Self-Taught MBA Podcast

To Investors,

In previous letters, while researching and writing about the significance of the recently imposed U.S. trade tariffs and various trade dynamics, I’ve also become increasingly aware of companies or projects which are deemed national champions. One example that I can’t get out of my mind is a rare earths producer and soon-to-be permanent magnet producer called MP Materials — a U.S. national champion. Another broader example is how China, through its top down economic and political structure, picks important industries and supports them through various means – which naturally breeds national capabilities such as minerals processing companies and companies that manufacturer finished goods – that's why generally speaking, minerals refining of almost any kind is largely done in China, and why China is the manufacturing hub of the world. But today I want to talk about Renergen, a company that has the makings of a South African national champion.

Now in my own words a national champion is a business that has all of the tailwinds that come about because of a supportive economic and regulatory landscape. Those tailwinds enable a company to produce goods that are of critical importance for domestic consumption at scale and/or for international exports – so much so that when you think of a particular product, the company that produces it at scale is the one that comes to mind first. I’ve mentioned MP Materials, but an example in the oil industry is Saudi Aramco; another example is Reliance Industries in telecoms; Huawei is an example in IoT; Airbus is an example in Aerospace, and there are many others.

In the South African context, the country is grappling with energy shortages, a coal-heavy energy grid, and South Africa needs more inspiration for innovation and rapid industrialisation. Renergen could be that game-changer. Renergen has the potential to create a value chain that powers transport, diversifies energy, supplies critical materials to high tech industries, and encourages further innovation in South Africa.

Quick Intro on Renergen

Renergen Limited, listed on the Johannesburg Stock Exchange (JSE: REN) and Australian Securities Exchange (ASX: RLT), is South Africa’s sole onshore producer of liquefied natural gas (LNG) and liquid helium. Operating through its flagship Virginia Gas Project in the Free State, Renergen taps into the Witwatersrand Supergroup – a geological minerals formation packed with high-purity methane (over 90%) and reportedly one of the world’s largest onshore helium reserves. This dual-resource play sets Renergen apart – making the company a key supplier of clean energy as well as a key supplier of a critical material that is in high global demand (liquid helium).

The Virginia Gas Project has also been deemed a Strategic Integrated Project under South Africa’s Infrastructure Development Act, which underscores its national importance and ensures regulatory tailwinds.

In Phase 1 of its operations, Renergen is supplying LNG to a few customers with revenues reaching R29 million in 2024.

Phase 2 of the company’s operations will see not just a ramp-up of LNG production, but also increased liquid helium production.

Phase 2, planned to go live in 2027, will reportedly add 350 new wells, 400 km of pipelines, and a beefier liquefaction facility, backed by a fleet of tankers and dispensing infrastructure.

Another aspect that makes Renergen special is their “wellhead-to-tank” supply strategy — a vertically integrated approach where the company not only extracts natural gas and helium from its wells but also processes (beneficiates) these gases and supplies the refined LNG and liquefied helium products directly to customers without the need for third parties. That takes care of the upstream and midstream processes in the respective LNG and liquid helium supply chains.

Further down the supply chain is where things could start to get interesting.

South Africa’s Energy and Industrial Future

In the broader picture, Renergen can add significant capacity to South Africa's energy outputs as well as to South Africa’s industrial capabilities.

Energy

On the energy front, we can look at two key points that supporting Renergen on a national scale could address:

* More than 80% of South Africa’s energy currently comes from coal. This needs to change if South Africa cares about reducing its carbon footprint.

* South Africa needs to add additional energy capacity to address rolling blackouts from energy shortages and poorly maintained infrastructure. In addition to other sources, natural gas should be taken more seriously. Natural gas is a widely used source for electricity globally. Russia, the U.S., Italy, Spain, the UK, and Japan are among the world's largest consumers of natural gas for energy production.

Another point to consider is that natural gas has a global cost that is around the same for coal according to the chart below from Bloomberg NEF. Additionally, according to Perplexity, natural gas emits significantly less carbon dioxide than coal when used for energy, producing about 50 to 60 percent less CO2 per unit of energy generated.

That said, the chart above shows the levelized global cost of energy, but it's important to note that if there’s no infrastructure in place, or if there’s no efficient way to source and distribute the energy then that cost won't necessarily be realised for that country. In South Africa, comparing the cost of natural gas vs coal is near impossible for now given the lack of natural gas power infrastructure in South Africa vs other sources. Therefore it may be difficult to reach that levelized cost initially, but that doesn’t mean we shouldn’t try.

Fuel

In transport, LNG can be used as an alternative fuel for vehicles, including trucks, ships, trains, and buses. LNG reportedly gives out 20-30% less CO2 compared to diesel, supporting cleaner transport solutions.

Industrial Capabilities

Liquid helium has broad applications, but keeping in line with my idea that Renergen has the makings of a national champion, I want to make a note of two pain-points I’m considering in this section: The first is that once their helium capabilities are up and running in their Phase 2 operation, Renergen plans to export their liquid helium internationally; and the second pain-point is the fact that we can’t begin to discuss industrial capabilities without going back to the energy discussion.

Regarding that first pain-point – one key use case for liquid helium is cooling during semiconductor and electronics manufacturing. Against the current backdrop of trade conflicts, I’ll give you one guess where that liquid helium will likely be exported to. I’m not happy about that “export-first” approach, but these are the cards that we’re dealt. Supporting Renergen as a national champion will help us solve for this.

On the second pain-point; another use case for liquid helium is as a coolant in nuclear reactors. Why don’t we champion a nuclear power producer that uses liquid helium to cool reactors and make them significantly safer and more productive. Besides adding additional power for the national grid, additional nuclear energy plus natural gas energy sources would put South Africa on a path towards energy abundance. When was the last time someone talked so positively about South Africa’s national energy grid?

Energy abundance matters because it supports industrial output. The two largest economies in the world understand this. According to information from “Our World in Data”, China currently produces ~9 400 TWh of energy with a production per capita of ~6 700 kWh.

The U.S. produces ~4200 TWh of energy and their energy production per capita is ~12 700 kWh.

South Africa produces ~200 TWh of energy which amounts to a per capita of ~3 600 kWh. This is an oversimplified comparison and obviously ignores a lot of complexities, but it gets the point across – which is that it is imperative that we increase our energy capacity in South Africa significantly if we want to resemble an economy that can support large scale industrial output. Natural gas and liquid helium-to-nuclear energy could be a reasonable path – paved by Renergen.

That type of activity will also encourage innovation in other industries where liquid helium is used, such as in MRI and NMR machinery, and cutting-edge scientific research.

Remember that in almost any natural resource supply chain it makes sense that where you would see the highest return is in the capabilities further downstream because you can tack on value premiums for specialisation. I’d like to see more capital allocation towards downstream capabilities in South Africa.

Wrapping Up

All things considered, standing up refineries and manufacturing facilities takes time and tons of money. But that’s the point of the national champion idea. When creating an environment for a national champion to succeed you consider the entire supply chain, always asking “what does this lead to?”; then all of the forces needed to stand up the relevant supply chains will reveal themselves. Early in their rare earth mineral discoveries, China imposed export restrictions for their rare earths mineral producers and that led to the country controlling 90% of the rare earths supply chain. I’m not suggesting export restrictions for Renergen, I’m suggesting we create incentives for building local downstream capabilities.

Do you think Renergen can become a South African national champion? What do you think that path would look like and what other industries can be positively impacted in South Africa?

