I caught up recently with Ranjeet Sundher in Singapore to go over his latest projects and thought it would be worthwhile introducing him to you. I really like Ranjeet because he's a nuts and bolts entrepreneur, the type of guy who is adaptive enough, smart enough and flexible enough to prosper in countries which many shy away from.

Ranjeet is the CEO of Challenger Deep Resources (TSX.V: CDE), an Indonesian coal producer. Ranjeet formerly built-up Red Hill mining before selling it to Prophecy coal in Mongolia. More on that below.

Scott met more recently with Ranjeet over in Cambodia. Enjoy!

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Scott: Ranjeet, you've a fascinating background spanning software to coal mining on the Mongolian steppe. You moved from Canada to Indonesia in 1995. What prompted this move?

Ranjeet: My background is actually in equity trading. I worked up from a phone clerk to senior trader on the Vancouver stock exchange and eventually worked on the US trading desk. The Canadian Stock Exchanges were dominated by resource companies, mostly exploration and this is where the focus of my trading was. As a hobby I began staking claims in "hot" areas and selling them to companies, my hobby then became my full time job and I moved to Indonesia, which I believed offered the most reward long-term. I formed a private mining service company that soon grew to 90 employees and we covered everything from acquisition to exploration, legal and accounting for our clients. It was an exciting time until some political uncertainty affected FDI. Then in 2001 I relocated to Singapore where my home base has been ever since.

Scott: In 2001 Mongolia creeped onto your radar. After following the story remotely via your Bloomberg terminal, you ventured to Mongolia to learn about the resource revolution about to unfold firstthand. What made you finally decide to commit time and capital there? Something which you are doing to this day.

Ranjeet: I have always, even now, watched for breaking resource news and traded accordingly. In January 2001 Ivanhoe, then a junior, reported an exceptional drill result from its Turquoise Hill Copper/Gold property. I realized immediately that juniors exploration companies from around the world would start to focus their attention on Mongolia. Within 2 weeks I was on a plane to UB and spent the majority of my time there, until 2 years ago.

Scott: From a previous conversation, you mentioned Mongolia was awash with opportunities… from purchasing land leases to the obvious commodities plays. How did you find trustworthy partners to help you navigate the local scene?

Ranjeet: There was some luck involved. For the first 2 weeks I could not find the right partner who understood what I needed. UB was much different then, with no expat scene and no service companies in my sector. On the last day I met the right local partner who understood exactly what I needed, we have been partners ever since.

Scott: Founded in 2003, Redhill Energy focused on Mongolia and eventually identified 200m tonnes of thermal coal at Ulaan Ovoo, near the Russian border and over 1 billion tons on the Chandgana projects in Khenti. What was the strategy for this operation? Where was your end market and how did you intend to achieve delivery with limited infrastructure in country?

Ranjeet: To be honest we were a little short-sighted with our Mongolian ambitions, we were there to build resources fast and gave little thought to how we would sell it, a massive land grab was under way. We had spent 2001 until 2003 searching for gold and copper privately, then as Redhill we continued this and added Uranium. We had lots of initial exploration success but nothing panned out on the scale we needed. We started looking at coal in 2004, at this time there was no interest. In 2005 we made our first acquisitions and the next 4 years were very busy until we sold the company.

Scott: Today it is no surprise that Mongolia is awash in coal, especially thermal. Looking at the economics of this deposit can I assume that this was high-quality coal?

Ranjeet: The Ulaan Ovoo coal was of medium quality, but at the time was probably one of the top 5 deposits in Mongolia. The economics looked good at the resource delineation stage and we had several international consulting companies sign off of on positive scoping and PFS studies as the project developed.

Scott: What were some of the hurdles you faced operating this mine, or was it a rather smooth process?

Ranjeet: The acquisition and exploration of our Mongolian coal projects were straightforward and clear, the hurdles came with the needed mine and environmental permitting. The process was not that clear and few foreign companies had done this, so we kind of learned as we went. In the end we were successful and the hurdles we faced were nothing compared to what others face in Mongolia today.

