Babylon Burns Is Launching Something Big Today (and you're invited to join)
The world has been waiting 55 years for this day.
Exactly 55 years ago, on August 15th 1971, Richard Nixon went on television and told the country he was closing the gold window. There would be no more turning dollars into gold.
He called it temporary. It wasn’t.
Gold was $35 an ounce that night. It’s north of $4,300 now.
Your dollars have lost more than 99% of their value against the one asset the government can’t print.
In fact, real wages just haven’t held a candle to assets, and everyone has been left behind.
If you’re running as fast as the other guy, you’re on a treadmill and going nowhere.
The opportunity set is getting concentrated at the top. Working hard, being disciplined and hoping for the best just doesn’t cut it anymore.
So as promised when I started writing on Substack a couple months ago:
Today we are launching the Babylon Burns Portfolio and the premium content.
I built it around the world I think we live in right now:
Governments have promised their citizens far more than they can afford. They can’t seem to tax or grow their way out of their hole, so they’ll inflate the gap away. It’s what I call the fiscal endgame.
At the same time, the global order is splintering into blocs that no longer trust each other. Just look at what is happening in the Middle East. I call this multipolar fracture.
So we’re in a very difficult environment where the fiscal endgame meets multipolar fracture.
We are tasked to do better in a tough, tough environment.
The job is to find alpha wherever it hides in global equities and drag it into the light, Leave no rock unturned.
Find alpha or die trying…
Why you should care what I think
If you haven’t come across me, here’s my mini bio:
I have successfully called the collapse of currencies, Brexit, the V-shaped recovery post pandemic, The 2021-2022 oil bull, the market bottom in 2023 (within a week), the AI trade and more.
I was born in England, grew up in France, did my undergrad in Montreal. While I was getting my Masters in Economics at Sciences Po Paris, I launched my first investment newsletter on SeekingAlpha, helping individual investors beat the S&P 500 with less volatility while building reliable income they can retire on.
I’ve beaten the market for years, at the retail level and the institutional level, across a few different strategies. I’ve been the CIO for Havelet Bay Capital, a macro hedge fund.
I’ve traveled the world, lived in 10+ countries, visited dozens more, and advised sovereigns on economic policy, most recently in Sao Tome & Principe.
I’ve made a bunch of mistakes along the way too. We all do. I’ve made some investments that didn’t work out in public and in private markets.
But as George Soros once said:
“It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong. “
- George Soros
And that’s what I seek to deliver with Babylon Burns: a relentless system of generating alpha by leaving no rock unturned, and implementing strong discipline in managing the portfolio.
What you’re buying
Subscribe and you get the write-ups that I’ve been sending your way since June.
Deep single-name reports on companies nobody else is picking over.
Macro research on whatever matters that month.
Trade alerts with entries and targets, so you know not just what I own but when I’m moving on it.
And the charts, done my way.
If you sign up for the annual membership you also get the web app.
This is the part I’m most excited about.
It’s the live portfolio, every position, sized, updated as I trade, in one place you can open any time and see exactly what the book looks like and why.
And I’ll be building the whole portfolio from scratch on Monday, so if you join today you will be coming in at ground zero. There is literally no better time to join.
This subscription has already paid for itself.
There are some substacks you read for entertainment, some you read maybe for education or general knowledge.
And then there are the substacks that you read because they will MAKE YOU MONEY.
While I fully expect to have my share of bad stock picks (and I already explained in one of the previous articles how that is part of the design, and that the best way to have a great idea is to have many ideas), my aim is to find alpha (or die tryin’).
I wrote a report on July 26th with a bullish call on Aveanna Health ($AVAH). The stock is up more than 30% since.
So even someone making the smallest of investments of $1,000 in this stock, would already have paid for a full year of my work, before I even asked for a single dollar.
I’ve got a lot of interesting stock picks for you, and they’re all coming next week.
What’s coming next week?
To commemorate Nixon’s 55 years of unpegging gold, I’m giving Babylon Burns subscribers my favorite gold miner below.
Then next week will be a busy week. On Monday you’ll get the full portfolio in the web application at market open.
I will be writing one report per day to cover the whole portfolio, this is what you can look forward to next week:
Monday: The Big Long. The oil disruption the market is sure is temporary, and the bet that it isn’t.
Tuesday: The Boomers Strike Back. The demographic trade sitting in plain sight.
Wednesday: The Only Bull Market Politicians Guarantee.
Thursday: Left for Dead. Buying healthcare while everyone else runs for the exit.
Friday: The Island of Misfit Longs. The oddballs that fit no theme and make money anyway.
If you don’t sign up, unfortunately you won’t be getting the stock picks, their sizing in the portfolio. You’ll still get a little taster of the ideas. But it’s not the ideas, it never was the ideas, it’s what you do with them.
Subscribe today and all of it opens for you, starting with the gold miner in a minute.
The offer
“A bargain is something you have to find a use for once you have bought it.”
