Author: A.T.

Bryan Tyler Cohen

His first five minutes: the age thing.  Worth sharing widely.

(Faithful readers may recall from earlier this month how much they would have left on the table if they’d thanked Warren Buffett for his service at age 82 and sold their shares out of concern for his age.  Spoiler alert: a further quadruple.)

The Economist: 

What a second Trump term would mean for American business and the economy

. . . Businesses often say that what they fear most is uncertainty. With Mr. Trump that is guaranteed.

This unpredictability could make a second Trump term very much worse than the first. His administration would lack establishment types like Gary Cohn, once of Goldman Sachs, to shuffle the president’s in-tray and hide the madder ideas from him. More moments like January 6th are possible, as is a full-on revenge presidency. The idea that in this scenario business leaders could keep a low profile and focus on EBITDA is fanciful. Employees, customers and the press would demand to know where bosses stood and what they proposed to do. The administration might in turn take exception to every whiff of criticism.

In the long run, the idea that corporate profits can be insulated from societal upheaval is a fantasy. If Mr. Trump is broadly corrupting of American politics, and businesses are seen to profit from his rule, that poses a big risk to them in the future. In Latin America, when big businesses have become associated with autocrats the result was usually that capitalism was discredited and the appeal of socialism rose. That seems unthinkable in America. But so, until recently, did a second Trump term.

In case you can help, click here.

 

It’s The Economy, Stupid

From the Daily Edge:

MAGA voters cling to myths about the “Trump Economy.”

But the reality was quite different.

At the end of 2019—before Covid hit—Trump was leading the US economy toward collapse.

Here are 5 facts to prove it.

1. Trump said his tax cuts for the rich would “supercharge” the economy. But he created 15% fewer jobs in his first 3 years [pre-Covid] than Obama created in his final 3.

2. His first 3 years in office—pre-Covid—were devastating for factory workers.

3. 2019 was the worst year for U.S. farmers since the farm crisis of the 1980s.

4. By 2019, he was running trillion-dollar deficits, even as poverty soared in Red States.

5. The Trump recession started BEFORE Covid.

Read in full for the details.

(And then, of course, with Covid, it got much worse.  Just as Bush left Obama an economy on the brink of depression, so, too, did Trump leave Biden.)

BONUSES

If you like rock and roll, Little Richard pretty much originated it.  Among those who looked up to him: Elvis, the Beatles, and Mick, all featured in this toe-tapping doc.

If you’re gay, The New Life, set in 1890’s England, should be on your list.

If you like decency and civility in a president, read this account of how Joe Biden apologized to Asa Hutchinson, unbidden, over the weekend.

 

The Happy Gene Takes You Only So Far

But first the good news:

> As headlined in the Wall Street Journal:

Americans Are Suddenly Upbeat About Economy. Sentiment Just Logged Its Biggest Jump in Decades. University of Michigan gauge posts largest two-month gain since 1991.

> Unemployment is wonderfully low.

> Wage gains have begun outstripping inflation.

> Mortgage rates have started to fall.

> Gas prices that Putin sent soaring — while still higher than any driver would like — have dropped sharply.  Send this article to anyone who doesn’t realize how much Biden did to make that happen (among other things, we are now producing more oil than any nation in history) . . . but also to every environmentalist who faults him for that (because it will almost surely change their view).

> We’ve finally begun revitalizing our national infrastructure.

> “Made in America is back, leaving US factories scrambling to find workers.”

> And as you probably saw, stocks hit a record high yesterday.

And now, even so:

The Rising Tide Of Global Sadness — David Brooks on inequality.

Executive summary:

. . . The top 20 percent of the world is experiencing the highest level of happiness and well-being since Gallup began measuring these things. The bottom 20 percent is experiencing the worst. It’s a fundamentally unjust and unstable situation. The emotional health of the world is shattering.

He goes on to say . . .

Counties in the United States that saw the largest gain in voting Republican for president between the 2012 election and Donald Trump’s election in 2016 were also the counties where people rated their lives the worst.

Which is at once understandable and frightening: unhappy people are most likely to be angry and, thus, to vote for the angry candidate.  The one who says everything is rigged against you and that he alone can fix it.  Who plays to fear (“If Biden wins, you’re gonna have a stock market collapse the likes of which you’ve never had.“) and promises to get you “terrific health care at a tiny fraction of the cost” without ever revealing how (or ever really trying).

