Executive Summary

Wheaton Precious Metals provides high-quality, low-risk exposure to precious metals through its streaming portfolio — approximately ~67% gold, ~33% silver by revenue, giving investors meaningful silver optionality alongside gold exposure. All production figures are expressed in Gold Equivalent Ounces (GEOs), which converts silver and other metal production into a gold-equivalent weight using prevailing spot prices.

At the current gold spot price of approximately US$4,450–4,500/oz, my estimated price target is US$140–160. In my base case with gold reaching US$6,000/oz by 2029 and sustaining elevated levels thereafter, the 5-year DCF produces a price target of US$197.70, implying 58.5% upside and an ARR of 11.1% per annum from the current share price of US$124.70.

The streaming model delivers high margins due to fixed low delivery costs, no direct mining capex, and strong operating leverage to metal prices. Incremental revenue at higher gold prices flows almost entirely to free cash flow. WPM's ~33% silver revenue mix means GEO figures will fluctuate with the gold/silver ratio, and a rising silver price relative to gold provides an additional tailwind to reported production.

Price Target Scenarios

The standard PE multiples and even run-rate DCFs are not particularly good valuation methods for Royalty & Streaming companies however in the interests of brevity and simplicity I’m going to bend the rules here and use a modified DCF given we have good line of sight for WPM’s production profile over the next 5 years. Applying a terminal multiple will attempt (probably poorly) to account for the long mine life Wheaton enjoys and the ‘right tail’ optionality.

This methodology likely does not fully represent the full life-of-mine value of the royalty portfolio or the out-of-the-money optionality — both of which represent additional upside not captured in these figures. The numbers are deliberately conservative.

5-Year DCF Build — Base Case

I’m underwriting:

• Production ramps linearly from 900K GEOs (2026) to 1.2M GEOs (2030).

• Gold price grows at 10% per year from a US$4,475/oz base.

• Delivery cost fixed at US$400/GEO. EBIT margin 65%.

• Discounted at 7%.

• Terminal value applied at end of Year 5 using 20x NTM EV/EBIT on Year 6 projected EBIT.

Terminal value dominates total EV — this is typical for long-duration royalty businesses where the value of decades of future royalty cash flows sits beyond the 5-year forecast window. The DCF is intentionally conservative: OTM royalties converting to production, new stream acquisitions, and silver outperformance represent additional upside likely not captured at only a 20x Exit multiple.

Sensitivity Analysis

Price target (US$/share) across a range of gold price and GEO production outcomes. Base case sits at centre.

Primary Upside Drivers at US$6,000/oz Gold

Margin expansion. Incremental revenue at higher gold prices flows almost entirely to free cash flow due to fixed streaming delivery costs. Operating leverage is exceptional.

Production growth to 1.2M GEOs by 2030 supported by Antamina expansion, Blackwater, Platreef, Goose, and other pipeline assets — approximately 50% growth from current levels.

Silver outperformance. WPM’s ~33% silver revenue exposure means a rising gold/silver ratio reversal — typical in late-cycle precious metals bull markets — would provide a meaningful GEO and revenue tailwind above and beyond gold price gains alone.

Accretive stream acquisitions. A high-gold-price environment creates opportunities for WPM to deploy capital into new streams at attractive terms.

Market re-rating. As the market recognises significantly higher intrinsic value, P/PT compression reverses i.e the same re-rating dynamic that has defined every previous precious metals bull cycle.

Investment Considerations

Key Risks

• Production shortfalls or delays at partner mines

• Short-term gold price volatility (mitigated by bullish outlook)

• Minor dilution from future stream acquisitions (historically low impact)

• Premium valuation vs peers limits downside margin of safety

The Royalty King’s Remarks

WPM currently trades at a meaningful discount to the modeled price target. Buying at today’s price of US$124.70 and reaching the base case price target of US$197.70 by end-2030 implies an annualised rate of return of 11.1% per annum ex-dividend, while the higest success mode modeled implies ~19% ARR.

In a US$6,000/oz gold environment by 2029, WPM offers compelling re-rating potential as the market is forced to mark up intrinsic value. The combination of production growth to 1.2M GEOs, sector-leading margins, and no operational risk makes this a core holding for my expressing a long-term bullish view on gold.