Scott: Oyu Tolgoi's tax and royalties agreement with the Mongolian government was initially settled in 2009 which sparked the great mining rush. Was this the catalyst that transformed Mongolia from a sleepy backwater to world class mining destination?

Ranjeet: Without the Ivanhoe discovery in 2001 there would have been no mining rush and Mongolia would not be what it is today. The pioneers of our industry started arriving in Mongolia between 2002, and in 2009 the mainstream investors started to arrive. Mongolia will again have another rush to the resource sector, though in my opinion that's a couple years away.

Scott: Your operating history in Asia has been largely coal based. What licenses besides Ulan Ovoo did Redhill own and were any of them outside the realm of coal?

Ranjeet: Redhill started out exploring for copper and fold in Mongolia as well as Uranium, we probably had some sort of deal on over 50 projects in total over the years. In late 2004 I decided to have look at the coal sector, because at that time interest did not even exist. In 2005 we acquired Ulaan Ovoo, and 2 years later made a massive coal discovery on our Chandgana coal projects in Khenti Province.

Scott: In 2010 Redhill Energy shareholders agreed to a merger with Prophecy Coal. What made this strategically attractive? Why not position yourself to have been bought out by one of the majors?

Ranjeet: This deal was simply to good to turn down. At the time of the deal Redhill was looking at a capex of $50 million to get Ulaan into production, as well our market cap was only $20 million. By the time our all share swap deal closed the Redhill market cap was around $58 million. We all had shares in Prophecy, who at the time was trading large volume and raising large amounts of capital, they later spun out the non-Mongolian assets into NKL and we received additional shares, it was a good deal for us.

Scott: Today you are focusing your time on Challenger Deep Resources, a TSX.V listed company focusing on developing high caloric coal deposits in Central Kalimantan, Indonesia. At a time when prices have plummeted, what continues to attract you to the Asian thermal coal market?

Ranjeet: In 2008 I decided I wanted to run a coal mine for cash flow, I believed in the sector's growth potential and had a good understanding of the steps to success from my previous coal experiences. The best place in the world for this is Indonesia, so I built Challenger and my team and we started to build a small to mid-size coal producer.

Scott: Elaborate on the specifics of the thermal coal market. What does the coal mining and export environment look like in Indonesia?

Ranjeet: Indonesia is the largest exporter of thermal coal in the world, in recent years it has surpassed Australia. There is a lot of untapped potential, and in large part the government has been supportive for 40 years to foreign investment in this sector, this does not however mean that irrational thinking doesn't comes into play from politicians from time-to-time, but it always works out.

Scott: Speaking of irrational thinking, in 2009 Indonesia created a mining law banning the export of unprocessed ores, to be enforced from 2014. The Supreme Court struck down the export ban in September of last year, though MoEMR is attempting to counter the ruling. While it seems rational to demand the creation of an upstream mining industry in-country, it has wreaked havoc on junior resource companies and scared away investment. What are your thoughts on all of this and is there the potential for the domestic coal industry to be negatively impacted?

Ranjeet: I would first like to point out that the Indonesian domestic market demand for coal is growing every year. Additional power plants are being built and domestic users are competing for the coal that's being exported, also domestic coal sales are priced against an average of different international coal benchmarks, so margins to sell your coal domestically are competitive. For the foreseeable future coal exports will continue as they have been, I could see however some increased government royalties on exports coming into play once coal prices start to move upwards.

Scott: Your Barito licenses are the most prospective of CDE's properties, and are expected to be producing coal in Q4. A moderate sized deposit, what are you doing to enhance your resource base? What are your other licenses showing in terms of coal quality and quantity?

Ranjeet: The Barito project comprises 2 licenses 11km from the Barito river, there are also several other licenses in this area that we find attractive. There was only one private road into this area and one jetty, Challenger has purchased all this infrastructure. This creates a mini coal hub in this area and gives us leverage and scale to grow the resources and the economics.

