The Political Economy of Real Assets

Adam Turnquist (00:00):

Welcome to the Market Signals Podcast. Adam Turnquist here, chief Technical Strategist at LPL Research. Excited to host the call this week, but even more excited to introduce Will Thompson as our guest. Will's the founder and managing partner of Massive Capital, a long short hedge fund focused on liquid real assets prior to starting Massive Capital, will served as a co-portfolio manager running a portfolio of credit and political risk insurance policies for Hawser Lloyd's of London Insurance Syndicate. He also served as an economic advisor for part of NATO in Kabul, Afghanistan, and was a flag writer for a senior military commander. I had to Google what a flag writer was. Maybe Will can share some more insight there. He did graduate from Trinity College and also holds a master's in government from Harvard. Will welcome to the show.

Will Thompson (00:50):

Well, thanks for having me.

Adam Turnquist (00:52):

All right. Well, you came highly recommended from our research team. I had reached out to them asking for, really, who do I need to talk to for deeper insight into what's going on into the commodity markets in real asset universe. But before we dive into the markets, let's get a little bit more background, which as I outlined in your bio is, I would say, I think it's fair to say unusually diverse. Just curious how your past work experience helped really shape your view on global markets and understanding of geopolitical risk.

Will Thompson (01:27):

Yeah. So I think you know, the beginning of my career was pretty normal. It was private equity, investment banking, pretty normal finance stuff. I did the investment banking internship route out of college. I did it when it admittedly wasn't terribly competitive. I talk with guys now, or kids now basically leaving college. And I don't think I would've gotten a job I had to compete with these kids. But yeah, then it got a little more diversified, I guess towards the towards the middle of my career. You know, I think that the value, the challenge with finance, of course is that a consensus viewpoint is a mixed bag, right? If you follow some trend and momentum, a consensus viewpoint can work for a while.

Will Thompson (02:29):

But a contrarian viewpoint also needs to play a role at some point. And if you've got the same career and had the same experiences as everyone else, it makes it a little hard to have that outside viewpoint. And my career was not, you know, didn't follow an obscure path solely for that reason. But it was a happy benefit, I guess. And to that I'd add that I thought I was going to go into finance in college, and so, and I had everything sort of lined up with internships and things like that. So I also was a philosophy major in college. So I chose to study something that my peers didn't. And then with grad school which was 2008, 2009, 2010 period, or I guess 2009, 2010 period everyone was going back to business school.

Will Thompson (03:23):

I mean, because of the great financial recession, if you will. And I did choose deliberately to do something different there because it seemed like everyone was going back to do the same thing, which just seemed counterintuitive. I think though the international experience and specifically the international experience in a very different way, first with NATO in Kabul, as you said, sort of quote unquote flag writer, which is really just a generalist research assistant. And as an economic advisor presented me with a very unique perspective of what it takes to build an economy. And more importantly, perhaps how politics and economics are so interconnected, that insight, which barely qualifies as an insight that sort of general, if you will, which everyone would sort of nod their head and say yes to.

Will Thompson (04:32):

I actually attribute to a lot more of my success than people might imagine. Politics and economics are intimately related, intimately intertwined. And while we did experience a period of time in the sort of post Cold War era where it seemed like they were separate subjects very much siloed I think that was a an aberration rather than the state of sort of general the general operating sort of paradigm, if you will. And I think that those lessons related to that lesson and lessons related to that were picked up very much in that period of time. Whereas I was managing political risks insurance policies and that time in Afghanistan where I was actually involved in this sort of broader effort to try and build the economy but very much from the government side, if you will. And so, you know, that interrelationship is critical and probably the most important takeaway from my sort of more diverse background,

Adam Turnquist (05:42):

Right? Certainly philosophy in investing seemed to go hand in hand in today's world where the political environment is very much intertwined into the macro and the economy, the value I'm sure has increased in light of what's going on in markets today. Curious, you go from the security of a job in corporate America or as an economic advisor, what led you to starting your own fund? Was there kind of an aha moment that said, okay, I'm going to do this? Because That's a big leap of faith.