WPM is a high-conviction way to capture upside from sustained higher gold prices with lower volatility than direct mining investments. It is a core holding in both the Crassus Investments & Royalty King portfolio.

Want More Leverage on This Thesis?

If you want to go beyond the stock and access the options trades I have on WPM including: specific strikes, expiries, and position sizing, that level of detail is available inside Machina Capitalis. Members get my live options book, real-time trade alerts, and monthly strategy calls covering royalty and streaming positions across the portfolio.

machinacapitalis.com

Until Next Time,

— Benjamin

This is an illustrative price target. Not financial advice. For paid subscribers only.

General Disclaimer: This document is an illustrative scenario-based price target using a 5-year DCF and exit multiples. It is not a full life-of-mine model and does not capture out-of-the-money optionality value. All figures are estimates only. Actual results will vary with realised production, metal prices, new stream acquisitions, and market discount rates.

Not Financial Product Advice (ASIC): The Royalty King and its publications do not constitute financial product advice as defined under the Corporations Act 2001 (Cth). The information contained herein is general in nature and has been prepared without taking into account your individual investment objectives, financial situation, or particular needs. The Royalty King does not hold an Australian Financial Services Licence (AFSL). Before making any investment decision, seek independent financial, legal, and taxation advice from a licensed AFS licensee.

Conflicts of Interest: The author may hold a direct or indirect interest in securities mentioned in this document, including Wheaton Precious Metals Corp (WPM). This does not constitute a recommendation to buy or sell.

Royalty King Water Brief Final

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Data Centres, Water, and the Next Infrastructure Bottleneck

The prevailing view in markets is that the binding constraint on the AI buildout is electricity. Gigawatts of generation capacity, grid interconnection queues, transmission infrastructure, fuel substrate etc. These are the terms of the investment debate. Power, in this framework, is considered the scarce resource in this modern-day race to secure electrons.

This view is not wrong, but I contend incomplete and the dimension in which it is incomplete (water needed for said power generation) has consequences for project economics that are not remotely reflected in current market pricing.

The purpose of this report is to establish the full water demand picture for hyperscale data centre infrastructure, then attempting to model the specific case of a 1 GW campus in the Permian Basin of West Texas.

The sourcing problem is more acute than most operators publicly acknowledge and it appears the investment community’s continued reliance on a single, deliberately incomplete metric: on-site Water Usage Effectiveness (WUE) has produced a systematic blind spot that will likely to eventually be corrected by the market in the customary painful fashion.

Part I: The Scale of the Problem

Water consumption in a data centre occurs across three distinct systems:

1. The power generation plant supplying the centre’s electricity

2. The data centre cooling infrastructure

3. Backup and redundant generation

It is a peculiarity of current reporting practice that the first of these systems,the power plant, which in almost all thermal scenarios accounts for 50 to 70 percent of combined consumption, receives little-to-no mention in operator or broad market commentary.

This author can only surmise that this is due to the fact that WUE, as defined and disclosed by the data centre industry, covers only on-site water consumption. Investors who evaluate data centre water risk solely on disclosed WUE figures are evaluating, at best, 30 to 50 cents of every dollar of water consumed on their behalf.

Before attempting to calculate the entire picture of our 1GW model, let’s get some macro context on where the industry is heading in the USA.

For perspective: a medium-sized 15 MW data centre uses as much water as three average hospitals, or more than two 18-hole golf courses, per year. Now let’s appreciate that these facilities are now being built at 1,000 MW and above.

Withdrawal vs. Consumption: A Critical Distinction

When reading the available research it was found that these two terms are used interchangeably in most infrastructure writing yet they should not be.

• Withdrawal — total water drawn from a source. Most is returned to the environment, though often at higher temperature or altered chemistry.

• Consumption — water permanently removed from the local water cycle, primarily through evaporation. For wet cooling tower systems, ~80% of withdrawn water is evaporated and permanently lost; the remaining ~20% is discharged as blowdown.

Another thing to note is that withdrawal represents a one-time fill. It does not. The cooling tower evaporates roughly 1–3% of its circulating volume with every pass, and make-up water is drawn continuously year-round. Withdrawal is a perpetual annual operating cost, analogous to a fuel cost rather than just a capital input.

All consumption figures in this report use the evaporative loss definition. Withdrawal figures are provided throughout for infrastructure sizing, because sourcing, treatment, and pipeline costs are incurred on the full withdrawal volume — not only the fraction that evaporates.