-Benjamin Franklin
To be clear this isn’t just a newsletter. I’m offering you the chance to build a portfolio alongside me, to see when and how I build positions, to see my thinking on the micro, and on the macro.
You can pay month by month for $49, and that will give you all the write-ups on Substack. That’s fine if you want to hang around and decide if this is right for you.
Annual is $299 for the year. With that you get the web-app thrown in, which will evolve into a mobile application within short order, and gets you all my charts, the live portfolio, the trade notifications and so on.
I think the math should make the choice for you.
Twelve months at $49 is $588. If you’re serious about this, you take the annual.
Also, after Labor Day the annual goes to $399. So that’s $100 in your pocket to take the decision today.
I don’t even have to tell you this, but one good idea, out of everything landing this week and everything after, pays for the year many, many times over.
And you aren’t taking a leap of faith to find that out. Substack gives you seven days. Subscribe, read the whole first week, and if it isn’t for you, take your money back. One click. You don’t email me, you don’t explain yourself, and I never see a reason.
My favorite gold miner: Buy a mine get one free!
A few weeks ago I wrote a piece explaining why I wouldn’t touch gold miners with a ten foot pole (yet).
The main idea was that I was waiting for some confirmation of a breakout.
I don’t need to pick the bottom, I need to enter a trade when the risk reward is maximized.
On August 4th I posted this.
And then on August 5th, we got the breakout, so at market open, I started building my position.
It’s up 12% so far, and counting (the graphic above says 14.1% as I prepared this chart a couple days ago, it has given a couple points back over the past two days).
A miner is a geared bet on the gold price with a management team and a jurisdiction stapled on, and most of the time that cuts the wrong way.
Costs run. Grades disappoint. Governments rewrite the rules mid-game.
You take all the operational pain to get an exposure you could have had cleaner just owning the metal.
But if you’re willing to do the work, you can find a gem which is mispriced due to risks which are misunderstood by the general market, and I believe we have found this today.
Why gold, one more time
»»»»»»»»»PAYWALL
Gold miners are just a way of getting smart about how to own gold. Sometimes outright exposure is the better move.
But for those that didn’t get the memo, here’s one more time why gold is an asset which is particularly attractive in this environment.
Central banks have been buying gold hand over fist for three years.
They watched the Russian reserves that sat in dollars and euros get frozen, and they decided they’d rather hold the one reserve asset nobody else can freeze or print.
When dollars come with strings attached but gold doesn’t, they shift to the latter. So should you.
Especially when we know that countries when faced with a growth and debt problem, usually choose debasement as their way out.
This is Zimbabwe’s inflation over the last twenty years.
As we continue to see mismanagement from our central banks, continue to see our populations age, and continue to see the deficits rack up, it’s only a question of when we get another round of debasement.
Introducing Caledonia Mining
The company is Caledonia Mining. It trades under the ticker CMCL, on the NYSE.
It owns 64% of the Blanket mine, which has been pulling gold out of the Gwanda greenstone belt in southern Zimbabwe for more than a century.
And it owns all of Bilboes, a fully studied and permitted gold project a couple of hours’ drive north, near Bulawayo.
Blanket is a fine mine that pays the bills today. Bilboes, on the other hand is the reason to own the stock for the next three years.
The reason I like it, is that we get a self-help story strapped onto gold beta.
A cash-generating gold mine you’re paying for, and a second mine roughly the size of the first one that you’re getting for close to free.
Now of course, operationally, to get such a setup, there must be a lot of things that can go wrong.
What can go wrong
Zimbabwe is the whole ballgame.
Every other risk on this list is a rounding error next to the sovereign risk.
Zimbabwe makes its exporters hand over 30% of their foreign earnings and pays them back in the local currency, the ZiG, at an official rate that nobody believes.
The ZiG has already been devalued since it was introduced in 2024, and Caledonia has booked foreign-exchange losses on it already.
In January the government passed a budget with a 10% royalty which is imposed if gold trades above $5,000 an ounce.
Gold is $4,350 now, so if we’re bullish on gold, that switches on down the line sometime.
There’s an election in 2028 and probably a succession fight behind it. This is a country that has expropriated and rewritten the rules on its miners across the last twenty years, which makes it not for the faint of heart.
If you can’t stomach that, close the tab, come back on Monday for “THE BIG LONG” and don’t buy this stock.
Bilboes (the upcoming mine) needs money the company doesn’t have, and dilution or expensive debt is the base case that the market is pricing here.
The feasibility study puts the peak funding requirement at around $484mn. The whole company’s enterprise value is currently $350mn or so. So the growth project costs more than the entire business that’s trying to build it.
Caledonia raised a $150mn convertible bond in January, it has a gold hedge and a planned bank facility, and it has a project-finance package it’s still working on, and the whole idea is to build Bilboes with as little new equity as possible.
