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Driving Shenanigans and Sweet Investments

Posted August 14, 2017

I spent the weekend moving my stepdaughter into a sorority house at Virginia Tech. We didn’t see a cop the whole way down. Drivers were going 85 mph on the main highway because all the police were at the UVA Nazi protest.

“We should stop by so we can check it out,” I say to the wife. “Hell, no,” was the reply. “Besides, we have dinner plans.”

And so we did.

The wife's brother burned us some steaks at his place in Winchester.

He was a car dealer at one point and tells a story of selling a Chrysler to a sergeant. The sergeant showed up a day early and said, “I thought this car had 20,000 miles on it.” The odometer showed 60,000. The brother said, “Well, you’re early. If you showed up tomorrow, it would have 20,000 miles on it.”

Turns out the sergeant bought the car and told him to roll back the miles anyway.

Speaking of Cars…

The future of driving, they tell us, will be all-electric. And, heck, they may even be right. Regardless, many people are betting big bucks to make it so.

Elon Musk, owner of Tesla, is building a Gigafactory to make lithium-ion batteries for cars and other energy storage needs.

The Chinese are building four. The South Koreans, Germans, and Japanese are also getting in on the game. The lithium battery industry is expected to grow from $29.68 billion in 2015 to $77.42 billion in 2024, a CAGR of 11.6%. Others estimate the growth at 20% per year over the next five years.

This growth will produce shortages in metals such as lithium.

Lithium stocks have taken off over the last year, many of them going up more than 1,000%.

That said, a forgotten little metal called cobalt makes up over 50% of these batteries by weight, and it is running into shortages. The cobalt spot price has almost tripled since 2016 and could go a lot higher.

Cobalt is a transition metal found between iron and nickel on the periodic table. It has a high melting point at 1,493 degrees Celsius. It is also ferromagnetic and can retain its magnetic properties to 1,100 degrees Celsius, a higher temperature than any other material.

Cobalt is used in battery cathodes (49%) and super-alloys that are used in things like gas turbines and jet engines. Cobalt batteries have the highest energy densities. There is 7 kg of cobalt in a Tesla Powerwall 2 and 22.5 kg of cobalt in a Tesla P90 battery.

Supply Shock

Since about 1995, cobalt demand has grown from 20,000 tons a year to over 115,000 tons last year. It is expected to outstrip supply this year by 900 tons.

The problem is that cobalt isn’t found in nature. It is an offshoot of copper and nickel production (copper 38%, nickel 60%, cobalt 2%). So, it is difficult to ramp up production.

Furthermore, most cobalt comes from the Democratic Republic of Congo, which has been the most war-torn country of the last 25 years. The DRC is one of the poorest, most corrupt countries on the planet and has had more deaths from war than any other country since World War II.

DRC mines include child labor and other unsafe practices. Amnesty International alleges that Apple, Samsung, and Sony fail to do basic checks. There could be a blood battery movement along the lines of blood diamonds.

Furthermore, hedge funds are starting to stockpile the metal. According to the Financial Times:

In a bold wager on higher prices, half a dozen funds, including Swiss-based Pala Investments and China’s Shanghai Chaos, have purchased and stored an estimated 6,000 tonnes of cobalt, worth as much as $280m, according to the investors, traders and analysts. The stockpile is equivalent to 17 per cent of last year’s global production of the metal.

All of this means there could be a supply shock in cobalt. It’s something you should be investing in. My buddy Keith Kohl has a way for you to profit from this unique situation. He'll tell you more about it later this week.

All the best,

Christian DeHaemer Signature

Christian DeHaemer

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Since 1995, Christian DeHaemer has specialized in frontier market opportunities. He has traveled extensively and invested in places as varied as Cuba, Mongolia, and Kenya. Chris believes the best way to make money is to get there first with the most. Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor's page.

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