Will Thompson (06:20):

Yeah. So it's actually a somewhat amusing story. But I've been running the portfolio or co-managing this portfolio of credit and political risk insurance policies for a while. And the companies you deal with are in that business are all the sort of quote unquote, liquid real assets I deal with now. So energy companies, and that runs the gambit from you know, traditional upstream, midstream, downstream, oil, natural gas, all the way to renewables and some various idiosyncratic things like geothermal, for example and utilities. And then there's materials mining, principally mining but there's also, you know, chemicals, building products, timber agriculture, aquaculture, et cetera. And then industrials and infrastructure lumped together, sort of at the end. Infrastructure, you know, for us is everything except for airports. So electrical grids midstream oil and natural gas, toll roads, bridges, those types of things.

Will Thompson (07:31):

And then industrials are primarily companies that are the initial consumers of commodities and or service providers. Those are all the same companies you deal with in the credit and political risk insurance world. But what happens in insurance is you've got this nasty asymmetry where if a policy goes wrong in that line of business, you might be on the hook for 10, 15, $20 million in any given year but you're paid only one or 2% of the value of that insurance. So if one policy goes wrong and you're paid one or 2% and you're out 20 million or and you're out 20 million, you know, you've gotta slap a lot of, a lot of policies at one or 2% in the books in order to offset that loss. And so the asymmetry in the return profile is quite nasty.

Will Thompson (08:26):

And because we ran such a clean book, I got a little tired of not participating in the upside. Yeah. So I started the fund because I went to four or five hedge funds that we had relationships with, and they all told me that nobody ever made money in energy and materials, and everyone made a little bit of money in industrials, but everyone already had some money in industrials. I just couldn't wrap my hands around the idea that there was no money to be made in energy and materials. It just seemed ludicrous. So I quit my job after, you know, the fourth interview where I was told the exact same thing, that nobody makes money here and said, well, geez, if nobody makes money, I better start a business. Because if everyone thinks you don't make money, clearly there's money to be made.

Adam Turnquist (09:14):

Yeah. Talk about applying the contrarian viewpoint on that one. In terms of your hedge fund. How would you describe your investment process in universe, given it is a relatively unique area of the hedge fund industry?

Will Thompson (09:31):

Yeah. you know, so I often, and this doesn't apply to every company in our universe but I often talk about us investing principally in projects. And that sort of governs a lot of the research process, right? So someone is building something tends to cost, you know, several hundred million to several billion dollars and tends to take several years to build that cost will come up front, and then there'll be a cash flow for, you know, 10, 15, 20, 50, 40, you know, 40, 50 years, et cetera. And so, you know, we're very much project investors. Sometimes those projects are held by a business, say a Barrick Gold, where there are multiple gold mines. Other times that project is the business. And so approaching what we do from that project lens where we're always underwriting a project or a series of projects is sort of the lens through which we conduct our research in regards to the universe.

Will Thompson (10:41):

It's actually a far larger universe than people tend to think. It's a couple thousand companies across every market, say, for Russia, India, and China, which are three markets we don't invest in for various different reasons. E each one a slightly different reason. But it's a couple thousand companies and you know, well in excess of I forgotten what the market cap is now, but it's multiple trillions, which I guess in the grand scheme of things these days isn't that big, given that you have individual companies that are up there, but realm of $10 trillion or something. So it's a large market with a lot of things to do,

Adam Turnquist (11:28):

Right. And lots going on, especially in today's world and the commodity complex. And maybe let's jump into that and just your market views. We'll start with precious metals and gold prices. I looked this morning, and just for a timestamp, it's June 24th, about 10 15 eastern gold, down to about 4,000 an ounce coming well after January highs, and a bit counterintuitive to a lot of people with gold underperforming since the start of the Iran war. What's your outlook on gold and how have the fundamentals changed over the last few years from your perspective?

Will Thompson (12:06):

Yeah. So yeah, I mean, back here, 4,000 which just as a, as a reminder to everyone, put another timestamp in there. You, you know, that's where we were in November of last year. And of course, you know, if you go back a little bit further to just say the beginning of 2025, we were at I don't know it thereabouts. So while gold may have sold off especially this past month or the past two months we're still quite a ways off you know, various different levels we've reached over the last couple of years. So I would say that, you know, going forward, obviously the interest rate environment and the dollar strength, these are sort of high level impediments to the gold price.

