This week’s column: Australia can tax unrealized gains, coal is now ESG, and ice cream is more expensive.
Let’s get after it!
“Digging for Value, One Story At A Time.”
Mining Stocks? The Ones With No Unrealized Gains?
You’ve probably heard by now that Australia wants to tax unrealized capital gains. From SkyNews:
“Leading financial commentators have labelled Labor’s controversial plan to impose hefty taxes on unrealised capital gains as a “wealth tax” and outlined the potential dangers if the government applied the move to a range of commonplace assets.
The Albanese government’s polarising plan to slap a 30 per cent tax rate on super funds above $3 million looms, with Labor and the Greens expected to join forces in the Senate to pass the legislation after the Prime Minister’s resounding election victory.”
That sounds dumb, right? I shouldn’t need to explain that taxing unrealized gains is dumb. But let’s do it anyway.
Unrealized gains aren’t really gains. They’re blips on a screen that say, “Hey great job! You bought at a lower price and can sell it for a lot more today. You should start a hedge fund.”
It’s not actual money in your bank account. It’s theoretical. The stock could go down tomorrow and evaporate all those unrealized gains.
Australia doesn’t care. In their eyes, an unrealized gain is as good as cold, hard cash. Of course, the initial pitch is, “Don’t worry, this is only for the super rich. Most of you will be fine.”
But that’s not true?
“Prominent financial commentator Dimitri Burshtein labelled the policy a “wealth tax” and told Sky News host Chris Kenny that despite Labor claiming the proposal would only impact a slim portion of the population, the non-indexation of the policy meant that more people over time would fall victim to the tax.
“It’s currently non-indexed, so eventually it could erode to ridiculously low levels and capture everyone,” Mr Burshtein said, adding there was an element of “sloppiness in the analysis” due to Treasury not counting all defined benefit superannuation schemes.”
And I’m sure the government would stop at stocks and not look at other assets like homes, art, or mining deposits.
““It’s a horrible tax. It’s designed badly, it breaches transparency. The fact that it can be charged on unrealised gains is just despicable. It lays a template to go after the home, any assets, it’s essentially a wealth tax,” Mr Burshtein said.”
It’s absurd. But we haven’t even gotten to the craziest part. What if this is just the first step in Australia’s effort to consolidate all Aussie investment into government-chosen funds? I mean, as long as it’s NVDA or TSLA or BTC people wouldn’t care. But would they actually do this? Turns out, yes.
“Mr Greenwood also said the policy deterred people from accumulating sufficient funds in their superannuation accounts and forced account holders to switch from self-managed funds to industry funds of which are subject to more stringent government regulation and oversight.
“In many ways it almost seems though this tax strategy is a strategy to try and stop people accumulating too much in their super funds and secondly to try to divert people with self-managed super funds to put their money into industry funds”.”
Hmmmm … That’s:
- Not good
But
- Could be good if the Australian government put all its citizens’ money into mining stocks?
I mean, I can dream right? The good news is that mining investors don’t have to worry about this unrealized capital gains tax. It’s gains, not losses, they’re after.
Speaking of Australia.
Coal Is Now Has Always Been ESG
We’ve written a lot around here that anything is ESG as long as its stock goes up.
For example, in March I wrote about Norway’s Pension Fund allowing military/defense companies because “what is considered ethically acceptable may change”:
“This is the ESG end-game we all kind of knew was coming. Ethics aren’t fixed, but ever-changing to the benefit of Large Pension Fund IV. Back to the FT article:
“Take Norway’s $1.8tn sovereign wealth fund, formally known as the Government Pension Fund Global. Those investing the bounty from the country’s natural resources should note that “what is considered to be ethically acceptable may change” at a time of military rearmament and growing tensions, said central banker Ida Wolden Bache last month.”
My favorite part is, “what is considered to be ethically acceptable may change.” It’s my favorite part because eventually they’ll use this logic to buy mining stocks.
It will happen slowly, then suddenly. All it takes is a few months (or quarters) of outperformance. Ethics follows money, not the other way around.”
And I feel like I’ve been shouting from the rooftops that “MINING STOCKS ARE NEXT, JUST WATCH” ever since I started this column.
Well if a clock ain’t right twice a day. From the Australian Financial Review:
“AustralianSuper has reinvested in the country’s largest coal producer, Whitehaven Coal, a move the superannuation giant insists is consistent with its commitment to net zero emissions by 2050 but which environmental activists have labelled an insult to the fund’s 3.5 million members.
Last week – just days before three climate-related investment groups of which AustralianSuper is a member declared they’d double down on pressuring listed companies to decarbonise – AustralianSuper bought 1.3 million shares in Whitehaven, according the miner’s disclosures.”
Just let me bask in this vindication for a second … okay, I’m back. There are two moves AustralianSuper could make from here:
- Encourage Whitehaven Coal to produce as much coal as possible, realizing that the only way to reach Net Zero by 2050 is to invest as much as humanly possible into the technology that will power a “Green Energy Transition” (i.e., steel).
- Tell Whitehaven to stop producing coal, wind down it’s operations, or else face the wrath of a 5% shareholder?
Obviously the first option is better for everyone. Whitehaven Coal keeps mining coal, printing cash, issuing dividends, buying back stock, and helping make all that steel that goes into those wind turbines. Shareholders, Whitehaven, and the environment win.
But what about the second move?
“Market Forces’ Morgan said the AustralianSuper investment could only be justified if the fund demands Whitehaven ends plans to expand thermal coal mines, and manages down existing coal production.
“The only way AustralianSuper can justify this giant backflip is by using its position to end Whitehaven’s polluting and risky coal growth plans and instead return shareholder capital through a wind down strategy,””
This is like the ESG version of when David Tepper paid $43.5 million for his former boss’s beachfront mansion who rejected him for a promotion, just to demolish it.
TikTok Ruins Low Coconut Prices
Okay, TikTok probably didn’t ruin low coconut prices. But I bet there’s some viral health craze going around that’s responsible for increased coconut demand. I swear I saw a video of some health guru shoveling coconuts into his aiport bag so he could drink coconut water on the plane.
That guy.
Anyways, there are three reasons why you should care about coconut prices:
- It’s a natural resource, and we cover natural resources around here.
- You probably consume a lot of it on a daily basis in ice creams, health snacks, and other vegan/fat products.
- Coconuts are a great example of the wild and interconnected world of commodity markets.
Here’s Javier Blas’s latest column:
“Sure, ice cream isn’t a commodity. But coconut oil, a key ingredient of industrial-made gelatos, is. And its price has gone parabolic in the wholesale market, setting fresh record highs every month so far in 2025. Worse, further price gains are likely as demand outstrips supply, making one of my guilty indulgences even more expensive. In a nutshell, fewer coconuts mean less oil, which is extracted from the fruit’s dried or fresh meat.”
My wife always jokes that there should be a futures market for popular food categories, and I always laughed at that thought. But now, I think she’s onto something.
It’s 2025. We have NFTs, DAOs, and cryptocurrency. But you’re telling me I can’t hedge my Ben & Jerry’s consumption habits on a digital futures exchange?
“How bad is it? Last week, the benchmark wholesale price for Filipino coconut oil delivered in Rotterdam, an industry benchmark, rose above $2,700 a metric ton, nearly double from a year ago, and roughly 200% higher than the 2000-2020 average. The previous record high was set in 2011 at about $2,300.”
I mean, come on! There’s gotta be a trade here somewhere. Email me if you have it.
Until then, I guess I have to trade down to chocolate chip cookies? Without coconut oil, of course.