(Worth reading, if you have time: The Affordable Care Act Saved My Life. Donald Trump Wants To Destroy It, Again.)

It’s tragic, because the angriest candidate and his angry party are relentless in trying to advantage the top 1% while fighting the things that could stem “the rising tide of sadness” among everybody else.

Things like a higher minimum wage . . . $35 insulin . . . affordable health care . . . the Consumer Financial Protection Bureau . . . the Child Tax Credit.   

How unsurprising is this headline? Most kids losing Medicaid come from just nine states all led by Republicans.

People are right to be angry; but on most issues, they’re angry at the wrong team.

In case you can help keep things on track, click here.

Have a great weekend!

 

You Think It’s Rough NOW . . .

Former Republican Steve Schmidt worked to elect George W. Bush and, later, to defeat Barack Obama.  Wikipedia credits him with having helped get R0berts and Alito onto the Supreme Court. Should Trump Win, he writes, the story is just beginning.

NETFLIX

What a perfect weekend to watch Rustin — the man who made MLK’s March on Washington happen.  He had a dream, too.

CORRECTION

David P.:  “Last week you wrote << During the Biden presidency, incomes have outpaced inflation. >> That’s really misleading. 

→ David’s right.  I shouldn’t have taken that link at face value.  Drilling down, I now see it meant GROSS incomes — of the entire working population, which has expanded robustly and consistently for the past three years.  A very good thing — but quite different from the implication that AVERAGE incomes have outpaced inflation throughout his presidency.  I’ve amended that post, to say “lately” incomes have outpaced inflation . . . and linked instead to — Wages Are Finally Outpacing Inflation — which is worth reading.

UPDATE

After I suggested “my latest folly” Thursday, several of you asked whether, having run up from the 15 cents I paid to nearly 40 cents now, I thought RNGE was still worth buying.

I gave basically two answers.

The first was that — recognizing that stocks often fall back after a sharp run-up — one way to do this is to bet just 25% as much as you would have if it hadn’t run up.  If it never falls back, enjoy your gains on this small bet.  Otherwise, enjoy buying the rest of your position at a lower price.

The second answer was that maybe that’s “too smart by half” (or, in this case, 75%).  A friend who knows the company well says he has no clue where the stock will be in three years.  And, of course, that’s true: he doesn’t, and neither do I.  But, he told, me, when, recently, he had an opportunity to swap some options that give him the right to buy shares at $1.60 for something of more concrete value . . . he decided not to.  He thinks there’s a reasonable chance the stock will be higher than $1.60 three years from now.  Should that be the case, it won’t have much mattered whether you paid 25 cents or 50 cents for yours.

I just want to stress: ONLY with money you can truly afford to lose.

 

Inflation (And My Latest Folly)

INFLATION

It sucks that things are painfully more expensive than they were pre-pandemic.

There are two ways to get our buying power back to where it was:

> One is for wages to rise . . . a condition generally associated with Prosperity.

> The other is for prices to fall . . . a condition called deflation generally associated with the Depression.

We seem to be on track for the former.  Better, no?

Lately, incomes have been outpacing inflation.  Stock prices, and thus 401Ks, are at record highs. Inflation itself is back close to the 2% annual rate the Fed shoots for.  Year over year, prices are up 3%; but month over month, the CPI is about unchanged from where it was in November. 

Even so, it’s really tough out there.  The 1% are doing great — and Republicans are relentless in trying to lower their taxes and cripple IRS efforts to collect even that much.  But most Americans are not in the top 1%. 

There were three principal causes of the inflation we suffered:

1. Putin’s invasion sent the world oil price soaring.  A totally unjustified act of war that Trump saw as brilliant, but that caused Americans great economic pain.  And before you blame Biden for shutting down U.S. oil production, please note that we’re currently pumping more than in any year under Trump — more, indeed, than any country in history.

(ENVIRONMENTALISTS: Until energy needs can be lowered by means of increased efficiency and conservation . . . and met by means of renewables . . . someone has to make up the difference . . . the profits from which will flow somewhere . . . enriching someone.  It doesn’t matter to the climate crisis whether it’s Iran or Russia or the U.S.  So better us than them, not least so that we can use the tax revenue from those profits, and some of the profits themselves, to fund and expand the massive climate-change initiative President Biden has launched.)

