An Update from Murray and Steven

FRMO Investor Call

Required listening if you are a TPL-head (or a BTC-head) like myself.   Unfortunately, the transcription isn’t great.   Ctrl+F is your friend here.

But you can’t forget that what you are sitting on, you are sitting on like the greatest hydrocarbon property in North America and you can even make a strong argument maybe even the world. The technology keeps getting better. This pipelines being constructed as gas being flared that in 11 month is not going to be flared and this is going to theirs is leases, there is water being sold is all kind of things happening except those variables don’t change in any appreciable way in a matter of week.

Call details if you can’t get it on SA.

Murray Stahl, Chairman and CEO, and Steven Bregman, President and CFO, will host a conference call on Thursday, January 17, 2019 at 4:15 p.m. ET. Only questions submitted to info@frmocorp.com before 1:00 p.m. on the day of the call will be considered. The call can be accessed by dialing 1-855-710-4181 (domestic toll free) or 334-323-0516 (international toll) and entering the following conference ID: 5792922. A replay will be available from 7:15 p.m. on the day of the teleconference until Thursday, November 15, 2018. To listen to the archived call, dial 1-888-203-1112 (domestic toll free) or 719-457-0820 (international toll) and enter conference ID number 5792922. 

“I Buy It For Myself Everyday”

Murray Stahl Lunch Roundtable 12/13/2018

Notes:

All quotes are quite loose. Not verbatim.

-Baseline is that Murray thinks the stock market is still very rich.  Valuations high and Murray isn’t bullish on earnings growing into valuations going because ROE is already so high.  Tarrifs hurting and will continue to hurt.

-Murray thinks there is collectively way too much debt in the system.  Public plus private = $72T (I love the over personally).  100bp increase in rates = $717B in increased carry cost = 3.5% of GDP.

-Real rates are still negative as the float of the currency increases 4.4% yearly.  Add taxes on that.  Murray gets to a -2% real yield on the 10yr Tsy.

-“One way or another the bond market is going to get a positive real rate of return.  Could be deflation.  Could be higher rates.  Anyway it happens, equity valuations are going to take it on the chin as bonds become a viable alternative and discount rates increase.”

-“Texas Pacific Land is my favorite stock”  (12:35)

-TPL comments go from 12:30 to 27:30

-“Land has some economic value.  Assuming inflation is going to be 4%, the land is going to appreciate by 4%.  We know that about 1% of the stock gets taken out each year.  The trust also pays a small dividend.   My base return is a little over 5%.”

-“On top of base I get: 1) at the money call on inflation, 2) the optionality of technology improvements, 3) long term optionality on land and the oil below it, 4) long term option of benefitting from overseas political regime change.

-“In 2014 TPL was $100 and oil was over $100/bbl.  Not oil is $50 and TPL is $500.  There are other variables over the fullness of time that will differentiate TPL from oil.”

-“What a broker charge you for an infinitely long, at the money call option on oil?  That’s embedded in TPL’s price.”

-“Middle eastern monarchies are inherently not stable.”

-“If I find something good, I don’t want to sell it.”  Murray would prefer not to sell TPL in client accounts and mutual funds.

-“The taxes we would have paid on the sale are basically equal to the recent downdraft.”

-“The technology option has paid off.  The increase in oil price option has not paid off”

-“The technology option keeps resetting itself.”

-“Not a lot of things like TPL.  The odds of finding something as good are exceedingly low.  A normal investor is going to find 6 great investments over the time of their career”  (I love the under).  “If you find something good, you should leave it alone”

-Murray is buying for himself daily!   And adds it to new client accounts though not to 30% like other accounts.

-TPL comes back up in Q&A at 1hour 25min mark.  “TPL water business is expanding and will keep expanding.  There is lots of territory that hasn’t been touched yet.  Private equity is building many water purification facilities and they need water.  I’m really excited about water.”

-“USGA survey that recently doubled expectations is based on 2017 data.  Lots of 2018 data out there and the expectations could keep expanding.”

-“TPL is the greatest piece of real estate in the US”.

-“Very little is know for strata below current levels being mined.”

-“Extraction gets cheaper every week and the quality of the oil is very high”

-“I bought some today and unless something happens I will buy some tomorrow.  It’s very cheap.”

 

Side note:  If you are into crypto you should do yourself a favor and listen to the whole call.