Will Thompson (13:09):

But I would probably look to something a little more fundamental to understand what's happening here with the gold price. When thinking about a commodity at least in my opinion, one always needs to sort of be thinking about the average sort of cost of production across the entire industry. A commodity can unhook from that level for some period of time. But it's very unlikely to trade significantly above that level for extended periods of time. Now gold is perhaps an exception to that and that is because there's a lot of intangible variables associated with gold that allow it to unconnect disconnect from fundamentals for longer in theory. But the reality is that, you know, the all in sustaining cost of gold across the entire industry is, well, less than $2,000 an ounce.

Will Thompson (14:13):

I'd have to update, you know, some math to find out where it currently sits, but, you know, I'd be surprised if it wasn't you know, say about 1,500 or so dollars an ounce. How long and how high above that can the price of gold stay? And I would argue that, you know, it can stay above that for some period of time. But you know, 5,000 is well above that. And it was only a matter of time before it fell. So my expectation would be that gold remains, you know, at some sort of healthy price relative to that say 2024 period, and certainly relative to the 2000, say, 22, 2000, 23 period. But the idea that it was going to hang out up here in that four to $5,000 range seems a bit nonsensical to me, unless your assumption is that it has so disconnected from the fundamentals for a very tangible reason that we can all sort of agree on. And I would be hard pressed to figure out what that tangible reason that we can all agree on is there's governments have debt issues. There's no doubt that there's geopolitical risk out there. These are all things we can agree on in principle. But the value of those things as a risk premium is a much more open-ended question.

Adam Turnquist (15:49):

Right. Certainly, I think you can make the case fundamentally still a bullish view. Gold seemed to get caught up in this momentum trade last fall. When you look at some of the ETF flows. It was, it was trading more like a momentum stock than a very much so a precious metal. And I think we're seeing some of the unwind of that. And maybe it's a healthy unwind just given the parabolic rally that we've seen. How do you think about operators in this space from a fundamental perspective when you're looking at some of the gold miners, and is there a point in the cycle where owning actual gold makes more sense than, for example, a gold miner?

Will Thompson (16:29):

Well, so I'll take the second part of that question first. In regards to owning gold versus a gold miner you know, I invest in equities. So I really can't speak to that's a preference question. And it would largely be a thesis question. If you can construct a decent thesis around gold's future path, then maybe gold is the way for you to go. If that is the only thing you've got a thesis around the gold price, then you probably shouldn't be in equities, because equities adds a whole other layer of risk to it. If you have a gold thesis, you invest in gold. I very rarely have a gold thesis. What I said about gold is about as sort of in depth and nuanced as I'm going to get on the gold price and trying to forecast gold prices.

Will Thompson (17:23):

It's not a skillset for me, forecasting any commodity price is really not a skillset for me. And while there are some managers who are very good at least on a relative basis at commodity price outlook it's a really hard game. Probably no harder than equities, admittedly, but a different skillset, right? And it's not a skillset or that I have, and it's not necessarily part of our sort of general research sort of process. We have a general high level outlook about directionality over a period of several years. But beyond that, we don't get terribly nuanced body price itself. In regards to the equities I mean, you know, it, as I said, I think the, and again, I've got to double check these numbers and someone can correct me.

Will Thompson (18:20):

I think the average all in sustaining cost across the industry is, well, less than $2,000 an ounce. That means that you know, anything above 3000 and everybody's minting money. Now admittedly, there is some compression, let's say, on inflationary costs, especially, you know, with diesel cost inflation and things like that passing through. But I mean, in the grand scheme of things, if, again, we're talking about a all in sustaining cost of production, less than $2,000 an ounce our margin on anything above 3000, even including diesel inflation, things like that, is spectacular. So, you know, a lot of the gold miners especially given this move off of the highs set in February, March you know, they're starting to look quite attractive. I've got gold miners in my portfolio that are going to have free cash flow yields you know, in the hold on, in the, I don't know, I mean, well north of 15%. So I'm not sure what there, what there is to complain about with gold miners.

Adam Turnquist (19:37):

Yeah. Sounds like some good economics from the, yeah. From that perspective, you mentioned dollar in yields having a material impact on the gold trade right now. Do you have any views there and, and maybe the dollar diversification trend we've heard so much about?

Will Thompson (19:56):

Yeah. I have nothing really to say on interest rates per se. I mean, I, you know watch it the same way everyone else does. I wouldn't claim any particular insight into the future path of interest rates. I, myself was just sort of from a more philosophical perspective, pleased to see that, you know, we might be pulling back a little bit on this idea of forward guidance from the Fed. It is not clear to me that one thing that seems to have happened is that with forward guidance ever evermore of the market has become intimately tied to those forecasts. And those outlooks, and given that interest rates affect everything I don't think that I, that makes sense, right? Like, if they're going to provide forward guidance out of the Fed and it does impact everything, then paying attention to that forward guidance makes sense.