On my journey to becoming a master capital allocator, one lesson down, a billion more to go.

Hope you all have a great day

-Mansa

Thanks for reading Self-Taught MBA! Subscribe for free to receive new posts and support my work.

To Investors,

The other day I came across a post from Steven Bartlett about how there isn’t enough of a discussion about AI agents and how they are disrupting every industry. I wanted to discuss how these agents apply to the fields that I’m involved in, and even though I’ve tracked a lot of this activity for years, I’m continuously mind-blown at the information that I come across.

What are AI agents?

AI agents are software systems that perform tasks or make decisions by processing information and acting toward specific goals. Advanced AI agents can reason, handle complex tasks, and sometimes collaborate with humans. The best ones improve over time by learning from new data, algorithms, or experiences — much like how you and I refine our decisions with more knowledge and intuition.

According to a March 2025 report from Datagrid, adoption of AI agents among fortune 500 companies has grown 450% since 2022, and these agents are improving diagnostics in healthcare; assisting with inventory management in retail; they’re reducing costs and improving operational efficiency in manufacturing; they’re being used for precision farming; and obviously we’ve all seen the self-driving capabilities that Tesla and Waymo are unlocking. There are way more applications that we can discuss, but today I want to talk about how AI agents and AI more broadly is disrupting the private capital markets (i.e. venture capital and private equity).

I’ve approached this thought two ways:

* AI for Internal Operations in a VC/PE firm.

* AI as part of the investment decision-making criteria.

Internal Operations

Traditional venture capital and private equity involves investing in companies with high growth potential, typically in exchange for equity, with VC/PE investment firms playing an active role in guiding these companies while in the early stages. In the later stages of a company lifecycle, capital allocators may play a role in helping the companies transform their operations to improve their capacity and scale. An AI system replacing this model would need to replicate or enhance four key functions:

1. Deal Sourcing:

* Purpose: Identify promising startups.

* How It Works: The AI scans vast datasets to find opportunities, analysing industries, team backgrounds, early traction, and market trends.

* Example Features: Real-time alerts for emerging startups or ranking systems based on growth potential.

2. Due Diligence:

* Purpose: Evaluate the business’s potential and risks.

* How It Works: The AI processes business plans, financials, and market data to assess viability and scalability.

* Example Features: Automated risk scores, financial health projections, team competency analysis.

3. Investment Decision:

* Purpose: Decide which businesses to fund.

* How It Works: The AI uses predictive models to score startups against your firm’s investment criteria, recommending the best fits.

* Example Features: Success probability forecasts or portfolio fit analysis.

4. Portfolio Management:

* Purpose: Monitor and support invested companies.

* How It Works: The AI tracks performance metrics and provides insights or recommendations for growth or exits.

* Example Features: KPI dashboards, exit timing predictions.

An internal operations AI model would be data-driven, scalable, and capable of reducing human bias while speeding up processes traditionally reliant on manual efforts.

Let’s get practical. You’re probably wondering if there are any VC/PE investment firms that are actually using AI agents in their internal operations. The answer is yes, and many have been doing so for years…

EQT Ventures (Motherbrain)

EQT Ventures developed Motherbrain in 2016, an AI platform that proactively sources investment opportunities by analysing vast datasets, including startup performance, market trends, and founder profiles. It’s used for deal sourcing and due diligence, in partnership with their investment team’s decisions.

Correlation Ventures

According to an article from MLQ from 2021, Correlation Ventures uses a machine learning model trained on data from over 100 000 VC rounds to guide investment decisions. The AI analyses pitch decks, team experience, and board composition to predict success.

Hone Capital

Hone Capital is the U.S. arm of a Chinese VC. According to an interview with the managing partner, Hone Capital partnered with AngelList to create a machine learning model based on 30 000 deals. At the time of the interview, in 2017, it was claimed that the model evaluated 400 characteristics (e.g., founder background, funding raised, etc) to identify startups likely to reach Series A. In that interview it was reported that 40% of their AI-recommended companies raised follow-on funding, 2.5 times the industry average.

SignalFire

SignalFire uses a proprietary AI platform called Beacon AI, that, according to the firm’s website, tracks 2 million data sources to find investment opportunities, helps portfolio companies with a go-to-market strategy, and also helps them to recruit talent.

Bain & Company

According to a 2023 announcement on Bain & Company’s site, the firm developed a proprietary advisory model called Sage, which was built to help all advisory employees in the company with generating insights and business ideas.

Two Meter Capital

Founded in 2024, Two Meter uses AI to provide portfolio management services to family offices, funds, and corporate venture groups. Services include portfolio tracking/reporting, support for follow-on financing, and assistance with exit processes.

D3VC (AI Fund)

D3VC’s AI Fund uses a proprietary AI and machine learning model, trained on proprietary data, to identify patterns that indicate whether a company is on track for follow-on financing or other markers of success.

Those are 7 stimulating examples of how VC/PE firms are using AI as part of their internal operations to assist with deal sourcing, due diligence, deciding which companies to invest in, and portfolio management.

AI as a Part of The Decision-Making Criteria

The other side of this coin is thinking about how much to allocate to startups. What I mean by this is that there are basic platforms that help with simpler tasks like running research and reporting. One person now has the ability to become significantly more productive, without even needing technical skills by using “pick your commercial AI platform”. In my view, I wouldn’t want to allocate capital to a company that’s not using AI in some form as an operational tool either to improve productivity of employees, or to improve the company’s product, or to cut other expenses. If the business doesn’t use AI it's a serious concern because the founders or CEOs are neglecting options for potentially higher gross profits and/or lower operating expenses. So then I would ask the business to re-evaluate the amount of capital that the business is trying to raise, its allocation, as well as seriously question the competitiveness of that business in today’s environment.

Now that obviously won’t be as simple to apply for every type of business in the same way but the point is that the management tier needs to always look to get an edge by taking advantage of hyper-scaling technology.

Wrapping Up

The actual impact of the various agents that the firms above are using is still unclear — meaning the return on the amount of investment that is going into developing these agents is still unclear. What is guaranteed however, is that AI is making capital allocators more productive, and giving them the ability to have a detailed 360 degree view of any landscape before allocating capital. I can attest to this because I use AI in a very basic form for my work on a day-to-day, and my productivity has improved tremendously.

If you’re in the private capital markets, how are you using AI in your day-to-day? If you’re in any other industry, I’m also interested to know how AI agents are transforming your industry. Comment below or send me an email.

On my journey to becoming a master capital allocator, one lesson down, a billion more to go.

Hope you all have a great day

-Mansa

Thanks for reading Self-Taught MBA! Subscribe for free to receive new posts and support my work.

To Investors,

By chance I came across some lessons about how the Yale Endowment grew from $1 billion to $30 billion between 1985 and 2021. The architect of that achievement was a guy called David Swensen, who was the Yale endowment’s chief investment officer in that period. His strategy for running the Yale endowment is referred to by capital allocators as a case study called the Yale Endowment Asset Allocation Model. Now I nerd-out about this kind of stuff all of the time so I wanted to share what I learned in today's brief letter, because I think capital allocators can take away a lot that will help them manage and grow their own portfolios.

The secret to Swensen’s success was that he moved away from the traditional portfolio allocation strategy of 40% bonds and 60% public market equities, and favoured more risk-taking by allocating capital to alternative investments like private equity, hedge funds, and real assets. At its core, the Yale Model is about allocating capital across a wide range of asset classes to maximise returns while controlling risk.

