium
• Nickel

Our current positions:

We still believe in the long term fundamentals of all these three metals as they are, and will remain,
integral to the demand for batteries. However, we believe this trade can be simplified down to just
Nickel.

Nickel is one of those vital metals covering many different basing applications and also gives you
exposure to Cobalt (Cobalt is essentially a by-product of Nickel and Copper mining). So by having
exposure to Nickel you cover many bases.

COPPER
Buy - Freeport (this is a new trade)
Hold - Nevada Copper, Surge Copper, Rex Minerals, Hillgrove Resources, Turquoise Hill

We’re going to consolidate our exposure to Copper to one counter - Freeport (which we are buying
as a new trade).

The price of Freeport is so low that we don’t think that one needs to take on additional risk of
buying smaller cap companies. Freeport will make it through the current crisis.

For those of you who already have the other copper counters there is probably no harm in holding,
after all we haven’t changed our long term views on copper for its industrial uses and also its
inflationary properties. Contrary to what most people would have you believe, copper has better
inflationary properties than gold! Yup…..it’s true. Don’t believe me. Pull up a chart of any inflationary
period and the returns of asset classes and you’ll see it’s as true as the night is dark. It’s one of
those metals where there is no substitute. However, copper is getting more costly to produce as
mega copper mines approach the end of their lives and ore grades continue to deteriorate. The real
question is around what level of intensity the crisis produces. Those players that are levered may
not make it through.

BITCOIN
Buy - Bitcoin was forged in the 2008 crisis. It was quite literally built for what we’re in right now. I’m
possibly more bullish about Bitcoin than anything else in our portfolio. The halving is coming up in
under a month, which will decelerate the increase in supply and oh….have you looked at the world
today?

The events we’ve seen over the last decade in places such as Cyprus (remember that?) and
Argentina...and Zimbabwe...and let’s not leave out Venezuela. In every single one of these disasters
bitcoin premiums in those countries rocketed and Bitcoin became quite literally THE best asset to
own. And here we sit with much of the developed (sophisticated) world pursuing some of the most
extraordinary initiatives we’ve ever seen. It is beyond remarkable.
I’ve been buying fairly heavily at anything below $7k for the last few months. I even managed to
pick some up around $5k. There are obviously risks but an allocation to bitcoin is in my book - a
must.

If you don’t know how. Go check out our special report on it.
One other thing. Sure you can hold it in a brokerage account but the real value of it is in YOU
owning it with no counterparty risk. Go educate yourself on how to set up a wallet, buy, sell and
manage the investment. It’ll take you a day tops and may be one of the most valuable days of
education you’ve ever had.

US DOLLAR
Buy - ETF UUP

We continue to believe that the US Dollar will move higher over the next few months and possibly
longer. Yes there is going to be lots of confusing volatility over the coming weeks surrounding the
CoronaV issue. However, long term there is going to be a huge dollar liquidity squeeze.

As a basic underlying position we reiterate our buy on the ETF UUP. There is also a liquid option
market available for UUP.

We recognize that European Clients are not permitted to trade UUP (due to crazy Mifid II rules).
However there are a few work arounds. You can choose to hold USDs instead of Euros or GBPs
in your bank accounts and or brokerage accounts. You could also open an FX trading platform like
SaxoBank - they offer a variety of FX trades including an array of FX options on currencies.

Here are my notes from the call. Hopefully they will be helpful to you.
Trade: limit long on USD

JAPANESE EQUITIES
Buy - ETF DXJ (Wisdomtree Currency Hedged ETF)

Japan was cheap before the CoronaV crisis hit and has become even cheaper over the last couple
of months.

Japanese stocks have high cash and low debt levels. Moreover, liquidity continues to tighten with
the BOJ increasing its purchase of stocks via ETFs. With BOJ purchases stock free floats have
been significantly reduced. Perhaps this helps to explain why the average Japanese stock is down
significantly less than US stocks.

For Europeans who can’t trade US ETFs there are plenty of Japanese focused ETFs listed on
European exchanges for example the Lyxor Japan ETF trading on the Paris exchange which tracks
the broad Japanese TOPIX Index.
GREECE
Buy - ETF GREK

Most things in Greece were looking positive before the CoronaVirus hit. Our thesis being...things
were awful and needed to get to merely bad. But of course that is in the past. What matters is the
here and now. The question is - if you didn’t own the Greek equity market would you buy today?
There is absolutely no doubt that the tourism dependent Greek economy has taken a hit. However,
if we can look through this crisis and ask ourselves - where will the Greek economy be in a couple
of years? I guess that depends on your perspectives on how long this virus crisis will last. Will it be
relatively short lived, citing the Chinese and Korean experience. Or will countries be very slow to lift
international travel bans?