Challenger has reviewed over 200 projects. It is our goal to have 2 operating mines before the end of 2014 as well as 2-3 exploration stage projects. This would then provide several value drivers for our shareholders as far as a return on investment.

Scott: That's a remarkable filtering process, 200 licenses. Clearly you have a narrow focus which I presume is based predominately around low-capex projects?

Ranjeet: Low hanging fruit… we are looking for 5 to 10 year mine life projects with a capex under $10 million and a payback within 24 months of production starting. We rely on investor money to grow and we need to have the economics be very competitive.

Scott: Thanks Ranjeet, we'll speak in more detail soon!

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We expect to hear more from Ranjeet in the coming months as I'll be catching up with him shortly. We also hope to have him speak at our next Meet Up in Southeast Asia, with details on that forthcoming.

- Chris

"How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case." - Robert G. Allen

The evolution of the Western shopper is well documented… Gone are the small local outlets from which our previous generation shopped. Modern adolescents now spend their waking hours roving shopping malls while glued to smart phones. I wrote an article on the topic of virtual crack a while back, it may be worth a quick review for those that missed it.

Traffic congestion, just like bureaucracy creates a lag on economic activity, but remains a valid barometer for identifying changing or accelerating trends.

In Economics classes, as boring as they are, we are taught about supply and demand. Where supply exceeds demand falling prices are the result. This is precisely why "rebooting" the world's economy by increasing the supply of useless scraps of paper (some call it "money") is asinine at best, and at worst will lead people and nations to conflict. But that's a topic for a later post. On the other side of the coin, demand exceeding supply typically results in rising prices.

Now, consider traffic jams with respect to supply and demand.

Last month in Phnom Penh, Cambodia it became painfully obvious that the increased supply of motor cars, trucks, buses and tuk-tuks has exceeded the capacity of the existing infrastructure. This is exciting for us, given that the infrastructure today is waaay better than it was 10 or even 5 years ago. A mere decade ago the roads, if one could accurately label them as such, were absolutely horrendous, yet were less, not more crowded. Back then the average Cambodian couldn't imagine to afford a tuk-tuk, let alone a car.

Today, not only are there plenty of vehicles on the roads, but they are now driving on roads which would be acceptable in any Western city, at least within the city limits. Those further out are shabby, but still remarkably good, and many times better than they were just a few short years ago. Things are vastly different in today's Cambodia, and they are changing rapidly and consistently.

An investment theme that we focus on quite a bit is that of changing consumer habits. This is where traffic jams come into my story, and in a most unlikely place… supermarkets. Yes, supermarkets.

Everyone knows that a rising middle-class enjoys higher levels of disposable income, the question is how they allocate their spending and who benefits and who doesn't. When your mode of transport is walking, a bicycle or maybe a scooter, you'll have two issues to confront when heading off to the store:

1. There is only so much you can carry as a pedestrian, or on a bicycle or scooter.
2. You'll naturally shop close to home to avoid carrying your goods a long distance.

Basically, consumers in markets which don't yet enjoy sufficient disposable income will shop accordingly, and you'll find little "Mom and Pop" stores are the most common. In economies and markets that are moving up the consumer spending ladder, there is a transition that occurs. Once disposable income increases, more motor cars hit the roads. Now it makes perfect sense to travel further to shop, since you can transport greater quantities of goods in a car.

While only anecdotal, I think there is a correlation between traffic caused by increasing disposable income and supermarkets. Mark and I saw this day in and day out while living in Thailand. The not-so-obvious beneficiaries of this are the smaller chain stores, not the large scale supermarkets such as Carrefour, Tesco, Makro, etc., but rather Alfamart (AMRT) in Indonesia, and 7-11′s (one on EVERY corner in Thailand). In Cambodia you have Lucky, owned by DFI, it's probably the best company to own in this space in our opinion. These (not so little) guys are simply everywhere, and their financials are pretty appealing.

