Kistos: The ESG Paradox
§Kistos PLC
After a few months, I finally made this write-up public. The thesis is as follows:
The unit economics are fantastic
The reserves are undervalued, especially considering gas prices
Management is fantastic
There is plenty of room to grow
Kistos will be an ESG beneficiary
§Click here for the write-up!
There have been plenty of updates regarding Kistos, and I will add those to the website shortly :). Stay tuned!
Two Thoughts
§ESG Paradox
What is the Environmental, Social, and Governance (ESG) movement trying to accomplish? I think the goal is to invest and uplift companies that make the world a better place.
However, we must keep in mind Newton’s Third Law:
For every action, there is an equal and opposite reaction
What does this mean in terms of ESG? Well, for every company that is uplifted, there must be a company that is suppressed. In practical terms, the companies that are being uplifted are the renewable and clean energy businesses of the world. Meanwhile, the companies that are suppressed are the comparatively dirty coal/oil businesses, which provide 2/3 of the world’s energy!
But what happens if you destroy the supply of coal, oil, and even gas?
In his most recent letter, David Einhorn states:
…It will be the poorer countries and citizens that go without. Inflation, in general, disproportionately affects those with the lowest incomes. The unpleasant truth is that often the goals of ESG run counter to the goals of reducing or eliminating poverty and wealth inequality.
This needs to be fixed!!
§Click this sentence if you want to read the full letter
§Mandate to Rule
In a previous post I wrote about the idea of a Mandate to Rule- how every leader can only rule contingent on they accomplish a few things for their people. I claimed
The Chinese Communist Party believes their mandate to rule comes from the continuous improvement of the entire society
Essentially, the Chinese Communist Party cannot afford stagnant or declining growth. In a recent interview with Zero Hedge, famed short seller Jim Chanos echoed my views, stating:
JC: Since we started following China at the end of ’09, this is the fourth time that they’ve attempted to slow the real estate market down, because they do know that this is going to be basically too big to deal with if it keeps growing at the rate it’s growing. But every time they’ve done it, the economy has hit stall speed very quickly, and they panicked. They went from hitting the breaks to hitting the accelerator. That’s why we’ve seen higher levels of real estate. The idea that “I can’t lose buying apartments” became ingrained with bankers, real estate speculators, and the public.
It should also be noted that many Chinese see buying another property as a “step up” in terms of wealth, even if the apartment does not produce significant income compared to price paid. What if the CCP tries to slow down the buying of apartments? Well…violating your mandate to rule has historically not been a wise course of action!
The whole interview is great, especially if you are interested in Asia/Evergrande and that whole fiasco. Read it here.