New Profits From the "Old Economy"
Why I'm hunting for wealth in LNG, metals, and overlooked countries
Substack is the best place for authentic writers. Period. I've met extraordinary individuals here, and today’s article is proof of that.
I am thrilled to share my interview with the legendary William Patalon III.
With Bill, we are talking about life stories, obscure ideas, and derisking the risk. So, let’s start.
WPIII (Q): Thanks for being here, Mihail. We’ve had some fun collaborations here on Substack … in small ways. I wanted to elevate that with a broader talk. So let’s get started …
MS (A): Sounds good, Bill … sounds good.
WPIII (Q): Let’s start with the basics. Who is Mihail Stoyanov?
MS (A): Well, Bill, I am a full-time market participant and writer. My focus is on old-economy businesses: Shipping, mining, and banking. Regionally, I prefer emerging markets, with an emphasis on Latin America.
WPIII (Q): That’s good stuff … in fact, it’s. your “Old Economy” moniker got me interested in your work in the first place …, and then I started reading … and kinda dug what you were publishing.
MS (A): Thank you ... thanks for that.
WPIII (Q): The ex-reporter in me loves “stories.” Especially people’s stories. I sense a story here … a “backstory.” What’s yours? What first got you interested in investing in the first place?
MS (A): I am obsessed with asking questions about the world, which translates into a passion for writing and investing. It all started in 2007, just before the Great Financial Crisis. Of course, I was infected by FOMO syndrome. So, I hopped on the train a few weeks before the Lehman Brothers moment. It was a crushing experience to observe 50% of my account evaporating in a matter of weeks.
WPIII (Q): I get it, Mihail. As an investor, I have a few stories of my own …
And, as a reporter, I “seen” so many more …
I saw lots of folks get clobbered by the Dot-Com Bubble … including several who shared what they were going to do … and did it anyway … even after they were warned not to by me, family members, and other friends.
But I discovered something … the folks who “learn” from those miscues – and by “learn,” I mean really take the pain and lessons to heart and change their ways – often go on to become great investors.
MS (A): As it was with me, Bill.
You see, that whole event … triggered something in me. It “ignited” a spark.
I wanted to learn everything about the markets. Everything. On the way, I made so many stupid mistakes … but I did learn two very important things:
I admitted to myself that “I don’t know how much I don’t know.”
And I discovered that understanding what NOT to do is more important than knowing precisely what TO do.
From that came the less-complicated part: Learning what TO do. This is the philosophical version of the background story.
And here is the formal one: I hold a BS in marine engineering. And I served in a merchant fleet for 11 years. During my adventures as a seafarer, I nurtured my passion for investing. In 2021, I took the decisive step to devote all my time to investing and writing.
WPIII (Q): Man, I really like that part of your story … the learning part … and the personal part.
I like that you saw what happened … what you did wrong … and made “course adjustments” from there.
I also like your education/experience story. I’m kind of a rarity … a guy with a journalism degree who then earned an MBA. But I loved school … actually, it was that I love learning.
Your engineering background intrigues me … and your seafaring experience.
My Dad was an engineer – he had two physics degrees. And he did work in the defense sector … first for aerospace and then for the nuclear navy. In between the two, he worked in the commercial nuclear business … all of which leads me to say that I like your “origin story” and can relate to it.
MS (A): It brought me here …
WPIII (Q): Which actually brings us to another interesting question: Why here on Substack? What drew you to this platform?
MS (A): Substack is the best place to be as a writer. I am grateful for being here. However, The Old Economy is not my first project. In 2021, I started a site (investo.bg) in Bulgaria about investing and markets. It was the first Bulgarian website in that field to offer subscription-based services.
Then, in March 2023, I stumbled across Substack. Initially, I did not appreciate the platform's strengths. A year later, I decided to give it a try again. It was one of the best decisions I have ever taken. Substack is the media platform with the highest signal-to-noise ratio. The interaction between the author and readers is frank and open, and this interview proves that.