Across SE Asia we're experiencing increasing urbanization and rising incomes. The impediment to "supply" is undoubtedly infrastructure. We can therefore glean a lot by watching the steady build up of traffic in frontier markets. Think of it as demand trying to (literally) get to supply. That's an investment opportunity that's easy to understand.

- Chris

"Ever consider what pets must think of us? I mean, here we come back from a grocery store with the most amazing haul - chicken, pork, half a cow. They must think we're the greatest hunters on earth!" - Anne Tyler, Pulitzer Prize-winning Novelist

China circa 2008… six babies die from severe kidney damage while another 300,000 suffer kidney stones. As it turns out, melamine isn't meant to be in infant milk formula! The result was a few Chinese businessmen taken out back and shot, literally… and a nation that, for good reason, doesn't trust the dairy industry (for starters…).

Since then China has "enjoyed" multiple infant formula scandals, including formula containing aflatoxin, a known carcinogen, and a scandal involving milk powder containing mercury.

Outside of infant formula, but remaining on the topic of food found on Chinese supermarket shelves, it's also possible to buy "glow in the dark" meat. Turns out bacteria-laden pork does that. I figure there may be a market serving it in night clubs, instead of glow rods you could have "glow kebabs" - call it theme food.

Not to be outdone by the Europeans, who were recently caught passing off horse meat as beef, below I present a list of culinary delights to be found in the middle kingdom:

• Rice containing cadmium. A heavy metal which destroys your internal organs and causes cancer. Not a great ingredient in food methinks.
• Rat, Fox and Mink meat sold as Lamb. Come on…let's face it, most any meat deep fried and doused in sufficient amounts of soy sauce tastes pretty much the same anyway.
• Dead, diseased pigs sold as food. This was stylishly referred to as "swine gate". Turns out the pseudo-rabies virus in the pigs doesn't gel well with humans.

Deep fried with a bit hoisin sauce and it'll be alright, no?

In short, buying food off a supermarket shelf in China is a high risk adventure sport. What the average man may risk on his own behalf, he is far less likely to risk on his precious spawn. Those reading this article who have loved ones, especially children will likely agree with me when I say I would NEVER let my kid so much as look at any infant formula originating out of China. Even if there is a statistically small chance of poisoning, the ultimate penalty is death. Yeah, thanks, but no thanks.

It appears many Chinese parents feel the same way, which has led to mainland Chinese buying infant formula in bulk from Hong Kong, Europe, the US, and Australasia, thereby prompting a rationing in some countries by companies such as Danone and Mead Johnson Nutrition Co.

In a move reminiscent of US anti-drug trafficking efforts, the Chinese Government, exhibiting the intellectual capacity of a stuffed bear, have since restricted imports to just 2 cans per person. This has opened up a massive smuggling opportunity. You know the world is a screwed up place when transporting something so innocuous as infant formula is a punishable crime!

Hong Kong border officials last year arrested more people for smuggling baby infant formula than they did for heroin!

Markups now exceed 100% above retail prices in Europe, Hong Kong, Australia and New Zealand. When you consider I'm talking about the retail price and not the wholesale price, those of you who are not asleep, stoned, or dim, will quickly realise the obscene profits that smuggling generates. The average Chinese newborn consumes 22,630 grams of formula in their first 6 months of life, equating to a US$1,544 retail value. Demand is overwhelming supply right now.

When a market accepts and trusts people whom they don't know from Adam, selling infant formula out of their garage, then you know you have a market ripe with opportunity. Done properly the potential exists to create a powerful "trusted brand".

At present 70% of the imported infant formula market is controlled by foreign brands, with most of the independent brands run by small "Mom and Pop" companies from NZ and Holland, who as far as our analysis shows are successful mainly due to their product coming from "safe" jurisdictions. None we've found have strong marketing or endorsement programs, or are taking advantage of this opportunity in a well thought out manner.