Will Thompson (21:06):

At the same time, it has perhaps, and I have no, you know, no evidence to support, this is just an inkling I've got perhaps prompted everyone to focus unduly on that variable and not enough on say, in the case of equities, you know, fundamental research about the valuations of companies. And so at least from my perspective, pulling back on that forward guidance makes some philosophical sense. And I was pleased to see that is sort of the path that Kevin Warsh appears to be taking. I also am not terribly confident that interest rates should be lower. It seems to me they should be higher. So the fact that they didn't cut, you know, was a positive in my mind in regards to dollars. You know, I think the general the data that I have seen suggests that yes some people are cycling out of dollars at the margin.

Will Thompson (22:15):

But this, you know, broad-based de-dollarization is a bit of a headline that's been oversold, it seems like, is there, you know some movement out. Absolutely. there's no question about that. But the dollar is such a dominant force that, you know, we're talking about, you know, incremental percentages here rather than say a wave. And I do tend to think that the headlines sort of suggest or imply in their sort of bombastic ness that there is a massive move out of the dollar. And I don't think there's ever been any evidence to support that. There's just been evidence to support some marginal movement. So

Adam Turnquist (23:04):

Right dollar still king, when you look at some of the data points, and when you think about alternatives, the TINA rule applies in terms of there is no alternative when you look at Competing currencies out there. Let's, let's switch gears a little bit to the industrial metals. I read through your Q4 letter to investors, which anyone listening, I highly recommend reading, super insightful and a refreshing view on the macro landscape. But you outlined Copper miners and developers as the single largest investment theme. Walk us through your thesis on the Copper Miners and why they are the largest single investment theme from your perspective.

Will Thompson (23:45):

Yeah, and just for clarification, when I say the single largest investment theme, that was the single largest, you know, investment theme in our portfolio it clearly obviously is not a bigger theme than say, AI or something from a dollar value perspective. But within our portfolio it is a large exposure. And I mean, it comes down to a couple of variables but first and foremost being how difficult it is for a management team to actually build a copper mine. You know, building a copper mine has gotten really hard. There, there was a time where if you think about mines, you could think about, say the geology and the complication of geology, and then the infrastructure associated with mining that asset. And these things sort of ran in opposite direction.

Will Thompson (24:45):

So a diamond mine is very complicated, but you don't require a lot of infrastructure, if you will, because you could just put the diamonds in a suitcase, put the suitcase on a helicopter, and you could fly the diamonds out. The infrastructure is relatively simple. On the other end, you have something like, say, iron ore in Australia, iron ore in Australia is red dirt that they just scoop off the ground, but they had to build a fricking train system to get it out of the country, right? Trains, ports, et cetera. So, geology, very simple, infrastructure, massive. What's happened with copper mines is that copper mines have had to get bigger, and as a result, the infrastructure around them, the cost of building them, has exploded while at the same time the geology's gotten more complicated. So rather than these things sort of running in opposite directions with copper, they've run in the same direction, and that same direction is just to make it harder.

Will Thompson (25:50):

And so, from a dispersion perspective, you know, what is the results of everyone in the industry going to look like that has created wider dispersion. There are people who will do it better, and there are people who will do it worse. Anytime we see that wide dispersion or an opportunity for growth and dispersion as a result of operational variables, that's an opportunity for us to come in as stock pickers and really add value sifting between those management teams who are going to be capable of executing this extremely difficult task. And those who are going to bungle it. Now, those who bungle it may still succeed. They may get a mind at the end but it's going to be a much rockier road, and your return isn't going to be as high. And so, you know, a lot of the thesis with copper hinges first and foremost on the fact that increased dispersion creates an opportunity for management teams and companies and asset owners to really show the market their skillset and how unique they are.

Will Thompson (27:00):

And so we view copper as this sort of great metal to find great assets and great owners. In addition to that, you know, you have this macro backdrop, which is favorable, but is from our opinion, insufficient in of itself to invest in copper. You need, if you're investing in copper miners, I should say the copper miner story needs to stand on its own, absent that macro. But the macro thesis, you know, can be summed up as the average grade of global copper mines has fallen precipitously over the last decade. The difficulty in finding copper mines has increased significantly over the last decade. The number of massive sort of quote unquote tier one deposits that you need in order to you know, sort of continue to grow copper supply globally has declined.

