Of general interest: Forget Lithium for a while and maybe even cobalt..Gold is our thing.

A little bit of light reading.Interesting bits on Lithium,Charle Munger advice[very apt], and director resignations because of poor governance!!. I thought directors were responsible for that; vide GSR. We live and learn.

The Weekly Wrap| 3 December 2023

Welcome to the Weekend Newsletter! A bit of a quiet one for markets this week – The ASX 200 finished the week up 0.46%. Last week, we asked ‘where will iron ore prices be at the end of 2023’: 53.5% – US$130 a tonne 25.6% – US$100 a tonne 18.0% – US$150 a tonne 2.9% – US$200 a tonne At least historically speaking, December is the best month of the year for iron ore prices – Since 2008, prices have averaged a 10.6% gain and higher 93% of the time.

IN TODAY'S EDITION 1. Goldman Was Right After All 2. Say Hello to Alerts 3. Poll of the Week 4. It’s a Hard Nut Life 5. Trading the Neighbour 6. Three Director Resignations 7. Cybertruck > Everything Else 8. Short Bites 9. Cartoon

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1. Goldman Was Right After All

Goldman Sachs caused a lot of uproar back in May 2022, when they said “we see the battery metals bull market as over for now.” Twitter was littered with users calling them out as market manipulators, alleging that they were trying to drive down valuations to acquire cheap shares. Chinese lithium prices are now down almost 75% since the above Goldman note. I guess this is where they say – I told you so. In this week’s education piece, we’re going to revisit some of the key takeaways from Goldman’s ‘Battery Metals Watch: The end of the beginning’ note plus some of my key learnings from reading broker notes. The best bits: Lithium traded like a stock: “... with a surge in investor capital into supply investment tied to the long-term EV demand story, essentially trading a spot driven commodity as forward-looking equity.” A massive supply push: “That fundamental mispricing has in turn generated an outsized supply response well ahead of the demand trend in focus.” Supply by the numbers: “Battery’s demand prospects, combined with their clear ESG benefits, helped trigger the start of a supply capex surge from the late 2010s that was merely accelerated by the policy response to COVID. As a result, over 2022-25, we expect lithium supply to grow on average by 33% year-on-year.” Price outlook: “We see prices on a downward trajectory over the course of the next two years, with a sharp correction in lithium (GSe average 2022 US$53,982 a tonne and 2023 US$16,372 a tonne) and to a lesser extent, cobalt.” What I’ve learned from reading broker notes: Take ratings and target prices with a pinch of salt: Some brokers will run companies through several optimistic assumptions to derive at a seemingly outrageous share price target. One of my favourite examples is Macquarie’s target price for Sayona – As at 31 October, they had a 17 cent target price or 112% upside. They’ve had lofty price targets for the stock for well over a year while the stock is down almost 75% in the past twelve months. Magnitude of change: But on that note, when brokers upgrade or downgrade their ratings and target prices – This matters. The magnitude of change is also important. Take AGL for example, the company provided a guidance update for FY24 on June 16, which included a material tick in earnings expectations. The stock rallied 14% on the day. The next day, the average price target across 10 sell-side ratings rose 9.3% to $10.44 (and the stock would go on to rally another 15% by August 1). Models matter: While I tend to ignore ratings and target prices, I pay a lot of attention to their models, assumptions, and forward looking estimates (especially for well-documented large caps as opposed to more volatile companies like Sayona). Any miss or beat against these expectations matter.

2. Say Hello to Alerts

I haven't put it all up,its a bit lengthy.The Charlie Munger quotes and director resignations are further on.

6. Three Director Resignations

This is one of the wildest things I’ve ever seen – Three directors from Rectifier (ASX: RFT) all resigned in the one go, citing ‘series concerns regarding corporate governance’ as well as ‘series concerns as the result of a potential hostile takeover’. Rectifier is a $50m market cap company that specialises in developing and manufacturing high reliability and efficiency power conversion products. Here’s the sequence of announcements on Wednesday, 29 November: 1:48 pm – Pause in Trading 2:02 pm – Trading Halt 2:45 pm – Resignation of Directors 2:47 pm – Suspension from Quotation So what happens now? ASX listing rules require companies to have at least three directors, with at least two of these directors residing in Australia. On Friday, 1 December, the company said it was in the “process of undertaking a search for qualified and experienced Director candidates.” If the company can’t fill these vacant positions, it will likely delist. But then again, they also need to fix the internal problems that caused this mass exodus in the first place.

Tck starts at US$60,990 and there’s also a Cyberbeast model priced at US$99,990.tesla is set to start deliveries of its long-delayed, highly-anticipated Cybertruck this week. The Cybertru Here’s everything you need to know for the top model, Cyberbeast: 0-60 mph in 2.6 seconds 11,000 lbs towing capacity 2,500 lb payload capacity Tesla armour glass Bulletproof 845 horsepower (a Mazda 3 has 191 horsepower) Option for a ‘range extender’ which adds 440 miles Here’s a video of the Cybertruck racing a Porsche 911 and beating it … while also towing one of those said Porsche vehicles.

8. Short Bites

In memory of Charlie Munger – Here are my favourite quotes: "I think that every time you see the word EBITDA, you should substitute the words bullshit earnings." "Invest in a business any fool can run, because someday a fool will. If it won’t stand a little mismanagement, it’s not much of a business." "A great business at a fair price is superior to a fair business at a great price." "Bitcoin is probably rat poison squared." "Spend each day trying to be a little wiser than you were when you woke up. Discharge your duties faithfully and well. Step by step you get ahead, but not necessarily in fast spurts. But you build discipline by preparing for fast spurts. Slug it out one inch at a time, day by day, and at the end of the day – if you live long enough – most people get what they deserve.”

8. Meme of the Week

I feel like a lot of small caps will feel personally attacked.

Have a great week! Kerry and the Market Index team.

I do think the article has some application to GSR-in a general sense- in case the mods decide it could be considered extraneous and non relevant.


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