Below is a graphic representation of the major players in this $12.5 billion sector:

Mark and I, along with our CPAN members have recently completed a "friends and family" seed financing round in a company seeking to change this.

Using a strong marketing platform they will seek to establish themselves as a niche, high-end supplier of infant formula to the China market. I'm here in NZ, and I just met with the CEO who is sourcing supply from a boutique New Zealand dairy company. He commented to me, "you know I wouldn't know what to do here in NZ, all the problems seem to be solved." This is exactly what excites us about emerging and frontier markets. There is NO shortage of problems, and the greatest profits always go to those who solve problems.

We believe this company is in the right market, has a solid strategy which they are systematically executing on, and most importantly they have a very well-established team of professionals with solid track records of operating in China. Those factors, combined with a compelling valuation, are some of the reasons we got involved.

As mentioned on our blog numerous times, we ALWAYS bet on talented, proven management first and foremost. By doing so we think the odds are stacked more in our favour than otherwise. Executed well, the rewards in this sector promise to be substantial. What is a sure bet is that someone in this space is going to make a fortune.

We have placed our bet, now let's see how it plays out. Time will tell, and nothing in private equity is ever a sure thing. However, I'm always cognizant of the deals which have vaulted my own portfolio, and most have had the ingredients of this one. We'll likely introduce readers again to the company in question once they hit cash flow, but prior to going public.

- Chris

"Even if there is only a 1% chance that Chinese formula is not safe, I don't want to be that 1%." - a "Mrs Li" (a Chinese mother)

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Some do a fine job, provide a valuable service and deserve every penny they earn. In my experience however, and that of Mark and many of our friends who invest in private equity, these people, the deserved ones that is, are a very small fraction of those inhabiting this space. I've met hundreds of middle men and can count on one hand those I trust and value.

In the private equity space they are abundant. MAN are they abundant. In fact, I think we currently have a bubble in middle men. Doubt me? Hop onto LinkedIn and you'll find every Tom, Dick and Sheryl hard at work putting Nigerian scam artists to shame. To be fair, they may represent real deals which in-and-of-themselves are not shams, but beware the costs. Many "represent" millions in capital, yet like those "trusty" Nigerians, who also represent gobs of dough, somehow they just need that little itty-bit of additional capital from you and I to "pull it over the line."

I bring this up because of an amusing interaction I had recently with one such individual. I'd like to think that shining a light on some of these creatures lurking under slimy rocks may help other investors recognize these clowns when they see them. It may also serve as one of the red flags I previously spoke about for investors seeking an entrance into private equity deals.

Firstly, you'll likely have already come across some of them; they're quite possibly the guys "endorsing" you for your skills on LinkedIn. WTF..?

I'm confused, some guy I've never met and don't know from Adam, just endorsed me for "Strategic financial planning" skills. As confusing as this is, what really gets me is why I've not been endorsed for my great pancake making skills. My kids reckon I'm the best there is, and they actually know me and have witnessed said incredible pancake making abilities. The guy on LinkedIn…not so much!

Now these guys are nothing like brokers at all, but rather more akin to back alley abortionists peddling their wares, complete with the rusty, blood-stained "tools" from the last botched job. They litter the world of private equity like plastic bags on a Maputo high street, and frankly annoy the sh*t out of Mark and I.

A story to illustrate absurdity…

Onto my tale. I was recently put in touch with a gentleman of the type I described above, it turned into the stuff of high comedy.

Now, the underlying business was actually OK, which was why I gave the time of day to him to further explain the deal terms. However, the structure of the deal was such that the "promoter" got a fat chunk of the cash out of the gate, travel expenses (which were obscene), and sundry other expenses, which I showed to Mr. back alley boy, that amounted to fully 60% of the investors capital! I kid you not! Even more amazing to me is that this clown had in fact already found an investor of sufficiently low intellect to invest in the deal, taking out the majority of the offering. A 7-figure sum. I pity the sod. Something about "fools and their money" comes to mind.