Here’s what the allocation would look like:

* Domestic Equity: ~10%U.S. stocks, often via low-cost index funds.

* Foreign Equity: ~15%International stocks for global exposure.

* Fixed Income: ~5%A minimal slice for bonds and cash.

* Absolute Return: ~20%Hedge funds aiming for market-independent returns.

* Private Equity: ~25%Investments in private companies.

* Real Assets: ~15%Real estate, timber, and natural resources for inflation protection.

* Other: ~5-10%Venture capital or tactical bets.

If you look closely, up to 70% of the portfolio could be allocated towards alternative investments (hedge funds, private equity, real assets, and venture/tactical bets); which many investors would shy away from because those asset classes are illiquid. In my view, a well-managed endowment, with its perpetual time horizon and absence of redemption pressures, should allocate significantly to carefully selected illiquid assets to maximise long-term growth. Unlike traditional funds, endowments face no demands from investors to return capital, as they raise funds through donations and use only a small portion—typically 4.4% annually, as seen in Yale’s spending policy—to support university operations, such as scholarships, faculty salaries, or infrastructure upgrades. This structure allows the chief investment officer to pursue high-return, illiquid investments like private equity and real assets, which have historically outperformed public markets by 3-5% annually over decades, as evidenced by private equity’s 13.5% annualised return from 1986-2020 compared to the S&P 500’s 10.2%. Yale’s endowment, with ~25% in private equity, achieved a 13.7% annualised return from 1990-2020, far surpassing the 8.6% average for peer endowments. By balancing calculated risk with prudent oversight through diversification and top-tier manager selection, an endowment can grow substantially to secure a university’s financial future, though managers must remain vigilant of liquidity risks.

Swensen’s Yale Model worked because the strategy hinged on three core beliefs:

* Market InefficienciesPublic markets (specifically stocks and bonds) are “efficient” in the sense that prices reflect all available information, making it hard to beat the average. Alternatives, however, operate in less efficient markets. Private equity, for example, involves buying stakes in companies not traded publicly, or where the companies are still young and the public does not yet know how to value the companies correctly, so in that environment, skilled managers can spot undervalued gems. Swensen’s bet: talented managers in these spaces can generate alpha (excess returns).

* Diversification Beyond Stocks and BondsAlternatives like real estate or timber don’t move in lockstep with public markets. When stocks tank, your private equity holdings might hold steady–or even thrive. This reduces overall portfolio risk because the investment is not vulnerable to public market price and valuation swings.

* TimeAs I mentioned earlier, endowments have forever to invest. This allows them to lock capital in illiquid assets (like private equity or real estate) that may take years to pay off but offer higher returns as compensation for that higher risk. Most investors panic during short-term dips; endowments can ride them out.

Yale’s endowment reportedly averaged over 13% annual returns for decades–outpacing many peers. Particularly impressive, in fiscal year 2000 the portfolio returned 41%; and 28% in fiscal year 2007. Swensen’s model became so influential that institutions worldwide adopted similar strategies, making him a legend.

What are the downsides of this strategy?

* High fees: Asset managers in private equity and other alternatives charge high fees and up to 30% carry so this could eat into your returns.

* Illiquidity: During the 2008 global financial crisis, Yale’s endowment produced a negative 24.6% return in the fiscal year ending June 2009; and the value of the endowment went from $22.9 billion to $16.3 billion between June 2008 and June 2009.

* Expertise required: It's not easy to be a university endowment manager, let alone an effective one. To be able to allocate to alternatives you need to have access to alternative asset managers, and be able to discern which are the talented managers that put in the work.

I would suggest that if you don’t have the experience and expertise to be able to play on Swensen’s level, you’d be better off sticking to allocating to equities, bonds, and real estate. There’s information available for everyone in those asset classes. But that’s just my take!

In closing, here are some lessons…

Depending on the type of investment firm you’re running, I think you can afford to think outside the box, largely influenced by 1) whether your short term capital needs are taken care of; and 2) how much time you have. My learnings:

* Diversify beyond the basics: I see the equity and bond allocation, but perhaps you can afford to tack on real estate, and then maybe look into single company investments such as commodity business; and other alternatives.

* Think long term: If you're running an endowment, your horizon is decades. It may be worthwhile to take on more risk such as private equity and venture capital allocations because you have the time to let those investments mature.

* Always weigh fees: alternative asset managers may charge up to a 3% annual management fee, and 30% carry. This will limit the amount of money you’re able to put to work as well as eat into the return you get.

* Manager selection is an art: if you invest in active funds, choose a manager wisely.

* Exploit inefficiencies when you can: you may not have access to private equity, but you can still seek out less efficient markets such as within specific sectors or emerging market opportunities, but you’ll need to do the work.

What do you think about David Swensen’s Yale Endowment Asset Allocation model? Is there anything you like or disagree with?

On my journey to becoming a master capital allocator, one lesson down, a billion more to go.

Hope you all have a great day

-Mansa

Thanks for reading Self-Taught MBA! Subscribe for free to receive new posts and support my work.

To Investors,

In a previous letter I had mentioned how one of the main reasons for the U.S. imposing tariffs on imports is to create supply chain resiliency in key industries. I glossed through the specifics in that letter, but today I want to double-click on the rare earth minerals supply chain, why it’s important globally, but especially for the U.S., and how a company called MP Materials may emerge as one of the biggest beneficiaries of U.S. tariffs.

As a quick reminder, rare earth elements are used to produce permanent magnets which are used to make electric vehicle motors function, used in the robotics industry to give products mobility and functioning, and used in other products such as wind turbines, drones, and smartphones as a few examples. I came across a report from Adamas Intelligence that explains the importance of permanent magnets in the context of technology growth, I picked out a few key examples:

* Demand from NdFeB magnets (permanent magnets) will grow from ~230K tons today to ~880K tons by the year 2040 across robotics, electric vehicles, and other technology hardware products.

* By 2040, uses of permanent magnets for robotics will exceed usage for electric vehicles

* Adamas Intelligence predicts that robotics alone will consume two thirds of today's total magnet demand.

Additionally, currently being the largest market for NdFeB magnets, electric vehicles currently constitute about 19% of new car sales globally. According to some reports, year-to-date growth for EV sales in 2025 is around 29-30% globally compared to the previous year; while global sales of fossil-fueled vehicle sales are reportedly declining by about 8% year-on-year. Think about the amount of cars you see daily–a large majority of those may be eclectic in the coming decades.

All of that information shows a set-up for enormous market demand for permanent magnets. The country that will supply these magnets will cement itself as having control over technology growth in related categories, not necessarily as a builder of final products, but as a supplier of critical resources upon which these incredible products are dependent on.

All of what I’m going to talk about today, especially with regards to MP Materials, matters against this backdrop of significantly higher activity in the robotics industry as well as continuously higher demand for electric vehicles.

So going back to the introduction about the importance of MP Materials…

MP Materials primarily operates as a rare earths minerals producer and has a rich history in the rare earth elements industry in the United States, originally operating as Molycorp. Molycorp faced financial difficulties, leading to bankruptcy in 2015, but was revitalised in 2017 when a consortium led by JHL Capital Group and QVT Financial LP acquired its assets and renamed the company to MP Materials. This acquisition revitalised the Mountain Pass mine in California—the only active rare earth mine in the U.S.—focusing on producing critical materials for the technologies that I mentioned earlier. In 2021, MP Materials announced plans to build a permanent magnet manufacturing facility in Texas, and that facility is expected to begin production later this year.