Perhaps it is a bit philosophical, but viruses come and go and don’t tend to stay around for extended
periods of time. We suspect that the virus will pass within a couple of months (being conservative).
However, social distancing and travel restrictions won’t be relaxed overnight, it will be a gradual
process. But two years from now planes will be flying and Greece as a holiday destination will be back in
vogue. The entire market is currently priced for bankruptcy and there will be plenty of those but we
don’t think it’ll go away.

So if you currently hold GREK then it’s probably not the right time to sell, and if you don’t hold it
then it’s a wonderful entry point.

There are two Greek ETFs - GREK (trading on the NYSE) and the Lyxor MSCI Greece ETF - LGRE
(trading on the Paris exchange).

SOLAR
Hold - ETF TAN

We’re issuing a hold on Solar (ETF TAN) only because we think there are better opportunities out
there to invest new capital in. TAN has only dropped some 15% since the start of the year. For the
time being if you hold TAN it probably doesn’t make any sense to sell it. We will review this once
TAN recovers.

Solar will continue to grow, we think it has far better fundamentals than wind. However, we do
acknowledge big solar developments are likely to be put on hold until the Corona crisis abates.

RATES
Hold - BAC and Credit Suisse.

At the start of the year we had a high conviction that “5yrs from now rates are going to be materially
higher” we also held the belief that we are on the cusp of a bear market in bond prices that will last a
couple of decades, i.e. it won’t be just a decade long thing. The fiscal and monetary response to this
crisis by governments and central banks alike has only served to elevate our conviction.

Perhaps this virus crisis was the very event/catalyst we were looking for (but had no idea would
happen, nor did we want it to happen) that pricks the unprecedented confidence in government
bond markets.
If you think about it - is there anything more that Central Banks and governments can do to burst
the wealth maintaining properties of government bonds? We are struggling to think of what else
they could do to debase their bonds!

The big issue in the view that rates will move materially higher is exactly how to position for it.

Our macro view is that if rates are move higher it is because inflation is moving higher and we will
pick that up with our bullish positions in commodity based trades namely:

• Nickel
• Copper
• Gold in multi currency terms
• Energy

Our original idea was that banks will benefit as rates rise. Long term we still believe in that, although
the CoronaV crisi does cloud that view a little. In any event, putting money into banking stocks
probably doesn’t achieve anything different than putting additional funds into inflation sensitive
sectors (as per above).

So we’re putting a hold on banking trades.

By all means if you currently have these trades on in your portfolio, hold them. For new members
of Insider we look more closely at commodity based sectors. We’re trying to keep things simple for
readers and economise on positions where we feel appropriate.

SPECIAL SITUATIONS
Tesla - Hold

We were and are bearish on this gigafraud. As much as we believe that Tesla is one of the most over
hyped and overvalued large cap stocks listed in the US and that it will eventually fall dramatically -
the payoff is just not there for bearish option strategies.

Beximco Pharmaceuticals - Hold

A manufacturer of generic medicines. Revenues and profits continue to rise and as an individual
company we don’t see any issue with Beximco. However, we’re trying to get back to sectors and
themes rather than individual situations. For this reason we’re placing a hold on Beximco. If you
already hold Beximco then we see no reason why you should not continue to hold.
OFFSHORE OIL SERVICES
Buy
• Tidewater
• CGG
• Subsea 7
• Saipem
• Helix Energy Services

Hold
• CGG and TDW warrants

Sell
• Valaris
• Seacor Marine

Our current exposure:

Any exposure to oil services has just witnessed a perfect storm - demand for oil plummeting
because of the virus and the break apart of the OPEC Alliance.

What is now priced in? Virtually every oil service company is priced as if oil will be oversupplied for
a very long time, well long enough for virtually every oil field service company to go bankrupt.

So buying Oil Field service companies now is essentially a call on oil getting above $50 a barrel over
the next few years.

Can oil stay where it is? Well no one is making any money with oil the way it is. Not only will a
few oil majors go tits up, but so too will many nations who depend on oil income. I don’t want to
sound like one of those newsletter clowns making bombastic claims, frightening you into hiding
in a corner whimpering (that aint me) but if the oil war goes on for much longer governments will
literally topple. I mentioned in past issues the dollar peg mideastern countries and the dynamic in
play there. Those are the ones to watch for. The point is that as this incredible amount of oil hits the
market it is putting a ton of oil producing countries into quite the pickle. That’s supply destruction
right there.
The Ruskies and Saudi’s are pushing hard and it’s both a geopolitical as well as economic play. If you
could get rid of your competition in business would you? The question is rather how long they can
continue running a current account deficit to the magnitude they are?