Will Thompson (28:02):

You know, the number of mines that produce 500,000 or so tons of copper a year is very limited. And they've gotten increasingly difficult to find. And with that, the incentive cost to build a copper mine has increased what the incentive cost across the industry is to build a mine. You know, that's not a number. That is a sure thing. That's a, that's an inferred number you get from a sort of you know, talking broadly with management teams and looking at the supply the supply curve and things of that nature. But I would be surprised if, you know, the real incentive cost to build a copper mine isn't something like five to $6 somewhere in there. And yes, there are probably some mine somewhere where you do have a lower incentive cost. But, you know, again, the difficulty of building the mines has increased, and the number of mines that one sort of wants to build has decreased. So it's going to tilt that incentive towards the higher end of that price range. And that's, you know, to be perfectly frank, we're looking at copper right now today at, you know, about $6 a pound. So we're only really at that incentive cost. And so it's a really interesting backdrop to be investing in copper.

Adam Turnquist (29:23):

And I imagine the AI story has changed the supply outlook. You mentioned how complicated it is to get copper out of the ground. It's a big time commitment, a big capital commitment. How much has that changed your outlook on just the broader copper space as it relates to copper miners as well?

Will Thompson (29:44):

Well, I, unfortunately somewhat bemoan the fact that some of the things I invest in copper metals more broadly have gotten caught up in the AI trade, if you will. I think it's a bit tangential. But there's sort of a genuine linkage that has occurred as that trade has spread out. And as a result, of course, you know, say the last couple of weeks have been a little rough because there's been a bit of a sell off in the copper space and some of the other, let's call it AI related metals with, you know, the AI and semiconductor volatility. I think that hasn't changed my outlook. Even if we were just to not grow copper demand you we're still not putting into production enough new mines to sort of keep up with existing demand.

Will Thompson (30:54):

You know, it's not like oil and natural gas, although I'd have to look at oil and natural gas over the last couple of years. But at least historically you know, you've wanted your oil company to replace a hundred percent of its annual production yearly with new discoveries that's not where copper mining is at, right? We're, we're below that. I don't know where below that we are, but we're absolutely below that. And so it's not just a growth question. I don't really like investing into these growth thematics. What I do like is investing into situations where if nothing changes, we still have a problem. And that's where we are with copper. If nothing changes, we still have a problem. We actually need to see copper demand fall in order for the sort of business as usual case to be sufficient to meet our demand.

Will Thompson (31:51):

That seems improbable because copper just grows with the economy. If the economy continues to grow, copper demand is going to continue to grow. And so, you know, any time where the macro case is business as usual is not going to be sufficient to meet business as usual demand. That's an interesting situation. AI adds some potential growth, but, you know, who knows what it is? It's very hard to judge. So but again, I do somewhat bemoan the fact it's been caught up in that trade because it's added some volatility and momentum to it that has made the underlying stocks disconnect a little bit from the fundamentals. And one of the things I do like about our industry is that it, or these industries that I look at is that the stocks do tend to stick towards the fundamentals. They trade around them ly sometimes, but the fundamentals do act as a, as a very meaningful and real anchor that in say, an industry like AI or semiconductors you just don't have quite as much of, I guess in semiconductors, you used to have it with quite a bit of cyclicality, but tech more broadly, you don't have that anchor or quite as obvious, at least,

Adam Turnquist (33:14):

Right. Seems like one big AI trade for the market right now. And I like your point about AI or no AI supply side, still a problem for copper. You look at some of the supply demand forecast two years ago, three years ago, and it was really telling the, basically the same message. Let's, let's switch it up to energy. Obviously a major driver of risk appetite in volatility this year. We've seen oil prices come in materially on seemingly a peace agreement. We'll see how that plays out over the next 50, 60 days here. Just curious, your thoughts on energy markets and oil and this idea in the market. It seems that supply is going to normalize as the straight reopens. How are you thinking about that?