This particular investor now requires a 150% return in order to simply break even. This, on an investment which is high risk to begin with, and where it's entirely possible to lose 100% of his money. Of course the promoter was doing his damndest to make the deal sound like a low risk, HUGE upside, fit for widows and orphans opportunity. He tried to weasel his way out of the facts when I presented them to him, but I was having none of it. In frustration he simply walked away saying I didn't understand the deal. Oh, I understood…and that of course was the problem.

This was one of the more extreme cases I've seen of friction costs, but I will say that it's pretty common for your investment dollar to be "attritioned" or "frictioned" to the tune of 15% or more on many deals I've reviewed. On a $100,000 placement you're looking at losing $15,000 right out of the gate if you don't pay attention.

You will almost NEVER be shown these details, but will need to closely examine the deal to find them out. Small print etc. folks. Look for font size 8 and read diligently.

As an investor it's crucial to understand the cost of capital for any business you are looking at getting involved in. Additionally, ferreting out the true cost of capital for a business, and whether you are getting hosed or not, is important in order to understand the true state of accounts in the company.

Some points:

• Find out how much capital hits the balance sheet. Unless its a "friends and family" round you'll likely have placement fees somewhere. No problem, but analyze them and make sure that they make sense.
• Always ask whether they have their own capital on the line, how much, and ask for proof and full disclosure of compensation to those involved in the transaction. Let me tell you there is a vast, Grand Canyon wide difference between having your own cash on the line and that of a client, friend, associate, or whatever you want to call "the other guy"… you know, the one who is actually putting up the capital.

Kyle Bass mentions the, "give a shit factor", and it is remarkably high when putting your own cash on the line. I should know, I've been "dumb enough" my entire adult life to be the guy putting his own capital to work and only getting paid when I'm right, and taking it on the chin when I've screwed up. It has frustrated me many times to have watched middle men walk away with larger sums than I…even after they never put a single dime on the line. No need to follow my path though, you can always become a mini-Bankster yourself.

Good luck out there, watch ceaselessly for this nonsense and make sure you ask the question first and foremost if any fees are being paid and to whom. Full disclosure should be given. So, next time some back alley abortionist lies to you, do us all a favour and punch them in the face.

- Chris

"Money talks and bullsh*t walks" - Sam Zell

"No" was his answer. Stunning as that sounds to me…the vast majority of people, my friend's wealthy clients included, which I might add would be termed "smart money", simply think "it wont happen here". Are you shitting me? The banks are mostly insolvent, the governments are bankrupt and the Banksters have already shown their cards in Cyprus! They've GIVEN us the playbook! What will it take for people to wake up?

I asked what his clients were holding in terms of cash. "Euro mostly, USD and of course Yen" was his reply. I wrote a long time ago about the triplets Ugly, Uglier, and Ugliest mentioning how those with large sums of capital to allocate have little choice when seeking liquid markets within which to do so. What I never considered then was the vaporizing of bank accounts regardless of the currency being held. This will forever be referred to as being "Cyprus'd".

Holding currency in the banking system itself increasingly looks like a bass-ackward idea, and makes a mockery of the term "safe deposit". Our friend Simon Black of Sovereignman wrote an excellent article on the state of western banks here which you should read.

One of our readers (thanks Riana) sent me the clip below of Jeffrey Sachs, a Columbia University professor, providing a very candid view of the financial system in the US.

I strongly urge you to watch this clip! It is in my opinion a MUST VIEW. The short version is, "Massive, massive illegality" condoned by the legal system, government and big business. If you thought you were safe investing in the US stock market you have been taken for a ride. I think the American people VASTLY underestimate the extent of fraud, theft, and subjugation that is taking place under their very noses, and worse yet, feel powerless to stop it!

There is a reason Mark and I invest in private equity in markets which, humorously enough, are considered by the mass media as "too risky".

I think it's indicative of a problem when, half-jokingly, the vernacular increasingly being used in the popular media includes: being "Corzined" and "Cyprus'd". The former meaning having your money stolen from or via the equities market, and the latter being theft directly via the banking system.