WPIII (Q): Agreed … I really like that we connected. Whenever I read your “stuff” (journalist slang for “your work”), I always come away rolling what I learned around in my head … and looking for more information about the ideas, companies and stocks you’ve mentioned.
And THAT, my friend, is the sign of powerful “stuff.”
So … why “Old Economy?” Because I find that name to be as intriguing as can be …
MS (A): When you get right down to it, Bill, I’m a dinosaur. Tech … AI … all the “hot” stuff … they do not move me.
Conversely, dull-and-obscure ideas excite me. The more arcane, the better.
This is the emotional layer of the explanation.
Now, regarding investing, I believe we are entering a decade when capital-intensive businesses will shine. The reasons are widely discussed: Capital starvation, lack of personnel, and political stupidity, to name a few.
Digging deeper, I do not like to stay in that “center of the curve” – where everyone else is. Red Ocean with fierce competition for limited Alpha, which results in less Alpha per market participant. On the other hand, in both tails of the curve reside asymmetric-yet-overlooked ideas. The best thing is that almost no one is there, so there is way more Alpha per market participant.
WPIII (Q): What's got you most excited right now ... a stock ... asset class ... investing area ... or time frame?
MS (A): That’s a good question … a really good question. Let’s start by looking at my portfolio. Its composition reveals the themes I am most excited about.
The central pillar of my portfolio is Long Chaos. That translates into four main themes.
Dragon/Bear critical mineral dominance: PGMs and uranium.
A Latin American revival: Argentinean and Brazilian stocks.
Floating assets: Floating LNGs, Capesize bulkers, and ice-class LNG carriers.
Fiat money devaluation: Gold and silver.
The takeaway here: I believe in the coming two to three years those themes will play out handsomely.
WPIII (Q): That’s good stuff …
Let’s do a bit of decoding for some of the everyday investors … and add a few details here …
By Dragon/Bear … you’re talking China/Russia …
Minerals (broadly speaking) means commodities …
Uranium … we all understand. It’s nuclear … and needs to be in the “discussion mix” about the Energy Future. The term “PGM” are institutional “shorthand” for “platinum metals group” – stuff like platinum, palladium, rhodium, iridium, ruthenium, and osmium. These are pretty important metals …
MS (A): That’s right, Bill. They’re critical to lots of things … from razors to computers … catalytic converters for cars … and more.
And most of them come from South Africa …
WPIII (Q): And Russia …
MS (A): [Nodding] And Russia … and now you’re starting to see my Dragon/Bear thesis materialize in a very real way …
WPIII (Q): Yes, indeedy …
And then there are your “floating assets” …
LNG – liquefied natural gas. And a “floating” one is a “do-it-all” LNG operation on the water.
Capesize bulkers are the biggest bulk-carrying ships – which transport things like grain, ore, cement, coils of steel and even coal (which we talk about a lot with fellow-Substacker Matt Warder of The Coal Trader fame).
MS (A): That’s right … and they get their name from the fact that they can’t sail through the Suez or Panama canals … so they have to sail around Cape Agulhas or Cape Horn.
And – anticipating your next question – ice-class LNG ships that are designed for icy polar waters.
WPIII (Q): Like an ice-breaker …
MS (A): That’s correct, Bill.
WPIII (Q): Okay, let’s shift gears to the asset-class question.
MS (A): I love that question …
Gaining experience in the financial markets taught me multiple lessons.
One of the most valuable ones is the importance of time. We assume equity is not time-dependent because we can “buy and hold.” It is a grave mistake. Ask the Japanese who bought Nikkei just before 1989.
WPIII (Q): I spent time in Japan in the middle-1990s – during my time as a business journalist – so I saw … firsthand – the impact of that.
MS (A): That’s right …
Well, Bill, time is no different than other assets … it’s limited … and has alternative applications.
Therefore, I shifted my focus on explicitly time-dependent assets like options and, recently, bonds.
I still use equity when options are not available – such as with small-cap, event-driven plays. I treat these positions like call options without expiration, so the problem is solved.
I also like leveraged ETCs – exchange-traded commodities – for commodity plays. They offer massive growth potential … and at a lower cost than buying futures contracts.