Will Thompson (34:03):

Yeah, so I guess what I would say, having worked fairly closely with hull and war insurance organizations at when I was at Lloyd's it is not the politicians that will decide when the Strait of Hormuz is open. It is the insurance companies that will decide when the Strait of Hormuz is open. And at the moment, the insurance companies have very much decided the Strait of Hormuz is not open. That is in part why you see 16 to 24 odd tankers a day leaving the straits and not a flood, and certainly not the I think Donald Trump said a couple days ago that 700 ships left the the Persian Gulf which of course would be something in the realm of 10 times the average daily volume prior to the war in Iran. So my guess is that yeah we're going to get a short-lived flood of oil here.

Will Thompson (35:06):

The paper oil market, which is, you know, 10 times the size of the physical traded market is going to wag the tail, or is going to be the tail that wags the dog for a little while. And then you know, fundamentals will reassert themselves. And the fundamentals are that, you know, we've had a decade of underinvestment in oil and natural gas. We continue to have reasonably strong growth in demand and, you know there's definitely some opportunity for some growth out of various different locations, Argentina Brazil Qatar now that it's left OPEC. But I would return to sort of my copper story, which is, which is to say that if nothing, if nothing meaningful changes we're, we're still looking at a situation where, you know, over the next three to five years oil markets are tight.

Will Thompson (36:10):

They're not, you know, they're not oversupplied. The IEA came out with their monthly oil report a couple of days ago may, maybe two weeks ago. And I mean, golly, the numbers were something like, they're going to produce 108 million barrels a day versus demand of 102. I don't know where this 6 million barrels of spare capacity or whatever it is they came from. I don't actually pay for their report because their track record is so unbelievably bad. You're not the first person to say that. Yeah, no, I'm sure I'm not. So I don't know where all that spare capacity came from. Will, you know, the spare capacity that was forecasted to be in the market this year, which was, you know, a very fine number.

Will Thompson (37:06):

It was, you know an extra million barrels a day, maybe, you know, stuff like that. The types of numbers are well within the margin of error. And so I would call anything that's well within the margin of error when counting barrels, which is notoriously difficult to just be a push. You know, we're, we're the market's, market's trying to be precise when it doesn't even know if it's being accurate. So I think the outlook for oil and natural gas is particularly good. Albeit we will have sentiment driven moments that could last several months as this one quite likely will. They managed to, you know, stay in negotiations for 60 days, then yeah, the market for oil will soften dramatically. But I have trouble seeing us with oil now.

Will Thompson (38:05):

I'd have to double check the chart, but at the very least, where we were prior to when the Iran war kicked off quite likely below where we were. I have trouble seeing the market as less risky now than it was before. At a minimum prior to the war in Iran we would've had to thought about the oil price and baked in some sort of very small percentage chance that the Strait of Hormuz gets closed. But now that it's been closed once, you know, the bar to do it again, has been lowered dramatically. The methodology for doing it has been crystallized. It's been tried. Iran knows how to so at the very least, you have to bake in more of a risk premium associated with that going forward. So again, how the oil prices fallen to where it has and whether that is rational or not I highly suspect,

Adam Turnquist (39:04):

Yeah, I share those views. We're, we're basically right back to pre-war levels, which assumes no risk premium, and there's a lot of risk premium that you could attribute to oil. Right now. We don't know what the tolls are going to look like or if there's going to be tolls, the control of the Strait of Hormuz. And then just going back to your background on insurance, if you're underwriting a policy for a tanker, I gotta imagine there's a new premium embedded into the policy based on the risk of the ship getting blown up or being stuck in the strait. What are your thoughts there from the insurance perspective, if you've stepped back into your old shoes?

Will Thompson (39:46):

I would tend to agree, and it's not you know, look, I will say I was credit and political risk call insurance is a different group, but, you know, we sort of sat next to each other and they are related. And so I picked some things up over time. There are plenty of people who I would just imagine are just like, you want call insurance for war. If you want to go into Persian Gulf right now, I mean, really, eh, I think our book day, we don't need any more of that right now. We, we could just, you know, come back to us in a couple of months. You know, maybe, you know, maybe a good client comes around and, you know, this happens and this makes sense, good client comes around and, you know, look, we've been doing business with you for 10 years and, you know, we've always paid our bills on time.