What options does that leave us? Ah, the bond market…aye carumba, don't get me started.

Sorry folks, but when Mark and I, together with our exclusive CPAN subscribers, invest in private companies in places like Mongolia, Myanmar, Nepal, or Cambodia we have a LOT more control and understanding of what we're getting into. Risky? Look, it makes investing in the US and European financial systems look positively like Russian roulette in comparison!

Most stock markets, the US included - venerable, decaying, fecal matter that they are - are now rallying on the energy created by Bernanke's credit and paper printing. The true value of all that paper will be revealed when it's simply used for composting at some point. Please don't ask me WHEN that will be, as this train has stayed on the tracks longer than most, including myself, have thought possible…

Funny money - crazy printing - is what is vaulting stock markets globally. They are running on fumes folks. The current financial system will ONLY run out of fumes when the masses can finally differentiate between liquidity and solvency, and at that point the currency and bond markets get toasted!

Remember, a rising equity market doesn't always mean increasing economic prosperity. Look at Argentina. Its equity market is the best-performing in the world as of late. For those that don't know why, in a nutshell the crazy b%&$h that runs the place is single handedly turning it into a banana republic. The currency has been devalued by market forces to such an extent that the "blue" (underground) market rate for USD is more than 2x the "official" government rate. The rise in the equities market, as spectacular as it has been, has not even kept up with inflation, which the Argentine government says is still in single digits, but is running at double digits monthly now! These clowns (I'll throw ALL global "central planners" in there) are clinically insane.

From Japan, to Europe and across the Atlantic back in the States, to what Mark now regrettably refers to as "prison", economic push-up bras are in vogue. Why is Mark referring to the States as "prison"? Lemme see… the recent IRS fiasco, Benghazi scandal, Bloomberg scandal, gun control, militarization of the police force, 300+ national surveillance drones, the world's largest data collection center…the list goes on, and on, and on. For those that still insist that "if you don't like it leave", Mark asked me to remind our readers that he already has.

Make no mistake, push-up bras are still push-up bras, and when the lights go dim and the bra, with much anticipation, comes off, the "truth" will reveal itself. Market conditions will be seen for what they are.

Right now market participants are confusing liquidity with solvency, and the solvency issue is becoming increasingly stretched. When reality starts hitting home, and the inevitable market correction comes, the push-up bra will come back with a new and improved version (QE whatever… where are we at now? I lost count somewhere…). We'll be getting the mother of all QE, much like Kuroda is trying right now in Japan. It's also a lot like Rudolf Havenstein, the president of the Reichsbank in Weimar Germany once managed.

We'll be told that the entire world will choke and die unless these corrupt, unbelievably wealthy "masters of the universe" keep the game going. Herr Von Bernankenstein will man the keyboard with his two chubby fingers on CTRL and P. The only question is how much abuse can a currency take before it implodes? Again, we don't know!

This really is a Viagra economy. The "old man" is limp, much like what was hidden under the previously mentioned push-up bra. Anyone with any sense knows it, and will keep accumulating gold and "real" assets. It is one of the most obvious trades I can think of for now. Short term, the chart looks like it wants to go to $1,300 or even $1,200, but in the long run those tiny corrections are irrelevant.

We clearly need a hedge, and therefore Capitalist Exploits is proud to announce the launch of an ETF that will provide it!

The composition of the ETF is as follows:

• 25% precious metals
• 25% guns and ammunition
• 25% a sustainable place in the sun, far from the madness, with a massive veggie garden, fresh spring water, cows where my milk is assured not to have aspartame in it. (Oh yes, the FDA is now thinking about including artificial sweeteners in the definition of "milk"… you can't make this shit up!)
• 25% antibiotics, medication and bio-hazard suits

Ticker symbol: SHTF

The fund managers reserve the right to include tin foil hats in the portfolio as required.

Why now you ask? How about this…

No further commentary necessary.