2. The pandemic massively disrupted supply chains around the world.  One could argue that if Trump hadn’t slashed Obama’s forward-deployed NIH teams in China and elsewhere the pandemic might have been contained.  But rather than blame him for the pandemic, I think it’s enough to say for the purposes of this discussion that it surely wasn’t President Biden who caused the pandemic or those supply chain disruptions.

3. The American Rescue Plan and other efforts to avert the depression that widespread business and personal bankruptcies could easily have caused.  Would we have today’s record low unemployment and record high stock prices had more modest efforts been made?  Maybe.  Maybe not.  But trimming those efforts would have done nothing to avoid Putin’s higher world energy prices or COVID’s supply-chain disruptions.  So blame Biden some of the inflation we had in those two years (largely gone now) — but credit him, if you do, with averting the recession or depression and financial collapse that would have hurt a lot worse.

MY LATEST FOLLY

Summarized in this press release.

Buy shares of RNGE, if you do, only with money you can truly afford to lose.  As long-time readers know only too well, that is not an idle warning!

I’ve made this longer analysis microscopic lest it detract from the much more important topic above.  It appeared on MicroCapClub.Com by Michael Liu whose firm — like me — has an investment in RNGE at 15 cents a share.  To read it, just cut and paste it somewhere and increase the font size:

Range Impact was created in early 2022 as a play on the coal mine remediation services industry. Since that time, they’ve grown revenues from zero to $15 million in annual revenues and profitable. The two biggest strategics in their industry own 23%  and 30% (50%+ combined) of RNGE’s shares that they acquired through placements. These strategics are now funneling $10s of millions of business to Range as their strategic services provider. Range was created by the team of Joseph Loconti, who has overseen several public multi-baggers throughout his career, including founding $3 billion CBIZ (alongside Wayne Huizenga), which was a 10 bagger one year after its IPO and a 40-bagger through today.

History

The Range story started when Joe Loconti and his family office, fresh off a big win, invested $5 million into a tiny microcap biotech called Vitality Biopharma. They didn’t think much of it. It was just another high risk-reward position in the portfolio. Unfortunately, over the next 6 months, Vitality’s stock was delisted and investors realized Vitality’s management had defrauded them. In 3 years Vitality’s stock had declined from $8 to <$1. Loconti was forced to intervene and wound up replacing the entire board and management team.

Any normal investor would simply write off the loss and move on, but Loconti had brought in friends and family in this deal, and felt beholden to Vitality’s other legacy investors to “make them whole” again since he now controlled the entire company management. However, Loconti knew nothing about development-stage biotech. So for the new direction of Vitality, Loconti and his team focused on something they understood very well: Coal mine remediation.

Over the next 3 years, they built a remediation services company from the ground up. Small acquisitions here and there, buying equipment, hiring employees one by one, and suddenly Vitality Biopharma had transformed into Range Impact, with 50+ employees operating 60+ pieces of equipment doing over $3 million of revenue per quarter.

Why is Range Unique?

It’s likely that nobody besides Loconti’s team could have executed this strategy so successfully. It’s hard to break into the coal remediation services industry. The most important factor for winning remediation contracts is prior experience, and without contracts you can’t have prior experience so this chicken and egg problems is a huge barrier to entry.

Range circumvented this problem because Loconti had prior strategic relationships in coal mining. First, his family office owns Continental Heritage, the second largest provider of coal mine surety bonds in the US. Surety bonds are guarantees from an insurance company that if the coal miner goes out of business, the mine is still funded for remediation/asset retirement obligations. In short, Continental guarantees that a coal mine will be cleaned up. Through Continental/Loconti, Range also knows Indemnity National which is by far the largest surety bond provider in the US. Indemnity National and Continental own 50%+ of RNGE’s stock that they bought through placements around current prices.

These are very valuable relationships because once every few years Indemnity/Continental are stuck with remediation obligations for a coal mine when the operator goes bankrupt. The insurers are forced to foreclose on the mine and take control of it, and are then stuck with $10s of millions of asset retirement obligations. All Continental/Indemnity cares about at this point is getting the remediation work done as cheapy and quickly as possible. This means they need a remediation services company that they can trust. And who better to trust than yourself? That’s why Loconti created Range.

This is what happened ~2 years ago when Continental foreclosed on a large coal mine in West Virginia called Fola. Fola has ~$50 million of total remediation obligations and Continental decided to give all of the remediation work to Range. To date, Fola has comprised ~80% of Range’s total revenues, but they are in discussions to get a lot more mines under contract from Continental, Indemnity, and third-party mine owners. I’d expect that over the next few quarters Range can get another 1-2 major mine reclamation contracts from either Continental or Indemnity, which could double the size of their business in short order since the current revenue base is almost entirely just work on the one Fola mine.