Part II: Power Plant Water & DC Colling Requirements

The choice of power generation technology has consequences for total water demand that dwarf the consequences of data centre cooling technology selection. The numbers:

Source: US EIA Power Plant Operations Report; River Network 2012; World Nuclear Association.

Gas CCGT appears the most water-efficient thermal generation option by a significant margin which is why it is the assumed power source for the Permian Basin model (additionally there’s an abundance of cheap gas out there!). Dry cooling (air-cooled condensers) can reduce power plant water consumption by ~90%, at the cost of power efficiency, but the environments that support it rarely coincide with the other prerequisites for a hyper-scale campus.

Now that a guide for the main power plant figure has been estimated, let’s examine the cooling requirements for the DC itself, before considering that additional power and by extension water requirements must be anticipated to satisfy practical criteria to achieve the 1 GW working model in Pt 3.

These advances in data centre cooling are genuine and material. They are also largely irrelevant to the total water question, because the power plant dominates in every scenario and is unaffected by what happens to cooling technology inside the server racks of the DC.

Part III: The Model — Applying Theory To A 1 GW Hyperscaler In The Permian

Why the Permian Basin?

Firstly, a 1 GW IT-load hyper-scale campus in the Permian Basin is not a hypothetical. Chevron’s planned data centre power complex is sized at 2.5–5 GW of generation for a single client. Pacifico’s GW Ranch Project in Pecos County targets 7.65 GW which is the largest approved in the United States at time of writing. It in turn is expected to be eclipsed by BOLT Data’s 10 GW planned project in West Texas. The 1 GW working model that follows is a intended as a scalable starting point.

Key model logic: The data centre sells and delivers 1 GW of compute at all times. The 90% figure is primary plant availability, not system output. When the primary is offline, the backup takes full load. All water volumes are calculated on this basis. Other analysts contend differently i.e that not a second of downtime would be acceptable ergo a second back up power plant would need to be on standby at all times. Others also estimate PUE more towards 1.58 or above. The salient point is that my model can be considered on the conservative side of water and power consumption that will ultimately be needed - which is somewhat incredible given the outputs I’ve estimated are eye-brow raising in and of themselves.

Power Plant Water Demand: Two-Plant Model

Water intensity: CCGT withdrawal 10.6 L/kWh; consumption 0.86 L/kWh (midpoint of EIA range)

BL = billion litres = 1 million m³. Returned/discharged combined: 144.07 BL/yr.

The standby figure warrants particular attention. A CCGT in hot standby i.e gas turbine turning, heat recovery steam generator warm, steam pressure maintained consumes approximately 20% of its full-load water withdrawal continuously, even while generating no useful electricity. For this 1.43 GW backup plant, that equates to 23.92 BL/year of withdrawal and 1.94 BL/year of permanent evaporative loss simply to keep the plant ready.

This is not optional. A CCGT cold restart requires 4–8 hours — incompatible with data centre uptime requirements. Hot standby, with its associated water draw, is the minimum credible standby mode for a mission-critical facility.

Data Centre On-Site Cooling: Scenario Analysis

Annual IT energy on nameplate basis: 8.76 TWh/year

The mid-tier base case (WUE 1.2 L/kWh) is retained as a conservative planning assumption given the source water purity questions addressed in Part IV. A new-build AI hyperscale in 2026 might achieve WUE 0.15–0.45, placing it between the best-in-class and zero-evap scenarios above but the operator would need to be up for a higher grade of water.

The Three Scenarios That Drive Different Investment Questions

All figures use mid-tier DC cooling (WUE 1.2 L/kWh).

The distinction between B and C is meaningful. The water treatment plant, produced water pipeline agreements, and cooling tower capacity must all be sized for Scenario C, even if steady-state annual opex runs at Scenario B levels. Think of it as analogous to a power purchase agreement: you contract for capacity whether you use it or not. The supplier must be able to deliver the full volume on demand.

Total Integrated Model Across All Cooling Scenarios (Scenario B)

Even zero-evaporation data centre cooling still carries 12.72 BL/yr of power plant water consumption. The power plant dominates in every scenario and is unaffected by on-site cooling technology choices.

Permian Basin Barrels

It’s estimated that over 6 million BOE are produced in the Permian every day, alongside that emerge ~15 M BBL of toxic produced water.