- Chris

"We have a system which is out of control, that's politically out of control, regulatorily out of control, out of legal bounds, out of responsibility, and we've invented a system where you get to take home billions of dollars in personal compensation, your shareholders pay hundreds of millions of dollars in fines, you shelter your money in the Cayman islands in agreement with the IRS and nobody seems to control it at all." - Dr. Jeffrey Sachs

These aren't the only businesses that benefit in this environment however. With that in mind lets take a look at agriculture, a favourite of Mark and I. "Ag" is a market which enjoys growing demand, supply shortfalls, is severely under-capitalized…and this says nothing of the inflation which central bankers are adroitly baking in the oven. Unfortunately, in the western world agricultural land values are prohibitively expensive, and certainly not attractive on a pure yield basis.

I've spoken before about streaming companies, and in fact one of our trade alerts suggested writing Sandstorm Gold (SAND) puts. I estimated that doing so would get us a 30% return overall, if things went as I predicted. Streaming is well-known in the mining world. Companies like Franco Nevada, Silver Wheaton and Royal Gold have made a LOT of money for their shareholders over the years. It is a truly unique set of circumstances we find ourselves in with respect to the resource markets today, but I want to talk about agricultural streaming in this post.

Agricultural Streaming?

Yes! Agriculture is in a bull market. Much like the better known metals streaming companies who provide financing for producing mines in return for a "stream" of the metal over specified time frames, agricultural streaming follows the same essential business model.

As mentioned above, one problem with agriculture that Mark and I have encountered has been the unbelievably high cost of agricultural land in the western world. Farmland in the Midwest US is now topping $20,000 per acre, which is certainly not bargain territory. Yields are simply terrible. Eliminating this problem is possible, and the model is being effectively proved by a reader of ours with whom Mark and I have been communicating for some time now. Brad Farquhar is the co-founder of Input Capital, the world's first agricultural streaming company.

Focused on canola streaming in Saskatchewan, Brad and his co-founder Doug Emsley have built an enviable business! With IRRs in the 20-40% range, and operating cash flow margins exceeding 50% the business model is completely scalable, provides leverage to the commodity, and allows Input Capital to bear no direct operational risks. Their model offers diversification simply not possible by owning a farm itself.

Brad raised money for the business in a seed round last year at $1, and unfortunately for us and for our CPAN members this was at a time when the service was only just being born. We did not participate. Just for reference, that's the type of early stage private equity deal that we live for in CPAN.

Input Capital is now doing a pre-IPO raise at a multiple to the seed round, and will then list via a reverse take over (RTO) on the TSX. In conjunction with the RTO, Input Capital is also carrying out a $100 million private placement. This is a sale of Subscription Receipts, which will be converted to shares in the company when this RTO process is concluded. The offering is targeted at institutional and accredited investors ONLY.

The syndicate for the offering is composed of: GMP Securities, CIBC World Markets, National Bank Financial, Cormark Securities, and AltaCorp Capital. Mark and I both have a relationship with Sprott, and in fact our brokers there reached out to us on this just this week. Our guess is most Canadian brokers will be familiar with the deal.

While it isn't the early stage seed round we typically look for, we do believe the upside from here is likely substantial… assuming Brad and Doug continue to run it as they have up to this point. As we've said, we absolutely love the sector and we believe they have what it takes to make their investors a lot of money during this bull market.

We don't have any skin in the game at this point, but we may participate. You can get in contact with Brad or Doug directly by visiting Input Capital's website. We are told that the placement closes near month's end.

- Chris

Disclaimer: We didn't get paid to mention Input Capital…we just like what they're doing and may participate in the offering ourselves. We will make no attempt to tell you or anyone else when or if we participate. Do your own due diligence, this is NOT a recommendation or a solicitation on behalf of Input Capital or ourselves. The fact is we like the ag streaming space so much that we're personally in the process of setting up an entity dedicated to streaming grains and high-value crops in frontier markets. CPAN members have already been introduced to what we're up to.