There are hundreds of thousands of acres of coal mine land that needs to be cleaned up in West Virginia and Kentucky. If you want to understand how big the opportunity is just watch this video.

More On Loconti

Joe Loconti is not someone that should be involved at all in a $30 million microcap. He’s had exactly 5 involvements in public companies and each one was a resounding success.

– CBIZ – Loconti was Vice Chairman and it IPOed in 1995 at $1. The stock grew to $20 less than a year later (mainly because Wayne Huizenga was involved). They did 100s of acquisitions in a span of 5 years and today the stock is still a 40 bagger from IPO.
– ProCentury Group – was a spinoff from CBIZ with Loconti as a large holder and Loconti’s long time business associate Edward Feighan as CEO. It spunoff in 2004 at $10.50 per share and was bought out in 2008 at $20 per share.
– WCA Waste – Loconti’s team got involved in late 2009 at $3.50 and sold it for $6.50 in early 2012.
– The Joint – IPO investor and provided them some debt financing over the years.
– Vitality – TBD

Keep in mind that Loconti’s family office primarily invests in private companies. These are just incidental investments for them that happened to be public but are indicative of the type of success that Loconti’s team is involved in.

Loconti is involved in the oversight of Range as a large shareholder, but it’s really the CIO of his family office Michael Cavanaugh who is calling the shots. Michael is a former consultant and we’ve been very impressed by his ability to execute in the short time that we’ve known him. He bought $150k worth of stock in the recent placement and so is aligned with shareholders.

What’s Next?

Now it’s clear that this is a pretty unique situation. A very successful businessman’s team is involved in a very tiny microcap because of circumstantial reasons. He is able to quickly jumpstart Range’s operations because of all the strategic relationships he has in the coal mining industry. There is an easy path to market for the next 50-100% growth in the business by just taking on more of their strategic partners’ mines, but how does this become the 50-100 bagger that we all want in something as pent-up as this?

First: AML Mines

There are probably less than 5 mines in total that are owned by insurance companies like Continental, so that is a limited market opportunity. A much bigger opportunity is 100s of mines owned by the state of West Virginia and Kentucky through the abandoned mine land (AML) program. Before 1977, coal miners were not required to have reclamation surety bonds, so after miners drained the land for coal, they simply left. Over time those reclamation obligations were transferred to the state, which now owns 100s of abandoned mine lands that they have to clean up, with historically almost no funding to do so.

The new Infrastructure Bill has changed this dynamic and is providing West Virginia and Kentucky >$100 million in funding per year to clean up AML mines. This is a much bigger TAM opportunity than taking on insurance companies’ mines, but will also be more competitive. I’d expect over the coming quarters RNGE will take on some AML contracts starting small and then consistently growing. The bulk of the Infrastructure Bill funding hits next spring which is when I’d expect the inflection to really begin.

Second: Land

Reclamation work is not a great standalone business. It’s lumpy, low margin, and competitive. The long term value of coal mines and RNGE is in the land. The ability to quickly and cost-effectively clean up several 1000 acres of land creates opportunity to monetize the land for recurring income. RNGE recently announced a small acquisition of a land parcel from Indemnity National to test out this strategy with solar farms. We’ll see what IRRs they are able ot generate with this land but I’d expect in the long-term we see RNGE find more creative ways to acquire they land that they are cleaning up and monetize it. Some examples of this would be partnering with Continental to acquire an AML mine (Continental takes on the reclamation liability and RNGE does the reclamation work and retains an option to monetize the land in the long-term).

Conclusion

Today RNGE is at 1x sales and will likely keep growing from getting more work from pseudo-related parties and the start of AML work. In a year they could get substantially more work from strategics giving them large individual coal mine reclamation contracts, and new funding from the Infrastructure Bill for states to clean up historic abandoned mine lands. In 5 years they should own large amounts of land that they’re cleaned up with high margin recurring income from things like solar farms.

I know it’s a messy thesis but management gives me confidence. Loconti is one of the most successful businessmen around having founded companies with the likes of Wayne Huizenga and Michael DeGroot. And he is very committed to generating shareholder value, otherwise he would have just left this investment for dead years ago when the biotech fraud occurred. Loconti and other strategics have put in $10m+ of cash into this $30m market cap nanocap and they wouldn’t be involved unless they believed it had multi-bagger potential.