With the context established, let’s put things into Barrel equivalents for our USA brethren.

Equivalents

For comparability with regional oil and gas water reporting. 1 barrel = 158.987 litres.

Part IV: Sourcing the Water

Freshwater Is Not a Solution

The Permian Basin cannot supply potable or freshwater at the volumes required. The numbers make this plain:

The model’s steady-state consumption exceeds Midland’s entire municipal water supply! Groundwater aquifers in the region as I understand are partially brackish and under severe multi-year depletion stress.

Produced Water: The Permian’s Structural Opportunity

The same basin that cannot supply freshwater produces approximately 15 million barrels (~2.4 billion litres) of co-produced water per day from oil and gas extraction — currently a disposal liability for operators.

The Texas Railroad Commission has been progressively restricting produced water injection permits in response to induced seismicity, a trend that accelerated following the appearance of a 160-foot geyser of toxic water in Toyah in December 2024, which gushed for weeks. This pressure is simultaneously closing off traditional disposal routes and building legislative momentum for beneficial industrial reuse.

The symbiosis is straightforward: data centre operators need water at scale; oil and gas operators need to dispose of water at scale. The Texas Produced Water Consortium is the primary body developing treatment protocols for industrial reuse, including data centre cooling.

Treatment Cost by Quality Grade

Annual Water Cost Model (Scenario B — Steady-State Opex)

Note: Costs applied to withdrawal volumes throughout, because sourcing, treatment, and pipeline infrastructure costs are incurred on all water entering the system, not only the fraction that evaporates.

Total annual withdrawal of 170.6 million m³ equals approximately 2.94 million barrels per day. A campus paying the current integrated midstream market rate of ~$0.725/bbl (WaterBridge 10-K, March 2026) on the same volumes would face an annual water bill of approximately $778 million per year.

The $264M figure reflects treatment-cost-only assumptions ex-transport and delivery. The $778M figure is what the water supply chain currently charges. Both numbers belong in any serious investment model; neither is currently in most of them.

Part V: The Discharge Problem

This is a dimension of this analysis that is almost universally under-appreciated and I have found difficult to comprehend in terms of its numeric effect on water needs.

Water withdrawn must eventually go somewhere and account for changed in the solids concentration increasing as a result of the liquid lost through evaporation in the heating cooling cycle.

In an urban or coastal location, this discharge flows to a receiving waterway or municipal wastewater system. In the remote Permian Basin, neither option exists at this scale. The discharge must be treated and re-injected into the subsurface, or managed in large-scale evaporation ponds.

This discharge infrastructure is not being scoped in most project announcements this author has reviewed. Unfortunately, I am no better equipped to reach an investment conclusion, but believe it’s important to mention.

Part VI: Six Observations for the Investment Community

1. Freshwater scarcity is structural, not cyclical. There is no municipal water system in West Texas capable of supplying a 1 GW campus, and none will be constructed for this purpose. Any project that has not secured a long-term produced water supply agreement and on-site treatment infrastructure before financial close is not, in the strict sense, financeable. The underwriting community should require explicit evidence of water supply secured, not merely assumed.

2. Produced water regulation is moving in one direction. The Texas Railroad Commission’s tightening of injection well permits is proceeding in a single direction. Projects with treatment infrastructure are advantaged; those that assume disposal will remain available at current cost and volume are carrying regulatory exposure that may materialise on short notice.

3. The discharge problem is uncosted and underappreciated. 655 ML per day of thermal discharge in a remote location with no receiving waterway and restricted injection capacity is a major capex and permitting risk. It must be addressed at the feasibility stage, not deferred.

4. Infrastructure must be sized for peak, not average. The water treatment plant, produced water supply agreements, and cooling tower capacity must all be sized for Scenario C — both plants at full load — even though steady-state annual opex runs at Scenario B.

5. Water opex deserves its own line in the model. At ~$264M/year on the treatment-cost basis and potentially ~$778M/year at current midstream market rates. Water treatment and sourcing accounts for roughly 26–38% of power generation opex. That figure will likely rise as more projects compete for the same produced water supply and treatment capacity. Equity return assumptions that do not model a rising cost trajectory for water are carrying hidden risk/opportunity depending on buyer/seller.