That, anyway, is the plan. But… plans to fund a half-billion-dollar mine in Zimbabwe on debt do not always work out.
If the project finance falls short, they have to fill the gap with stock at low valuations, and we eat the dilution.
Last year, all-in sustaining cost at Blanket (the original mine) was about $1,952 an ounce. In the June quarter they just reported, on-mine cost was $1,675 and AISC was $2,678.
Some of that is cost inflation, wages and a weaker grade earlier in the year.
Some of it is a quirk you should know about: the company now folds the cost of funding Bilboes, into its reported AISC, so the headline number overstates what it costs to mine an ounce at Blanket.
I like this accounting choice, as it means we’re eating upfront the development cost, rather than hiding it somewhere on the books.
It’s a geared bet on gold, and gold has already run a long way.
Even if we forget the whole Zimbabwe story, a gold miner is still just the gold price with operating costs and a management team bolted on.
Gold has had a monster run. If it rolls over, Caledonia’s margin goes down faster than gold falls, the Bilboes math worsens, and the thesis gets harder to hold.
And it’s a small company (one of the smallest I’ll cover, don’t worry) and thinly traded.
You don’t build a big position in this and you don’t get out of one easily on a bad day.
That’s the bear case, and if it has pushed you out of your comfort zone, like I said, come back on Monday, I’ve got stocks with market caps up to $100bn for you on that day.
What I’m betting on
The thesis, 18 to 36 months out:
Blanket keeps doing what it’s done for a hundred years, generating cash at a gold price that stays high because I believe it is likely there is a new structural floor under gold. Production goes up once the company’s move to a 7 day work-week makes its way into the books in the coming year. And Bilboes gets funded, mostly on debt, and moves toward first gold in late 2028, turning a one-mine company into a two-mine one.
I’m quite confident on Blanket and on gold. I’m less confident on about Bilboes getting funded without a flood of new shares, but it is that uncertainty which creates the potential opportunity.
The price, if that thesis plays out.
Gold's near $4,400 an ounce today, and in the June quarter Caledonia earned $1.36 a share at a realized $4,259, so the run-rate is better than $5 a share, roughly $100mn a year, against a market value near $375mn. That's about four times earnings for the mine that already exists, and at any ordinary producing-miner multiple Blanket on its own is worth more than the whole company costs today.
Bilboes has an NPV of $500mn assuming a $2,500 gold price (yeah you read that right).
Fund it and build it reasonably and the stock can rise significantly.
If they discount the NPV by 50%, assume $2,500 gold, and start giving it some value, you get 100% upside on gold remaining flat.
What is beautiful is we don’t need gold to go to $5,000. For this to happen we just need it to stay above say $3,600.
You pay for the first mine and you get the growth mine for free.
Blanket has kept mining gold at a profit through hyperinflation, dollarization, a coup, and one dead currency after another. It has done so for decades, and paid a dividend the whole way.
Running a mine through all of that shows management skill.
This is a profitable gold producer priced as if its billion-dollar growth project doesn’t exist.
The stock could double or triple from here on good execution.
The things that would get me to sell the position
If Caledonia funds Bilboes with a big discounted share issue instead of debt and project finance, the low-dilution thesis would be dead and I would likely sell the position.
If the gold breakout we are witnessing turns out to be a fluke, I will likely exit and re-enter later.
This is a case where there is beautiful reflexivity between a higher gold price which enables the financing, which enables the self-help, which enables rerating.
Position summary for the Babylon Burns portfolio
Initiating the position at 3% of the portfolio.
Putting the stop loss at $20 just below the gap. There is a clear danger zone in the $24-$26 level, and we want to be cautious if it gets rejected there. We also want to track gold closely here as it will obviously be correlated.
Using limit orders due to the size of the stock.
If this thing can go above $25 and stay there, it will start to look really good.
As Babylon burns, we’ll light the cigars.
Disclosure: I own shares of the companies I write about, including positions held in the Babylon Burns portfolio. I stand to benefit if their prices rise. My rule: I never sell a position on the day I publish on it, or in the 24 hours after publishing anything positive on it. Assume I own shares upon publication. This is my opinion and analysis, published for general information. It is not investment advice, not a recommendation to buy or sell any security, and it takes no account of your circumstances, objectives, or risk tolerance. I am not your financial adviser or broker. Everything here reflects my views as of the publication date and can change without notice, and I am under no obligation to update it. Figures are drawn from company filings, official statistics, and market data. I make a real effort to get them right, but I cannot guarantee they are accurate or complete, and some are estimates. Equities carry risk, including the permanent loss of your capital. Smaller companies carry more of it, and can be thinly traded, meaning the price you pay and the price you can exit at may differ materially from the screen. Use limit orders, be patient on fills, and size accordingly. Do your own research and speak to a licensed professional before you invest.
Wouldn't mind taking the bargain offer for the annual for $300,but should be a way of paying that in installments of $50 dollars or a payment plan.Dont u take paypal?