The details on how to execute their strategy are a little vague for now but that’s because this company works at lightning speed. The entire current $15 million revenue business was built from scratch within the last 2 years. Who can say what happens in another two? I just think the stock will go up.

Disclosure: I am an analyst at IFCM which recently participated in a placement with Range.

For Richer Or For Poorer

Let’s say you take a vow (call it an oath) to stand by your spouse for richer or for poorer, in sickness and in health.

The vow is witnessed by the largest crowd ever to witness a marriage (or at least so you claim).

Ever.

Now a few years have passed.

The marriage has gotten rocky.

You’re in your office with one of those high-end surveillance systems that let you see what’s going on inside and outside your home.

On your way in, you were complaining to your acolytes that your spouse has treated you rotten lately . . . that she’s thinking of ditching you (and boy are you ever steamed about that, boy are you ever the victim in this relationship).  And you exhorted them to fight like hell to persuade her to stick with you.  If not forever (though possibly), then for at least four more years.

You know that these folks would do almost anything for you — you have the same kind of power over them Jim Jones had over his crowd — and so now you’re back at your office watching as they attack your wife.

You re-wind some of the most violent parts to watch them again.

Your children — and staff from inside the House itself — beg you over and over to call it off . . . to call the police . . . to do something to rescue your wife.

But for more than 20 minutes . . . more than 40 minutes . . . more than an hour watching this . . . more than two hours!  More than three hours! . . . you do nothing.

QUESTION: Would you say you had honored that vow (oath) you took?

I mean, come on, people.  This is not rocket science.  You saw it with your own eyes.  How is this defending your spouse?  Or, in this case the Constitution?

It’s not good enough to accept election results only when you win.

It’s not good enough to accept judicial findings — many of them rendered by your own appointees — only when they’re in your favor.

It’s not good enough to cherish the peaceful transfer of power only when it is transferred to you.

It’s not good enough for the Supreme Court to uphold the Constitution (in this case, the Fourteenth Amendment) when Trammell Crow tells you it’s okay to do so.

It’s just not.

Meanwhile, as I was writing that yesterday, Trump was in court watching his lawyer argue that, under the law, a president can do literally anything — even kill his political opponents — and never face criminal prosecution unless first impeached and convicted.  I’m sure you’ve seen that by now.

If true, then a president — Trump, say, in a second term — could kill anyone he didn’t like . . . and then, if impeached, kill whatever Senators he feared might vote to convict.  End of story.

(It’s probably worth noting that the only reason he wasn’t convicted — the vote was “only” 57-43 when it needed to be two-thirds — is that Majority Leader McConnell told his team impeachment was the wrong route to take; that once out of office two weeks later, he would be criminally liable.  Otherwise, McConnell — and presumably those who looked to his leadership — would have added their votes to the 57.  Indeed, in a secret ballot, the vote would have been more like 98-2.)

ONE MUST-SEE MINUTE

Here.

 

You Are What You Eat / Coffee Or Tea

This four-part Netflix doc is so worth the time:

You Are What You Eat: A Twin Experiment.  

You may (or may not) want to skip ahead a little in the beginning, when they’re introducing the twins and taking all their baseline stats before beginning their 8-week vegan-versus-omnivore diets . . . but it’s about three things I’m guessing you care about:

  1. Your health, vitality, and longevity.
  2. The planet.  (“Every time you eat a steak, a little puff of smoke goes up in the Amazon.”)  Fascinating to see how and why Eleven Madison Park went vegan and retained its 3 Michelin stars.  And to learn the effect today’s 1.7 billion cows have on climate.
  3. Animal cruelty.  Cows and chickens, pigs — and, yes, fish.  I knew a lot of this stuff, but . . . wow.  Meet the guy who went from raising millions of chickens in four enormous CAFOs to, now, growing mushrooms instead.  And the founder of Impossible meat.  And the woman who makes plant-based cheese.

If you haven’t made yourself a Beyond or Impossible burger lately, watching You Are What You Eat (here’s the 2-minute trailer) — just might get you to try one.  When you do, I think you may find they really now are just as delicious as the estimated 50 billion planet-destroying, cow-torturing variety Americans eat every year.

I’m no strict vegetarian, let alone vegan . . . but I’m leaning ever more that way.

BONUS: COFFEE OR TEA

Turns out, both are good for you.

Here’s a fun way to find out which is better.