Special Situation Twofer: LXU, CRECF

S&P poised to repeat history. Tesla, lithium, uranium and ammonia.

LXU - LSB Industries is new to me. A friend shared the video below. It’s an excellent assessment by a brilliant team on a company I’m eager to buy more of over time as it’s perfectly in-line with my “buy reality” thesis:

LSB website: https://lsbindustries.com

Ticker is LXU, to be clear.

It closed the week at $7.74

I’m in, and would add at materially lower prices.

No stop on this position.

CRECF - Critical Elements Lithium I’ve gone around the block with for years, keeping a core position while booking huge gains on the swings.

It enjoyed big run-ups during two lithium hype cycles, reflected in the chart below.

Note the sections within blue circles are essentially similar; fractals.

Note too that the green and yellow lines are parallel.

The run-up from 2016-2018 was a typical sector cycle. Electric vehicle hype hit the mainstream and speculators dove into lithium stocks. 1000% gains were common.

As is also common, prices retraced back to the start.

The run from 2020 to 2023 was another sector bull coupled with supply chain issues due to Covid, a lot of newbie speculators chasing prices due to free time and money during lockdowns, and Tesla leading the charge in rampant meme stock speculation helped goose lithium names.

Now we’ve had another dose of reality and another retracement, with both EV and battery metals stocks falling out of fashion.

Key difference here: CRECF was not a momentum stock with nothing but froth in its favor. Not at all, so keep a close eye on it.

A full-circle drop back to the lower green channel line shouldn’t surprise, however it’s already down 80% from the high and I’m not waiting any longer; been buying back a lot the past couple weeks and I’m going to make a(nother) killing in this name.

Buying back? I sold most near the peak as it spiked on hype over its expected permitting for production being granted, and the upper yellow and green lines factored.

The adage “sell the news” applied too. Plus in the rare times a junior mining company hits economically recoverable paydirt and is permitted, it’s normal for a cycle of selling to take place.

Why? The company’s news cycle slows as it takes years to staff, build and transition to production, and usually any big news events come in the form of delays, cost overruns or dilutions.

Meanwhile most people bought at the top so they’re soon suffering losses, while even those who bought early are seeing their profits fade to red.

Eventually there’s a washout, as has been the case the past year, then price consolidation before the next cycle of hype toward production begins. With both the stock and sector now in the dumps, it’s right in the sweet spot for accumulation.

Why CRECF? Too many excellent reasons to list - including its highly compelling resource in a safe and stable jurisdiction with a rare premium grade of lithium on tap - and it’s a fine irony that its prospects have only improved as the price plunged.

I refer you to its website: https://www.cecorp.ca/en/

Specifically, see its recent presentation in pdf form here: https://www.cecorp.ca/en/presentation/

Also read its December corporate update - https://www.cecorp.ca/en/critical-elements-lithium-provides-a-corporate-update/ - and the open letter to shareholders from last summer - https://www.cecorp.ca/en/open-letter-to-shareholders-from-chair-of-the-board-of-directors-eric-zaunscherb/

Barring a total disaster, like a giant hole in the earth opening up and collapsing the entire property, or some miracle battery tech advancement rendering lithium obsolete - there are always wildcards, including positive ones like greater resource discoveries on its properties - my worst case is the company will be taken over for a 2x-3x gain from current pricing.

If the company remains independent and public while becoming a producer, I expect 6-10x.

This setup is a great gift and an actual investment. Don’t ignore it.

It closed the week at $0.48

Its domestic listing is under ticker CRE in Canada, last at $0.66 CAD

If it drops, all else equal, I’ll only add.

No stops.

Loading up on situations like these is how the gods kill.

However be aware of where we are in the overall cycle. Patience and prudence are paramount.

Below is a view of the S&P500 in different time frames with the same obvious implication.

Maybe this time it’s different? Probably not.

Headlines:

EU Looks To Accelerate Development Of Small Nuclear Reactors

Famous investors are now touting uranium.

When asked about his highest-conviction idea at the iConnections Global Alts conference in January, Porter Collins of “The Big Short” fame talked about uranium’s tight supply…

Super late compared to this publication, yet still quite early vs. the mainstream.

10-year “cup and handle” pattern in URA targets ~ $50:

Catch-up on my uranium positioning here:

Federal Scientists Recommend Easing Restrictions on Marijuana

Yellen: It's 'obvious' empty office buildings will create banking stress and losses

German bank warns of 'greatest real estate crisis since the financial crisis' as CRE contagion spreads

Shaky commercial loans threaten a new regional bank crisis

Credit-Card & Auto Delinquencies Soar, Especially Age Group 18-39

US interest rates doubled since 2020, debt to hit $48 trillion by 2034: CBO Report

The number of Canadians worrying about their finances spikes to 55%, a new high

Worrying now. Forced to deal with it soon?