The oil producers that can stay alive through this will come out of it with MASSIVE market share.

The magnitude of the global panic over the CoronaVirus has surprised us and so too did the
breakdown in the OPEC Alliance. However, if we were in the fortunate situation of not having any
exposure to oil field service companies we would certainly be licking our lips at what appears to be
a once in a lifetime opportunity now.

One just has to be careful in picking companies that are well capitalized.

RARE EARTH METALS

Buy - ETF REMX
Hold: Arafura

A short term setback with the virus but long term the fundamentals for Rare Earth Metals haven’t
changed. Why a hold on Arafura? There is nothing wrong with the company, if you are happy to take
on the risk of a small cap mine developer and you believe in the long term outlook for REMs then
you can certainly buy Arafura. The issue is that the components of REMX have become so cheap
that for the less risk inclined just buying REMX makes a whole lot of sense.

SHIPPING
Buy - Golar, Frontline, Scorpio Tankers, Star Bulk Carriers, Coatamare, Pacific Basin Shipping
New trades - Buy DHT, Teekay Tankers, Euronav

Our current shipping exposure is as follows

To this (as previously mentioned in our update on tankers and weekly commentary we ramped our
tanker exposure) we have also added crude oil tanker stocks DHT (DHT), Teekay Tankers (TNK) and
Euronav (EURN)
Pre Corona we were bullish on shipping stocks primarily due to the lack of supply of new shipping
capacity coming online over the next 5yrs (limited orders on shipbuilders’ books). It was difficult to get
financing to build new ships, in addition, even if a shipper could get financing for a new build, there
wasn’t the capacity at shipbuilders as many shipyards had closed while others were busy doing
IMO2020 conversions. While demand for dry bulk and containerships has fallen somewhat due
to the CoronaV, on the positive side, finance for new ship builds has dried up like a puddle in the
Sahara.

The other positive of this virus crisis is that it has created unprecedented demand for storage of
crude on VLCC tankers with tanker rates more or less at record highs. Tanker stocks (FRO, DHT,
INSU, NAT, TNK, Euronav) have just started to move higher and sit on ridiculously low forward P/Es
and forward divi yields are in their mid teens. How long will this demand for storage last? We don’t
know but we do know that there was limited capacity for transporting crude at the start of the year
and with little new builds set to come online over the next few years we expect that tanker rates
will remain high even when demand for crude picks up as the world gets over the Corona crisis.

Bottom line is tankers are going to print money and nobody is really looking at them. We anticipate
at a minimum 3x multiples though there’s no reason we can’t see them run 10x. Yes really!

SOUTH AFRICA
Buy: XAU/ZAR, XPT/ZAR (gold & platinum in ZAR)
Sell: long short equity trades

South Africa has just been downgraded to Moody’s downgrades South Africa to junk status. What
the hell took them so long? As Business Insider reports

So the cost of South African debt now goes up and the cost of doing business in SA goes up
• Higher costs for financing mines and projects - which means less supply of gold, plat,
coal, iron ore etc
• Higher cost of producing agris - less supply
• Higher food prices - Inflation runs even more rampant, and the natives become
restless, start destroying things, looting, killing ...you get the picture. Basically another
day in Africa.

The real deal here is that there are more supply constraints of key commodities - precious metals,
coal, iron ore, base metals, grains. This is what we said some 2yrs ago in our South African
investment alert and we were...as is all too often the case...a bit early.

And the virus in Africa? Hmm, this is going to absolutely flatten South African industry and mining!

OK how best to trade this? We did a series of long short trades

Long

• Gold in ZAR
• Platinum in ZAR

Long world banks (HSBC) and short FirstRand (South African banks)
Long world retailers (Target) and short Woolworths (South African retailers)
These trades have worked out really well for us and we still believe there are more gains to be had.
However, we realize that long short trades are a bit complicated for many and they carry the added
risk of leverage. So to keep things simple we are going to close our long/short stock trades HSBC,
FSR, TGT, WHL.

However, we are going to keep our gold and platinum holdings in ZAR terms. These are reasonably
simple trades particularly those who have FX trading platforms like Saxo and IG Markets who
actually quote a price for gold and platinum in ZARs (amongst other currencies).

If FX trading isn’t your thing or you look at it in the same way I look at a shelf full of beauty products
(WTF is all that stuff?) then here are two easy ways to execute on this.