So that’s what’s got me excited …
WPIII (Q): That’s good stuff, Mihail.
Let me circle back on something …
Why the Dragon/Bear … why China/Russia? I’m intrigued by that … and I’ll tell you why: Back during my reporting days, I spent time … worked in … China. And, having worked during the Cold War – and having grown up as the son of a defense-contractor engineer – I’ve always paid attention to both China and Russia.
MS (A): China and Russia share some geopolitical goals. As with every Great Power, they have strengths and weaknesses. The supremacy in energy (Russia) and critical minerals (China) is the strongest hand in their possession.
As a side note, Velina Tchakarova, a brilliant geopolitical analyst, coined the term Dragon/Bear. Her work is a must-read for any market participant.
Niche energy commodities, like uranium, are perfect asymmetric bets for Russia. By cutting uranium supplies for the U.S. and EU, Russia will reap more geopolitical benefits than the price it pays (declining revenue from uranium exports). Simply, the reward exceeds the cost. This is just one example. China is in a similar position when it comes to critical metals.
The most recent example is antimony export restrictions.
WPIII (Q): Antimony … which is not a PGM group metal … but which does have uses in medicine, batteries, electronics, chips and even – if I remember correctly from my defense-reporting days – nuclear weapons …
MS (A): All correct.
Now … with rising geopolitical entropy, export restrictions on critical minerals will become normal. This does not only apply to uranium or antimony. Consider palladium, titanium oxides, and NdPr magnets, just as examples. For industrious investors, there is a lot of Alpha to harvest in those segments.
WPIII (Q): Very interesting … I like that, Mihail.
Okay, let’s shift gears …
Anything you're concerned about? Sounds like energy, uranium (nuclear power is getting some legs right now) and metals are areas of focus.
MS (A): To answer … let me answer on a point-by-your second question, let’s say a few words for every bullet point.
China and Russia dominate critical minerals production and processing. It gives them strong hands in the geopolitical poker game. With growing global chaos, the role of export restrictions as a geo-economic lever will only grow.
And I believe uranium and platinum are the best ways to bet on that theme.
South America has the lowest geopolitical risk.
The reason is simple: A single religion and two similar languages dominate the continent. In addition, LatAm has formidable oil-and-mineral reserves, an abundance of fertile land, and healthy demographics. In my opinion, Argentina and Brazil offer the best risk/reward ratio …
Floating steel thrives in times of uncertainty and volatility. But all ships aren’t equal. Considering supply fundamentals (order book, aging fleet and shipyard capacity, for instance) and growing tonne-mile demand, I find Capesize bulkers and ice-class LNGs the most-lucrative ideas.
Floating LNGs deserve special mention. Global LNG demand is growing, and geopolitical chaos is rising. Having an asset capable of delivering liquefication as a service – at any point in the world – is a massive advantage.
Most importantly, such assets are scarce and costly to build.
Fiat money devaluation became the norm. I believe we are approaching an inflection point in the next 10-15 years when economic systematic issues will become unrepairable. The reason is not a secret. For the last 16 years, the debt-growth rate has been higher than the production-growth rate. There is no “cheat code” to escape consequences.
Owning gold/silver – and gold/silver-based financial assets – provides protection and the proverbial “alpha.”
WPIII (Q): As you know, we like silver here at Stock Picker’s Corner. And I’m a bit of a “silver bug” personally … as a means of protecting myself and my family a bit.
I own physical silver and gold … and I like commodities in general … so I like your overall thesis here.
Good stuff …
Okay … let’s talk about a few stocks that you’ve talked about to your Old Economy Substack followers.
Tell me what they are … and why you like them.
MS (A): Following the Long Chaos trope, my favorites are Golar LNG LTD $GLNG, Sibanye Stillwater LTD $SBSW, and IRSA Inversiones $IRS, to name a few.