Four States Consider Lifting Taxes On Precious Metals

Citizens of Georgia, Kentucky, Wisconsin, and Kansas may soon enjoy lower taxes on precious metals if recently introduced pro-metal bills are made law in 2024.

World Gold Council: "Blistering Central Bank Buying" Fuels Strong Gold Demand

As a gold fan I hate to see this, given central bank timing is typically abysmal.

Hopefully they accidentally get it right this time. In any case, it’s funny that they’re effectively and openly shorting their own currencies.

In your face, komrades! All glory to the Big Pig!

Taxpayer-Funded Electric Busses Are Sitting Broken Down And Idled Across The Country

Canada's EV strategy has cost $4 million a job

EV's cost twice as much to insure as fuel-burning cars in the US

South Korea EV Sales Held Back by Drivers' Fears Of Battery Fires

GM Shifting From EVs To Plug-In Hybrids, Following Industry Trends

Ford could get 50% more profit without EVs

Wind Farms Are Overstating Their Output — And Consumers Are Paying For It

Dozens of British wind farms run by some of Europe’s largest energy companies have routinely overestimated how much power they’ll produce, adding millions of pounds a year to consumers’ electricity bills, according to market records and interviews with power traders.

These extra costs are linked to a growing problem with Britain’s outdated electricity network: On blustery days, too much wind power risks overloading the system, and the grid operator must respond by paying some firms not to generate. This “curtailment” costs consumers hundreds of millions of pounds each year.

Adding to that expense, some wind farm operators exaggerate how much energy they say they intend to produce, which boosts the payments they receive for turning off, according to nine people — traders, academics and market experts — most of whom agreed to discuss this controversial behavior only on condition of anonymity.

In effect, they said, the grid has paid some wind farms not to generate power that they wouldn’t have produced anyway.

Bloomberg News analyzed 30 million records from 2018 through June 2023 to compare wind operators’ daily forecasts of the energy they planned to generate to their actual production when they weren’t curtailed. Out of 121 wind farms in the analysis, 40 overstated their output by 10% or more on average, and 27 of those overestimated by at least 20% …

Bloomberg

Wind power on a mass scale was always a totally obvious, environment-wrecking, animal-slaughtering, absolute scam. So too solar.

Why do people fall for it?

On the bright side, and for the good of all humanity, it’s bullish for nuclear energy.

In January Cold, The Texas Electricity Grid Held-Up... Barely

Biden freezes approvals to export US natural gas, imperiling major projects

Japan’s liquefied gas imports in January fell to lowest level in 15 years

Barclays to adopt fresh curbs on oil and gas financing

Very bullish for oil and gas. Adding related positions soon.

German software giant SAP will no longer source its company cars from Tesla due to unpunctual deliveries and price fluctuations

Delaware Court Judge Voids Elon Musk's $55BN Compensation Package

WSJ: The Money and Drugs That Tie Elon Musk to Some Tesla Directors

Board members have reaped hundreds of millions from stock awards and separate investments, even as some do drugs with Musk…

Puppets, puppets everywhere, doing puppet master’s bidding.

Zero auto / manufacturing experience in total among Tesla’s board prior to appointment. Zero. Almost as much relevant experience as its recently-resigned CFO had.

The rot at Tesla is epic, and not yet begun to be fully revealed. A shame that efforts to expose Musk seem much more a political thing than an ethical or legal thing; all was well as long as he kept quiet while sucking up the green grift.

It’s a long, long way down, and shorting Tesla is classic value investing.

I remain short Tesla via 2 TSLQ positions:

Nvidia’s now worth as much as the entire Chinese stock market

Spoiler alert: today Tesla someday Nvidia, because if you think Nvidia’s narrative and numbers ring fully legit I can sell you as many bridges made of platinum-plated pure unicorn dung as you can possibly buy.

Don’t worry though, it’s perfectly normal - totally expected - for rubes, and more than a few “experts” to clamor for a brutal fleecing at the peak of a mania.

A hell-bent zeal for self-sabotage is always the beginning of the end. It’s evident everywhere, far beyond market indexes.

Know the routine. It’s nothing new.

WSJ: More Americans than ever own stocks

That’s exactly how a generational mania ends.

CNN Fear - Greed Indicator

Kansas lawmakers giving themselves a 93% pay raise

New bill would require speed-limiting devices in California cars

"There’s no reason why people should routinely be allowed to drive more than 10 miles per hour above the speed limit," Senator Scott Wiener (D) said in an interview with The Times.

“You can want whatever you want. But that doesn’t mean you’re allowed to do it and that doesn’t mean you should be physically able to do it."

The slope is super slippery and steep, but trust the “experts” to navigate a soft landing and rest assured that Big Brother loves you!