Both of these are backed by physical (our head trader Brad actually helped structure these products

If you’ve access to the London exchanges you can buy PHPT which trades in London and is
physically backed too. This provides exposure to Platinum.

If your broker only allows you access to US exchanges don’t complicate things and just buy PPLT
(The physical platinum ETF) which trades on the NYSE.
For gold exposure see below.

GOLD
Buy: XAUAUD, XAUEUR, GDX
Hold: Goro, Gran Colombia, Pretvim, Northern Vertex, Endeavour Silver

We believe that the environment for gold hasn’t been as bullish in a generation or two! It seems
central banks and governments are doing all they can to debase their currencies and breakdown
confidence in government bond markets. How high will gold and precious metals go? We don’t
know but we are “reasonably” confident that a bull market lasting at least 5 yrs has already kicked
into gear.

Our current exposure to Gold (excluding the South African trade)

We are going to maintain our buys on gold in AUDs, gold in Euros, and GDX.

However, in order to keep things simple we will place holds on Goro, Gran Colombia, Pretvim,
Northern Vertex Mining and Endeavour Silver.

Direct gold exposure you can buy the ETF GLD which trades on the NYSE.

COAL
Buy - ETF KOL
Hold - Mongolian Mining Corp

We maintain our buy on the coal sector ETF KOL. For Europeans who are not permitted to buy KOL
it isn’t hard to find cheap well capitalized US and Aussie coal miners (as per our alert).

We’re placing a hold on Mongolian Mining, there are US and Aussie coal miners out there that
are now equally as cheap as MMC without the risk that goes with owning a miner in Crazystan
Mongolia.

For those of you who are unable to trade KOL then you can invest in the coal mining stocks listed
below which will give you a good representation of the world coal sector
ANTI-DRONE TECHNOLOGY
Hold - Rada & DroneShield

We are placing a hold on the “Anti-drone” theme. There is nothing wrong with the stocks or the
theme. We continue to stand behind our original thesis on this theme. However, in an effort to
reduce the number of themes we are covering we are going to place a hold on this theme.

HYDROGEN
Sell - Nel, PCell & Ceres

Current holdings:

This might come as a bit of a surprise. However, with the price of oil now cheaper than water and
world economies in the gutter, we feel the ESG theme, and with it the crowds’ interest in hydrogen,
will take a back seat for quite some time. Compounding this is the fact that all these hydrogen
stocks are free cash flow negative and they have only survived with continual equity capital raises.
This is all fine while there is a belief in the concept but it falls apart when investors start to demand
a return on their capital.

We have actually made some reasonable money from the hydrogen trade which makes it a much
easier proposition to sell from a psychological perspective.

URANIUM
Buy - all holdings

Can we qualify the “buy” by saying don’t overweight any one component in the list below. We really
don’t know which stocks will outperform and which will underperform.
Cameco has now shut down Cigar Lake which effectively takes some 10% of world uranium
production offline, and it’s likely to remain offline for many months. This almost guarantees the
uranium price will move materially higher because Cameco will only bring supply back online when
it is able to lock in materially higher prices. What about demand? That doesn’t change too much,
it’s inelastic as nuclear power plants virtually run at full capacity all the time. Electricity production
cannot be ramped up or down unlike gas or coal fired power plants.

Bottom line. Everything we mentioned in our original Uranium alert remains true so if you want a
deeper dive go read the alert in the archives.

That’s it for this update my friends. Stay safe.

REFER A FRIEND
Much of our subscriber base love our work and refer their friends. For this, we’re extremely grateful
as we’re isht at marketing, dislike it, and prefer to spend our time on things that make us happy.
Markets basically.

I’d hate for any of you to refer friends and not get something out of it, which is why we have a 30%
discount both for your friends, colleagues, and even your enemies if you send them this way. And
you’ll score yourself a bonus 4-month subscription, which amounts to the same thing.

Nobody wants to feel like they’re selling their mates something only so they can get something in
return. That’s not how friends work.

In any event, below is the link for this so when you’re singing the praises to your friends, please use
this link to ensure they get a better deal… and you do, too:

https://capitalistexploits.at/refer-a-friend/

Lastly….if you’re not on it already feel free to join the telegram channel (as a fly on the wall) where
hedgies myself included banter and discuss markets. If you’re easily offended then best you stay
away...otherwise...buckle up. Go here to get instructions.

As always, thanks for reading and being part of Insider.

Sincerely,

Chris MacIntosh

Founder & Editor In Chief, Capitalist Exploits Independent Investment Research

Founder & Managing Partner, Glenorchy Capital

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