MP Materials has long been heralded as a United States national champion, because the rare earths supply chain is essentially controlled by one country currently: China—therefore the fact that the United States has a decent, home grown, producer of rare earths is a point of pride for the country.

The influence that China has on the United States’ rare earths industry can be summarised in the chart above which shows that in 2022 the U.S. had only 13% of the global mining and beneficiation resources with no mid and downstream capabilities; as well as the chart below which shows that 72% of U.S. imports of rare earths between 2019 and 2022 came from China.

With the current escalated trade war taking place between China and the U.S., even though there may soon be a deal to allow the countries to resume mutually beneficial trade, the U.S. no longer wants to be dependent on another country for critical resources. That's the crux of the global trade shake-up that was created by President Trump.

The tricky part though, is that it's extremely difficult to compete effectively in mineral resources production because for one, rare earth minerals are not actually rare–the rare part is refining ores and producing specific elements such as neodymium, praseodymium, dysprosium, terbium, lanthanum, etc; and on top of that the only country that houses multiple companies that are able to refine minerals at scale is China. But that’s just the tip of the iceberg. Chinese companies operating in the rare earths industry are mostly vertically integrated and have state backed policies supporting them, which makes it near impossible to compete with unless you build a company that is structured in the same way, in a similar economic environment.

Here’s why that matters…

Vertical Integration: Controlling the Full Supply Chain

Vertical integration means owning every step of the process – from mining rare earths to processing them into oxides, and ultimately manufacturing high-value products like permanent magnets. Chinese companies like JL MAG Rare-Earth Co., Ltd. and China Northern Rare Earth Group have mastered this model, producing ~90% of the world’s rare earth magnets, according to various reports.

Vertical integration works because it allows businesses to capture more profits, have more control, gain stability, and easily innovate.

* More profits: because in any minerals supply chain, the downstream productivity (manufacturing) enables a business to tack on value premiums related to specialisation and quality, less so in the upstream or midstream productivity (mining, beneficiation, processing minerals to split elements). For example permanent magnets can sell for $200–500/kg vs. $50–100/kg for oxides.

* Control: having control over the entire supply chain reduces reliance on other parties. In China, early in the rare earths discovery process the country imposed export restrictions for rare earth minerals, forcing the local industry to develop Chinese based processing and manufacturing capabilities, supported by the state.

* Stability: commodity markets tend to experience a lot of volatility for many reasons, therefore flexibility across stages helps weather price swings or supply disruptions.

* Innovation: owning the entire process, from mining to manufacturing, allows a company to iterate faster to improve quality.

That said, there’s a downside to vertical integration in the mineral commodity environment. One downside is that building manufacturing capabilities can be capital intensive. For example MP Materials was initially only a mining and processing company, selling a lot of their oxides to a Chinese based customer named Shenghe, who would refine those resources. However, MP Materials always had plans to build a western supply chain for rare earth materials so the company quickly built out its rare earth concentrate refining capabilities, and when they were ready, they put together an estimated $700 million for a permanent magnet manufacturing facility, which they call Independence.

The other downside of vertical integration is the major risk if a customer cannot fulfil orders. For example the MP Materials’ Independence facility was built largely so that General Motors could buy and use those permanent magnets in their electric vehicles. The problem though is that to date General Motors is experiencing a mixed bag of results with some EV lines doing better than others, but there’s too much customer risk if GM is the main buyer, so to ensure the investment into the Independence facility is viable, MP must secure a wider range of customers for their permanent magnets.

Nevertheless, the upsides of vertically integrated supply chains far outweigh the downsides.

Minerals Producer: Sticking to Mining

So, I’ve already mentioned that a vertically integrated approach to rare earths production is necessary to compete effectively with Chinese companies in the space. Had MP Materials remained solely a rare earths concentrate producer the company would have possibly continued to suffer from volatile price swings of mineral commodity markets.

As shown in the chart below, revenues for MP Materials are yet to stabilise because the company’s revenues are still only driven by sales of concentrates–which are experiencing price swings if you look at the changing realised prices per ton of rare earth oxides over the last 5 years.

As mainly a player in the upstream and midstream capabilities you also miss out on larger profits that are realised in the downstream capabilities (finished goods). The revenue swings for MP Materials also have a negative impact on the stability of their net income as shown in the chart below.

That said, if you encourage an integrated approach to the industry you can capture more value through the final products, so the large capital outlays are easier to justify.

Let’s wait for their vertically integrated approach to take shape because it's early days for MP Materials. But even so, it's already been estimated that MP Materials produces ~15% of the world's rare earth oxides, which the company is now largely refining on site as it expanded its capabilities, plus the company announced last Thursday that they would stop exporting their minerals to China and will rather hold production as inventory. I think they’ll end up expanding their refining capacity and just run that process themselves. The cherry on top is the Independence facility, which will no doubt be fielding offers from investors looking to expand that facility to enable larger production volumes.

Investor Notes on MP Materials

MP Materials’ stock price is up 60% YTD, but is down 54% from it's all time high.

I’ve talked about this company a lot in the past couple of years, and it will be fascinating to see how my initial thoughts shape out over time. Remember that MP should be considered a startup because the company was recently bought out of bankruptcy, and in addition to that, there was a lot of work required to get the company’s operations back up and running.

It’s hard to build a minerals production business at all, let alone build one that is supposed to offer relief to China’s stronghold on the rare earths industry. On top of the unstable revenue and net income for MP, the company’s operating cash flows have dropped by 96% from 2022 to 2024, although their ending cash balance is up 96% over the same period (cash received from debt and realisation of short term investments).

That said, rare earth oxide production continues to grow annually, with the aim of slowly growing production to 60 000 MT according to MP’s annual report.

One final note to satisfy investors on the growth of MP Materials is that the company’s revenues from NdPr oxide and metals increased by 83x to $57 million from 2023 to 2024. That shows positive refining capacity growth.

While the United States was the second largest producer of rare earths in 2024 with all of the country’s production coming from MP Materials; China was the largest producer of rare earths globally in 2024 with annual production of ~270 000 MT across multiple Chinese based producers. It will be a long road to establishing stable U.S. based rare earths production. The best opportunity the U.S. has to enable resilience in this supply chain would be to 1) support MP Materials in every possible way similar to how the Chinese environment supports its own businesses–support MP’s vertically integrated approach and encourage MP’s success in every competitive and fair way; and 2) as mentioned earlier, rare earths are not technically rare but the refining ability at scale is rare–so the U.S. would also need to support other U.S. based upstarts in the space, here’s a list of up and coming U.S. based players…

Noting the other U.S. based upstarts in the rare earths industry, I think MP Materials will see incredible growth over the next few years. How they do it will be interesting to watch, but if I had to offer a strategy, I see the company expanding its production sources by acquiring more mineral production operations in the U.S. and multiplying its manufacturing productivity—simply because they have the know-how in the U.S. and they have a head start.

Am I the only one excited about all of these macroeconomic shifts we’re witnessing first hand?

What do you think about MP Materials and its position in the rare earths industry, given the current global economic environment? What are your thoughts on how to build a national champion that can compete on the global stage?

On my journey to becoming a master capital allocator, one lesson down, a billion more to go.