Golar LNG is a bet on one of the world's most complex and scarce assets: floating LNGs. The cost of a new unit is north of $1.5 billion. FLNGs provide enormous advantages compared to land-based or fixed-offshore installations. They usually start life as LNG carriers and have their own propulsion. At any moment when the economic/political landscape is not favorable, FLNG can sail away. In the next months, another positive catalyst, FLNG Gimi, goes into operation.
Sibanye gained some notoriety in Fintwit because of its bombed-out chart. That’s why I like it. The consensus is that SBSW is doomed because it operates in crisis-torn South Africa, and no one needs PGMs except rappers. I believe the consensus is wrong.
All major automakers announced their plans to keep the ICE production lines focused on hybrid vehicles. Interestingly, hybrids need more PGMs than simple ICE cars.
SBSW is not a pure PGM play. It exposes gold via its stake in DRD gold … and uranium. The company owns 32 million pounds in Cooke tailings and another 27 million pounds in the Beisa mine.
The last, but not least, is IRSA Inversiones. IRSA is one of Argentina's leading companies that own and manage real estate. Over 90% of its portfolio is located in Buenos Aires. The bulk of the portfolio comprises commercial space (shopping malls), with a smaller portion of hotels and offices.
The company owns Costa Urbana, a project of Puerto Madero's caliber. Obstacles to its realization have significantly reduced. As with mining companies, each new permit for a construction project reduces the risks of project failure.
Milei’s first nine months in power have pleasantly surprised me.
WPIII (Q): Argentina President Javier Milei, who took office back in December … and an economist whose background made him a political “outsider” …
MS (A): Yes … and I’ll be candid … I was expecting more difficulties and unnecessary demagoguery from him. But his administration has convinced me otherwise.
The Argentine Treasury runs a budget surplus for the first time in 16 years. Inflation (on an annual basis) of over 300% dropped to around 100%. This also affected interest rates —f rom 133% in December 2023 to 45% in May 2024. The country's largest bank, Banco Nacion, started lending mortgages in pesos as of May 20. This means improving demand for real estate.
WPIII (Q): Great stuff, Mihail. Let’s talk risk. How do you identify it? How do you manage it? What other points about risk need to be made here?
MS (A): The role of risk management is utterly underestimated at the expense of stock picking. Too often, the latter is confused about the whole investing process. It is a grave mistake. Of course, I learned that the hard way.
Investing is more than selecting attractive businesses. Long-term success in the market depends, to a greater degree, not on our stock-picking skills but on our risk-management skills. That said, I prefer to be a “good enough” analyst – but an excellent risk manager … rather than a “brilliant” analyst – but a poor risk manager.
WPIII (Q): Let’s drill into that a bit … can you give us more details on risk management – as you see it?
MS (A): Absolutely.
My interpretation of risk management stands on two main pillars:
Micro-management at the position level.
And macro-management at the portfolio level.
Micro level means size, time, and expression. In other words, when to buy, how much to buy, and what to buy.
The latter means which asset best expresses my view on a company/theme: fixed income, equity, options, or a combination.
Macro, on the other hand, describes a number of positions and themes, correlations, and portfolio risk metrics. I am a proponent of diversified concentration. I seek exposure to three to five big themes via a few individual positions per theme.
In conclusion, investing is like a business. Everyone has unique ideas (stock pics), but almost all fail on the most crucial part, the execution (risk management).
WPIII (Q): Great stuff, Mihail. Truly.
Thanks for being here … and I look forward to more of the Substack chats you and have seem to have pretty regularly.
MS (A): Thanks, Bill.
For any of you who wants to check out Bill’s work … to see what he says about being a long-term Wealth Builder – you can check out his Stock Picker’s Corner Substack.
Everything described in this report has been created for educational purposes only. It does not constitute advice, recommendation, or counsel for investing in securities.
The opinions expressed in such publications are those of the author and are subject to change without notice. You are advised to do your own research and discuss your investments with financial advisers to understand whether any investment suits your needs and goals.
Great interview Mihail. you deserved it! Since you've published some artcicles on seeking alpha plataform, it became clear the high level of your knowlodge.
I am glad to be the first ones to follow you here.