Will Thompson (40:32):

None of our policies have gone wrong. And, you know, yeah, we need to get a tanker in there and we need to get a tanker out. We need some insurance. Okay, fine, yeah, I'll write that policy. But you know, that that's not the majority of your clients that that's a small selection of your clients. You know, some guy comes off the street wants insurance, I'll be like, eh, forget it. It is just not worth, it's not worth the headache. It's probably not worth the headache in terms of paperwork that the, you know, the risk management department is going to ask for, let alone the actual, the actual return. So I would be surprised as much as being written in the grand scheme of things.

Adam Turnquist (41:12):

So taking what we've learned from the Strait of Hormuz being a political lever, we've got new export restrictions. China restricting some of their rare earth exports, a growing U.S. Critical minerals lists, more frequent supply shocks, go back to Russia's invasion of Ukraine and the shutoff of gas to Europe. There seems to be a growing resource nationalism theme. And under that regime, do you view the world a little bit differently as an investor today, maybe verse say, five years ago?

Will Thompson (41:48):

Yeah. And I will add you missed an important one. There's not only a resource nationalism theme, there's an AI model, nationalization, yes.

Adam Turnquist (41:58):

Good call out.

Will Thompson (41:58):

Right? So, and I bring that up, not because I find that one in particular to be, you know, significant or more significant than the others. But because it demonstrates the breadth at which this drive for security and for freedom of freedom of activity, if you will, is being put. Every day we see countries that are making an effort to increase their independence from everyone else and it is broadening into more areas of the economy. It is not shrinking. And that is critical from my perspective, this is sort of why this concept that I talked about at the beginning of political economy as opposed to economics and politics is so important. And why thinking about the world through that joint lens is so important.

Will Thompson (43:10):

It is another risk that the market is either not pricing or prices quite poorly. That sort of second one is very much true there. There's nothing the market handles more uncomfortably or with less surety than geopolitical political risk. Yet it is proliferating as we speak every day, almost. There is something new. And so again that has a impact on dispersion that has an impact on results of companies. You know, there are going to be companies whether we like this or not, and I'm uncomfortable saying this but, you know, there are going to be companies that do better because they have a better relationship with governments. And while that may be a moment in time here in the United States, given the current administration, although I don't think so it is absolutely not a moment in time in most other countries, especially, you know, fast growing emerging economies you know, whether that be Africa, Latin America, Southeast Asia you know, that that is, that is an operating sort of standard operating procedure in those countries that they are only doubling down on and here in the United States and in Europe, we are now, you know increasingly moving towards that type of industrial policy.

Will Thompson (44:42):

And certain places are already clearly ahead of the curve on that U.S. industrial policy is moving very fast. But, you know, in places like Europe, they already have some national champions, right? Like you think about Airbus. Airbus is the European aerospace national champion, right? Rheinmetall is increasingly becoming, you know, a defense national champion, right? They gobbled up they've gobbled up a shipping company, now they've gobbled up a or a ship building company. They've gobbled up you know, a tank manufacturing company, right? So this drive towards national champions towards heavy industrial policy towards linking national security with economic strength. These are things that are only going to increase with time, at least for the foreseeable future. And increased dispersion of results at companies, which means that there's an ever greater opportunity for someone to come in and make thoughtful stock picks about management teams and business models and companies.

Adam Turnquist (45:54):

Right. Certainly a fascinating time. We're, we're running out of time, so I want to throw one more question out for our listeners that want to learn more about your fund and views on the market. Where can they find you? And then selfishly, I got to ask, when can we expect your next investment letter, which I, again, I highly recommend reading for any of the listeners out there.

Will Thompson (46:15):

Yeah. Well, I appreciate the opportunity to just sort of share my fund with people. You can find us at www.massivecap.com. That's M-A-S-S-I-V-E-C-A-P.com. On that website, you'll find all our past letters. You'll also find a link to a blog that we write that, you know, shows investment reports and things of that nature. About once a month we put out a big report and in regards to our letters. Anyone can sign up for those things. They're distributed sort of to anyone. And in regards to our next letter, you know, I've started thinking about it already. My guess would be July 10th is my target. Now. My, my guess is it probably will be July 17th.

Adam Turnquist (47:13):

Yeah, I know, I know how that goes. It's publish research.

Will Thompson (47:16):

Yeah.

Adam Turnquist (47:18):

It always takes longer. Well, thank you so much for sharing your thoughts and insight into such a unique market right now. Really appreciate you joining us Will.

Will Thompson (47:28):

Absolutely. Thanks for having me.