Hope you all have a great day

-Mansa

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To Investors,

Yesterday I did something a little unusual, I asked Perplexity to give me the three South African stocks that it thinks are the most attractive to buy right now. I also told the model to optimise for companies that can be resilient in any market condition, but that also have significant future upside.

The first stock that Perplexity recommended is The Foschini Group (TFG). The reasons where:

* Why it stands out: Forecast to grow earnings by 13.6% and revenue by 7.9% per annum, with EPS growth expected at 17.5% annually; strategic acquisitions like White Stuff and leveraging the Bash platform are set to boost market share and profitability across multiple regions and product categories.

* Resilience: Established retail group with a diversified brand portfolio and strong cash flow generation, enabling it to navigate economic cycles and invest in growth opportunities.

* Upside: Future return on equity is forecast at 14.9% in three years, indicating efficient capital use and potential for sustained profitability gains; revenue growth outpaces the South African market average, signalling competitive strength.

The second South African stock that Perplexity picked was Prosus, majority owned by Naspers. According to Perplexity:

* Why it stands out: Prosus is rapidly scaling its e-commerce business, with adjusted EBIT expected to jump from $38 million in FY2024 to $400 million in FY2025, reflecting strong operational improvements and strategic focus under new leadership.

* Resilience: Diversified global portfolio with significant stakes in high-growth Indian tech companies like Swiggy, PayU, Meesho, and BYJU’S, which provide exposure to fast-growing emerging markets and digital economy trends.

* Upside: Potential for substantial value creation through upcoming IPOs of portfolio companies and continued investments in profitable, fast-growing businesses, aiming to double its valuation by building new growth engines.

That brings us to the third stock that Perplexity picked: Southern Sun. The reasons were:

* Why it stands out: Forecast earnings growth of 19.1% and EPS growth of 52.9% per annum, driven by recovery in hospitality and gaming sectors with improving tourism and occupancy rates.

* Resilience: Debt-free balance sheet and its improving free cash flow generation support stability and dividend payments even in uncertain economic conditions.

* Upside: Revenue growth forecast at 8.3% per year, exceeding the South African market average, combined with a future return on equity of 12.5%, signals strong operational leverage and growth potential as travel demand rebounds.

Those are the top three South African stocks to buy right now according to Perplexity. Maybe the model is going to be right, maybe not. What do you think? Do you think that these three stocks are going to outperform?

On my journey to becoming a master capital allocator, one lesson down, a billion more to go.

Hope you all have a great long weekend

-Mansa

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To Investors,

The last 12 or so days have been wild. Trump’s Liberation Day tariff announcement shook everyone. Global stock markets were down, then went back up, tensions were high as some national leaders felt the need to announce retaliatory tariffs, and other leaders such as the Vietnamese President and President of the European Commission quickly jumped right to suggesting zero tariffs for the U.S. in order to express their desire for a trade deal.

On April 9th, President Trump announced a temporary pause to the tariffs for countries that did not retaliate to his initial tariff announcements. I think this was calculated and by no means a sign of Trump caving because in my view the Liberation Day event was a negotiating tactic, and where we go now is exactly what Trump has been saying he wanted to do for years, which is to reshape the global trading order.

What do I mean by that?

Well, I’m unable to confirm this, but I have a theory that the U.S. ended up with trade deficits initially by design as a way to expand U.S. influence globally. After Nixon announced the end of the Bretton Woods agreement and declared that gold would no longer be exchangeable for dollars, the United States was the only superpower in the world, and to maintain that status they used the U.S. dollar to help developing economies grow and industrialise, while attracting demand for U.S. dollars and cementing dollar dependency through exporting U.S. government bonds as a reserve asset.

I would argue that a strong dollar led to a higher standard of living in the U.S. but through a series of compounding events such as the Vietnam war, the Cold War, the Global Financial Crisis, then more recently with Covid, the U.S. trade deficits became more and more unsustainable because the U.S. ended up having to continuously fund trade settlements using debt, at the same time as carrying the burden of being a provider of reserve assets, which contributed to U.S. national debt reaching 123% of GDP as of 2024, and 10Y U.S. government bond yields reaching an uncomfortable level at around 4-5%, which means higher refinancing costs for the U.S. which would significantly add to the growing national debt.

Stacked on top of that problem, while the U.S. fiscal status was taking a bad turn, China was able to grow into its own superpower, supported by its low cost exports model, and ever growing trade surpluses.

As a legitimate superpower China is now seen as a threat to the United States, the U.S. dollar, and to the dollar as a reserve asset, and the U.S. 's hold on global security. This is what various commentators are saying and I agree with the security threat in terms of China expanding influence and the threat of China’s growth on domestic U.S. industrial capacity; but I disagree with the idea of China threatening the U.S. dollar.

After the announced 90 day pause on tariff implementation I think that we’re going to see most of the world’s leaders come to the table to make an agreement with the U.S. and the agreement will likely be world-changing, something like the initial Bretton Woods Agreement. These new negotiations will be called the Mar-a-Lago Accords; a gathering of global leaders to pen a new world order that will be America first (once again) similar to the Bretton Woods agreement.

The Mar-a-Lago Accords will be a reinforcing of United States self-sufficiency as well as U.S.and U.S. dollar hegemony. So a series of deals will be struck and I’ve broken down some suggestions of what I think will be the 3 key themes of the Accords, and what might shape the deal points within each theme…

1. Reorganising Supply Chains Away From Foreign Dependency:

There are three key supply chains that the U.S. will likely want to secure to ensure self-sufficiency.

The first is pharmaceuticals and medical equipment; because during the COVID-19 pandemic, according to Grok, top U.S. medical equipment firms like 3M, Medtronic, and Becton Dickinson struggled to scale PPE production due to reliance on overseas supply chains, raw material shortages, and regulatory hurdles. Pre-crisis, the U.S. imported nearly half its PPE from China, which dominates global production with firms like Winner Medical, BYD, and Powecom. When China prioritised its domestic needs and restricted exports, U.S. stockpiles dwindled, exposing a critical dependency. Despite domestic efforts–e.g., 3M quadrupling N95 output–the U.S. leaned heavily on Chinese imports to bridge the gap. This vulnerability underscored the risks of non-U.S. reliance, and this is fuelling a strategic shift to re-shore manufacturing in the pharmaceutical and medical equipment space because the U.S. can never come across as vulnerable in that way again.

The second supply chain is the rare earths supply chain. Right now China has 90% of the rare earth industry supply chain, from minerals to finished goods. With the continued global efforts towards electrification, one important component that electric vehicles rely on are rotors which make the car move, and these rotors are spun using permanent magnets. Wind turbines that generate wind energy have them as well, and so do drones. These permanent magnets are manufactured using rare earth minerals, the most important of them being neodymium and praseodymium. The only mining company outside of China that has capacity to supply a significant amount of rare earths is MP Materials, a U.S. based company that recently was bought out of bankruptcy, but has quickly grown to restart its mining and production processes, and after investing in a U.S. based permanent magnet manufacturing plant, MP Materials is expected to start deliveries of its first permanent magnets in 2025. According to the chart below from Boston Consulting, outside of the U.S., China, and Australia, “upstream activities are mainly in Myanmar, midstream activities are mainly in Malaysia. In both instances, rare earths are primarily mined by Chinese companies.”

In another chart, 72% of rare earth imports into the United States between 2019 and 2022 were from China. That’s a deep vulnerability.

Being the only supplier in the U.S., MP Materials has long been flagged as a U.S. national project, because again, the U.S. does not want to come across as vulnerable in any supply chain.

The third critical supply chain that may be included in these Mar-a-Lago Accords is related to United States energy. Right now OPEC controls more than two thirds of global oil supply, and together with Russia, they largely impact the productivity of the world through oil supply and prices.

According to Perplexity, in 2021 Russia supplied 45% of the EU's natural gas imports, with Germany and Italy being the largest importers. In 2024, that number fell and Russia accounted for less than 19% of the EU's total gas imports, however those countries are in an energy deficit, so it's not as though they’ve necessarily replaced the Russia-dependent supply chain. This cannot continue to be the status quo for the U.S., where an allied region depends on energy from a non-ally.

So in short, as a deal point in the Mar-a-Lago Accords under a theme of reorganising supply chains away from foreign dependency, countries will be mandated to lend expertise and capital to build a pharmaceutical and medical equipment supply chain coming of the U.S., support companies such as MP Materials and related businesses to build a rare earths supply chain coming out of the U.S., and buy United States oil and gas outputs – if the country wants to avoid tariffs and become part of the United States economic and security umbrella.

2. Reinforcing U.S. Dollar Supremacy:

Many people tend to look at China’s holding of U.S. treasuries (going from ~$1 trillion in June 2020 to ~$774 billion in June 2024), as well as more recently China’s gold purchases that are suddenly big news, as some sort of sign that the U.S. and U.S. dollar are in trouble if one of the world’s largest holders is selling treasuries and buying gold. I think there’s no such sign. I think it's more plausible that China is selling U.S. treasuries to support their own currency. China is in a growing national debt environment, with their property market (which makes up 20-30% of the GDP) reportedly in crippling debt, so propping up the yuan may make sense to try to generate more revenue for their exports market – comforted by the fact that a lot of the world are dependent on Chinese goods anyway so there’s nothing we can do except eat the higher prices.

On top of that, China has a pattern of buying gold every 6 or 7 years or so, therefore I don’t think there’s a hidden signal there.

Additionally, one of the main reasons why it makes sense to hold U.S. treasuries in an environment where the U.S. dollar is the global trading currency is to have access to U.S. dollars by having the option to sell treasuries in order to get more dollars to settle trades. But China is a net exporter with large trade surpluses so they don’t need to hold large amounts to U.S. treasuries to settle trades because they sell more than they buy anyway. So in this Mar-a-Lago Accords theme of Reinforcing U.S. Dollar Supremacy, the idea is geared more towards the United States being able to manoeuvre the dollar to support a U.S. export economy at the same time as having a relatively stronger currency, as well as being able to finance domestic growth through longer term commitments such as longer duration bonds.

I’ve also seen media publications and other comments that the yuan will replace the dollar as a global trading currency or reserve currency.

For the record, there is no alternative to the U.S. dollar as a reserve asset and global trading currency. Because if a currency will be used as medium to settle global trades, it must also then be valuable to hold as a reserve asset. The reason being that, as I alluded to earlier, regular access to that currency is a requirement for payments, so it would be expensive to continuously go out into the market to buy the currency because you’re then vulnerable to exchange rate volatility. So countries hold the trading currency in reserve because it helps them secure a long term price. At the same time, countries hold that currency not as cash but as a government bond, so the country also then collects income via interest on that government bond.

Putting aside the fact that the yield on a Chinese 10Y government bond is floating around 1.65% vs 4.49% for U.S. government bonds.

There are two conditions for a currency to be acceptable as a reserve currency. One condition is that you must be open to sharing financial information with the buyers and potential buyers of your reserve assets. In this case the U.S. must always have transparent and open financial markets and be willing to share national fiscal data to any party that wishes to buy U.S. government bonds. That also includes a free and open financial system that permits free capital flows and true market discovery based on public scrutiny and analysis. China certainly does not satisfy this condition because China has a relatively opaque and closed economy with intense capital controls.

The second condition for a currency to be acceptable as a reserve currency is that there must be a governing rule of law that guarantees that your investment in a country’s assets is protected and won’t be stripped away at the whim of anyone. It’s no secret that there is no such rule of law in China. Because of the lack of rule of law, and the lack of financial transparency inherent in the Chinese economy, forget about the Chinese yuan even being an option to replace the U.S. dollar as the global reserve and trading currency. Would you lend a business person that operates in China your money at the risk of not being sure if they 1) have the financial means to repay your loan, or 2) can just say “no actually we’re good, we’re keeping this money. Sorry!”?

So that deals with the “Yuan replacing the U.S. dollar” argument. Again, there is no other option outside of the U.S. dollar, so I think this is significant leverage for the U.S. and they will play it by floating the idea of a security umbrella. This is an idea mentioned by Stephen Miran, but I’m using it here to explain it in my own words so that I can test my understanding of the idea.

A security umbrella in this context is physical and financial security that the United States offers allied countries. These are countries that are in NATO as a military alliance, and other countries that are large holders and purchasers of U.S. treasuries, including those that aren’t floating the idea of “replacing” the U.S. dollar for trade settlements.

The aim of this security umbrella will be to encourage interested parties to partner with the U.S. to 1) reshape global supply chains away from non-allies (away from OPEC oil dependency, away from Russian gas dependency, away from Chinese dependency on critical medical and mineral resources); and 2) buy U.S. treasuries, perhaps even century bonds (100 year bonds) so that the U.S. can secure lower yields; and in exchange the U.S. will remove tariffs for the purchasing nation, and most importantly open U.S. dollar swap lines with the purchasing nation. Now that does three things:

* A century bond is a less liquid investment than a 3 or 10 year government bond so to alleviate the worry of the lowered liquidity, swap lines will play a significant role because they ensure that a country looking to access U.S. dollars can do so at more favourable rates than open market rates.

* The swap lines protect the buying nation’s own currency as they won’t have to sell large amounts of their own currency to access more and more dollars if the U.S. dollar appreciates.

* In the context of these Accords, if the negotiating party agrees to purchase century bonds, that locks in a partnership to help rebuild the U.S. as mentioned earlier.

Trump has also complained that the U.S. disproportionately pays for NATO membership requirements while the U.S. supplies the most reliable security. He’s mentioned that the U.S. should be paying less and offered that member countries pay more as a percentage of their respective GDPs. As another deal point in this section of the Accords, Trump may offer to continue paying for NATO at the current proportion, or offer to pay more, on the condition that member countries continue to buy U.S. treasuries or buy at a higher rate–perhaps even the suggested century bond.

It's important that demand for U.S. treasuries remains strong because it reduces the yield on the bond, meaning that the U.S. can continue to issue debt at

To Investors,

On April 2nd President Trump announced a wide range of tariffs on goods imported into the United States. This day was called “Liberation Day”. But you might wonder: ‘liberation from what? The United States of America is not a slave to anyone, or constrained by anything?’ Today I want to explain Liberation Day, break down what all of these tariffs mean, how we got here, and to highlight the hypocrisy which a lot of countries have fallen into by screaming “bloody murder” about tariffs.

What happened on “Liberation Day” April 2nd, 2025?

President Trump announced:

* A baseline 10% tariff on all goods imported into the U.S., effective from April 5, 2025.

* Reciprocal tariffs on about 90 nations, with rates varying (e.g., 34% for China, 20% for the EU), effective from April 9, 2025.

* A 25% tariff on vehicles and auto parts imported into the U.S., effective from April 3, 2025.

* Continued enforcement of existing steel and aluminium tariffs, with some exemptions for Canada and Mexico.

Firstly the reciprocal tariffs are self-explanatory: the U.S. will impose the same tariff that any country has against the U.S. Here’s a chart shared by John Caple on X, which shows the tariffs countries currently have in place against goods imported from the U.S. The chart also shows the level of reciprocal tariffs (before the current Trump tariffs) that the U.S. has on those countries–and its zero.

The reason for the tariffs announced, according to President Trump and various members of his cabinet, is to reduce the United States trade deficit which has reached record levels of around $123 billion as of February 2025. Reducing the trade deficit is a piece of a larger three point plan where President Trump is trying to broadly improve the financial status of the United States by 1) reducing national debt for the U.S. which has ballooned to 123% of GDP as of 2024; 2) cutting government waste plus spending which is largely financed through government bonds at uncomfortably high interest rates of around 4-5% (this is where DOGE comes in); and 3) reviving the United States’s manufacturing and export economy.

Without going off on a tangent, U.S. Treasury Secretary Scott Bessent explained the idea well, I'm paraphrasing: the aim is to cut government spending by reducing the size of the government and related labour. When that happens, because government spending will be lower, the government won’t have to rely as much on debt-fuelled spending–so bond yields will go down. At the same time the government will generate higher revenues from tariffs and additional business that the U.S. will attract from tariffs. Again the government will rely less on debt spending because there will be more revenues to spend from. This will also push bond yields lower because the government will be in a better financial position from both higher revenues and less spending. When tariffs kick in and manufacturing productivity is brought back into the U.S., jobs removed from the government sector will shift onto the private sector and service the additional productivity growth.

But today we’ll mostly focus on how the Liberation Day tariffs play a role in that three point plan. Tariffs are a tax on consumption and in service of the larger mission these tariffs will make imports costlier while encouraging domestic production and promoting job creation in manufacturing by incentivising companies to produce in the U.S.

How Did We Get Here?

This strategy is part of Trump's "America First" mission–centred around highlighting that what school has taught us about how global trade is free, is inaccurate, and focusing on how because the United States is a disproportionate buyer of goods from every country, the U.S. is running costly trade deficits. The way that we got here is a mix of factors but my thinking is that after Nixon announced in 1971 that U.S. dollars would no longer be exchangeable for gold, the U.S. dollar started appreciating against global currencies because of the demand for the dollar. This meant that it became cheaper for the U.S. to import goods than it was to export goods and this led to a higher standard of living in the U.S. That, along with China entering the world trade organisation, along with other Asian countries, made U.S. manufacturing expensive because goods could be manufactured cheaply outside of the U.S. Deals were likely cut for the U.S. to run trade deficits with China, and the rest of the developing nations to prop up their economies. But this gutted the U.S. industrial base.

Here’s a quick story about the car manufacturing economy in the United States: Detroit, once the world’s car-making king, started cracking in the ‘70s as Japan’s cheap, efficient imports rolled in, and by 2001, China piled on with low-cost parts and vehicles—pushing the trade deficit to $213 billion by 2018 according to the Bureau of Economic Analysis. Jobs vanished, either to automation or overseas. Years later General Motors was forced to shut down its Lordstown, Ohio, plant in 2019, leaving thousands high and dry as production shifted to Mexico and beyond.

Nowadays many electronics are manufactured in Asia, and for the U.S., this led to 3.7 million jobs lost when this productivity shifted out of America. Textiles saw a 30.4% drop in Black manufacturing jobs from 1998 to 2020, chased overseas by cheaper labor according to the Economic Policy Institute. U.S. steel has been hammered too, with imports forcing plant closures according to a report from the American Iron and Steel Institute.

The hollowing out of the manufacturing sector switched the U.S. economy into a services based economy with manufacturing jobs replaced by services sector jobs. In general this resulted in a higher standard of living in the U.S., however when the standard of living improved in the U.S., the country had a higher consumption rate but a low savings rate, forcing the economy to issue foreign debt in order to support government spending.

As the dollar became stronger, this cycle continued to grow and grow, and has now reached unsustainable levels.

The high national debt and persistent trade deficit are reinforcing each other. U.S. national debt is high because the U.S. has a persistent trade deficit, and the persistent trade deficit means the U.S. must continue to fund domestic spending by issuing government bonds, but those bonds are issued at higher and higher interest rates so that makes the interest payments high, which means the government must continue to issue more government debt, which will continue to be at higher rates because, among other factors, the trade deficit is persistent.

Brief History of U.S. Tariffs

The Trump administration has chosen tariffs as the fix for this problem.

But tariffs aren’t an invention of Donald Trump and his cabinet. The United States has historically relied on tariffs to fund tax revenue and protect domestic industries.

According to research by Anthony Pompliano, the United States never used to have income tax and relied only on tariff revenue. Pomp mentions that “George Washington signed tariffs into law as the second bill of his administration as the first President of the United States. A year later, the US Revenue Cutter Service (which later became the US Coast Guard) was created to collect [a] 5% tariff on all imports to the country.

Tariffs continued to be the main source of government revenue for about 70 years. These tariffs also protected American industries from foreign competition and ensured America was able to become self-sufficient, which was considered a national security issue at the time.”

This practice was eroded over the years however, and the chart below shows that tariff revenue for the United States is now effectively zero in comparison to the late 1700s.

Addressing Common Misconceptions

I’ve seen a lot of comments on social media about how these tariffs are “alienating” the United States and some friends of mine have also commented similarly in private conversations. I’ve also seen comments about how tariffs will lead to inflation so I want to address these inaccuracies:

* The Trump administration is not alienating the U.S., instead they are trying to revert to more fair trade for the U.S. by reorganising the global trade order.

* Tariffs will not lead to higher prices in the long term.

1. Is Trump alienating the U.S. from the rest of the world?

No. Here’s why…

As mentioned earlier in this letter, the U.S. is a buyer of goods from every economy in the world, which has led to the U.S. having trade deficits with those countries. We can all understand that selling more than you consume will put you in a better financial position, so trade deficits are bad—especially if they exist across the board and are growing persistently as shown in the chart below.

The U.S. therefore needs to take a stance that puts their country first and supports their local economy. The customer almost always has the leverage, so in this example as the customer to the world, the U.S. has leverage through tariffs because if you no longer have a customer you no longer have a business. Do you see where I’m going with this?

That said, there are many examples of countries that have similar protectionist policies and everyone is conveniently ignoring those because people are paying too much attention to the mainstream media which constantly distorts the truth.

Let’s run through a few examples…

India

India is known for its protectionist trade policies, particularly in the automotive sector. India reportedly imposes tariffs on imported cars at around 106% as part of a “Make in India” campaign to boost local manufacturing. This tariff doubles the price of imported cars, and therefore encourages consumers to buy domestically produced cars.

Additionally, ownership laws for foreign companies in India add another layer of protectionism. Foreign direct investment (FDI) is regulated, with certain sectors requiring joint ventures or partnerships with local companies. For instance, until recent reforms, the automotive sector often required foreign firms to collaborate with Indian partners, but restrictions remained in strategic sectors like defense and telecommunications.

China

China is an interesting and well documented example of a country that has intense tariffs and trade barriers. Historically, foreign carmakers were required to form joint ventures with Chinese companies to produce and sell vehicles, a policy in place until 2022 when China announced it would allow 100% foreign ownership in some cases. However, restrictions persist in strategic sectors like energy, mining, banking, insurance, and defense, where foreign ownership is limited to protect domestic industries.

Google, Meta’s social media products, and various non-Chinese shows cannot be accessed in China, which is no secret, and something the country is proud of. The difficulty for foreign businesses is also compounded by a complex regulatory environment. For example, intellectual property rights protection remains a concern, with reports of mandatory technology transfers in joint ventures. These policies apparently aim to foster domestic innovation but are controversial, with foreign companies often citing barriers to market entry and competition with state-backed enterprises. We also can’t forget that every industry is essentially state backed in China and is wholly supported through subsidised loans and policy.

And one other thing, while most of the world has a free floating exchange rate, China manipulates its currency by tightly managing its exchange rate with the U.S. dollar daily to reduce the impacts of currency volatility on their domestic economy. Where’s all the outcry about that?

Did you also know that China has tight capital controls to restrict capital flight in times of economic volatility?

South Africa

South Africa also has a tariff structure designed to protect local industries, with an average tariff rate of 7.1%, though specific goods like apparel face higher rates, such as 40% for finished goods. The tariff schedule, governed by the South African Revenue Service (SARS), includes various rates ranging from 0 to 30% but can be much higher in some instances. According to the International Trade Administration “the end rate for apparel is 40 percent, yarns 15 percent; fabrics 22 percent; finished goods 30 percent; and fibers, 7.5 percent. Import duties on vehicles and automotive components will remain at 25 percent on light vehicles and 20 percent on original equipment components through 2035.”

South Africans are also very aware of the ownership laws affecting local companies as well as foreign companies in relation to the Broad-Based Black Economic Empowerment (B-BBEE) – which mandates companies to meet thresholds of black ownership and management control to participate in government tenders and contracts. This policy, while aimed at economic transformation, can pose challenges for foreign firms.

Ireland

As a member of the European Union, Ireland applies EU tariffs, with duty rates on manufactured goods from the United States generally ranging from 5-8%, based on the c.i.f. value at the port of entry. Agricultural and food items are subject to import levies that vary with world market prices, reflecting EU protectionism in these sectors.

If you’re not happy with those examples, let's look at Brazil.

Brazil

According to trade data, Brazil’s average applied tariff rate is approximately 13.5%. However, specific sectors face significantly higher rates, particularly the automotive industry, where the import tax on cars is set at 35%, with additional taxes that vary by engine size and fuel type. This high tariff, effective as of 2025, aims to protect domestic manufacturers like Fiat and Volkswagen, which have significant production facilities in Brazil.

Ownership laws for foreign companies in Brazil generally reportedly allow 100% foreign ownership, however, restrictions exist in certain sectors to protect national interests. For instance, in the media sector, radio and television stations must be majority-owned by Brazilian citizens, a policy rooted in cultural preservation and national security concerns. Additionally, sectors like financial institutions, telecommunications, and defense require prior approval for foreign investment, creating bureaucratic hurdles that can delay market entry.

Still not satisfied? No stress, I’ll give yo

To Investors,

In any business, in any industry, revenue growth can be a dazzling figure, until you look behind the curtain. One term that I recently understood is “round-tripping revenue,” a practice where companies inflate their top lines through reciprocal deals that don’t always create real economic value. Today I wanna look at what round-tripping revenue means, whether it's legal or not, and how it might tie into NVIDIA’s cozy relationship with CoreWeave. Spoiler: it's a fascinating dynamic, and one we can’t ignore.

What’s round-tripping revenue?

Think about it like this: Company A “sells” $1 million in goods to Company B, books the revenue, and then Company B quietly “sells” something back to Company A for the same amount. The cash might not even move—it’s all on paper, a closed loop that pumps up the numbers without changing the underlying reality. The intent is to impress investors, lenders, or analysts with growth that’s more mirage than substance. But this isn’t a new trick— Enron was caught doing something similar with its trades a while back.

Is it legal? Well, it’s a grey area. If the transactions are genuine, disclosed properly, and reflect real business (even if circular), then they’re legal. But if they’re designed to deceive—hiding the lack of economic substance or misrepresenting financial health—they’re fraud, plain and simple, and that's a big problem. Context is everything: transparency and intent separate a clever strategy from a courtroom drama.

Now let’s zoom in on NVIDIA, the most influential company in this AI wave, and CoreWeave, its strategically placed cloud computing chess piece. As I noted in a previous letter, NVIDIA’s been playing a smart game: investing in the ecosystem to seed more customers for its chips. NVIDIA owns 5.97% of CoreWeave, a stake tied to a $100 million investment back in 2023, and CoreWeave’s business is built on buying NVIDIA’s chips to rent out as AI compute power.

Here’s where it gets interesting. CoreWeave’s 2024 revenue hit $1.9 billion, a 737% leap from $229 million in the previous year. Impressive, right? Dig deeper, and 15% of that—about $285 million—comes from NVIDIA itself, with 62% from Microsoft. NVIDIA sells chips to CoreWeave (booking revenue), CoreWeave scales up with debt (often backed by those chips), and then NVIDIA rents back capacity. It’s a tidy cycle: NVIDIA’s sales grow, CoreWeave’s business booms, and the chips keep humming.

Does this smell like round-tripping? Some investors think so. If NVIDIA is juicing its numbers by funneling chips to CoreWeave only to lease them back, it could exaggerate growth without much external demand. Imagine selling $1 billion in GPUs, then paying $300 million annually to use them—revenue looks stellar, but how much is “real”? The optics get murkier since NVIDIA doesn’t name CoreWeave in its filings, though it’s not required to unless the relationship crosses certain thresholds. In any case we know that demand for NVIDIA GPUs is through the roof and NVIDIA is reportedly struggling to fill orders.

So let’s give NVIDIA the benefit of the doubt for a moment. This could be the ecosystem play I flagged earlier—brilliant, and not shady. CoreWeave meets a genuine need: hyperscalers like Microsoft can’t get enough GPUs, and NVIDIA’s supply is tight. By backing CoreWeave, NVIDIA ensures its chips hit the market fast, serving real customers (Microsoft’s 62% chunk proves that). The 15% revenue loop with NVIDIA might just be pragmatic—testing capacity or meeting internal AI needs—so not a scam.

But we can’t overlook the round-tripping risk. If CoreWeave’s growth hinges too much on NVIDIA’s largesse—chips, investment, and rentals—it’s a house of cards if demand shifts. A supply glut or Microsoft building its own stack could expose that cycle’s limits. Is this relationship sustainable? That’s the billion dollar question, because CoreWeave is competing with AWS, Google Cloud, and Microsoft Azure as cloud services providers, but on the other hand, NVIDIA really needs more suppliers to drive demand for its chips, test new products and solutions, and help the company maintain revenue growth.

I see the round tripping element which may or may not be there as a nefarious act, but in my opinion NVIDIA’s CoreWeave tie-up is a masterstroke of strategy, but I may be wrong. With a 5.97% stake and 15% of CoreWeave’s revenue in play, it’s a relationship worth watching. Round-tripping is a loaded term, and there’s no smoking gun here yet. For now, I see it as NVIDIA planting seeds for an AI harvest, not cooking the books. But time will tell.

On my journey to becoming a master capital allocator, one lesson down, a billion more to go.

Hope you all have a great day.

-Mansa

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