6. Political pressure is accelerating. Texas does not yet require most data centres to report water usage. The Texas GOP has adopted a resolution demanding that the AI industry follow the same water management and recycling protocols required of oil and gas. The question for investors is not whether reporting requirements will tighten, but when, and what they will reveal when they do.

Conclusion

The investment community has spent considerable energy developing sophisticated views on the power constraint facing AI infrastructure. The power constraint is real. The water constraint is equally real, less well understood, and currently unpriced in this author’s opinion.

Produced water reuse in the Permian Basin is, at present, the only credible path to supply at this scale. The economics of that reuse are genuinely favourable today as operators pay for disposal, and data centres need water. That alignment will persist until enough treatment and delivery infrastructure exists to serve the full pipeline of announced projects. At that point, as with most infrastructure constraints that transition from ignored to recognised, the pricing will adjust in the usual direction.

© 2026 The Royalty King Research Report. Subscriber distribution only. Not for redistribution.

Data sources: US EIA Power Plant Operations Report; EESI Data Centers and Water Consumption (2024); Baker Institute for Public Policy, Rice University (August 2025); Lawrence Berkeley National Laboratory 2024 US Data Center Energy Usage Report; EU Climate Neutral Data Centre Pact; East Daley Analytics; Texas Campaign for the Environment; E&E News Permian Basin Water investigation (December 2025); Nixon Peabody AI Facilities Permitting (February 2026); Nature/npj Clean Water; IFC/World Bank Water Reuse; River Network Burning Our Rivers (2012); World Nuclear Association; MIT Energy Initiative Power Plant Water Use Working Paper (2012); DOE/NETL Power Plant Water Usage and Loss Study (2007). WaterBridge 10-K, March 2026.

Disclaimer: This publication is intended solely for documenting my personal journey with trading and investments for income and travel purposes. I am not a certified financial advisor nor am I a financial professional and none of the content provided should be construed as investment advice. It is essential to conduct your own thorough research and consult a registered financial service provider for appropriate guidance. I cannot guarantee the accuracy or completeness of the information presented. Any actions taken based on the information shared in any of my work are done at your own risk and discretion. Past performance is not indicative of future results. All investing involves risk, including the potential loss of principal. There is no guarantee that any investment strategy, including those discussed here, will achieve its objectives or generate profits. You should carefully consider your investment objectives, risk tolerance, and financial situation before making any investment decisions.

Get your tickets to the RULE SYMPOSIUM 2026

Market Musings

My macro view in terms of most sectors price action can be briefly summarised thusly: down, then up.

Really I think it is that simple and as such I am very happy to have come into 2026 with such a huge amount of cash liquidity.

For 2026 through to Q1 2028 I am bearish on the broad equity markets in most countries, yet have no interest in flirting with bonds trying to time that market as its long term fundamentals are simply dreadful in my view. Ergo, I have left my profits in my gold bullion trade as a free ride and sold only enough to withdraw my initial capital. In the near term, I am putting on various options trades to profit from an anticipated downturn in what I consider to be the most liquidity-sensitive assets: BTC (via IBIT), QQQ and SPY.

My bearish trade on IBIT is already very profitable and I only require a mere 10% drawdown in QQQ and SPY to make a ~4x return on capital. I deem these rare examples where a high probability outcome also coincides with an asymmetric payoff. Interested readers can learn the exact positions in .

This then leaves my outlook for 2028 and beyond and brings us back to Druck’s quote above. If things go as stated above, thanks to contracted liquidity available in western capital markets, the only politically expedient option for policy makers will be to (yet again) inject enormous amounts of liquidity into financial markets and the ‘main street’ economy. All signs point to this occurring right when goods inflation is increasing thanks to a dearth of historic capex, combined with de-coupling and, thanks to the recent Iran war, outright destruction of key supply chains and infrastructure hubs.

Thus, with an eye towards 2028 and beyond I remain with my core positions in royalties and exchanges, which won’t be touched, and am using my large cash reserves to gain more leverage to precious metals and their associated royalty Co.s via options setups. It’s difficult for me to imagine the gold price to be less than $5,500 per oz in Dec 2028 and so logically it follows that if I am so confident in Gold appreciating circa 20% from today’s spot price, then I should be maximising my exposure via options on the metal itself and the royalties as mentioned above.

My Price Targets On Gold

Remember: a LOT can happen between now and then.

ICYMI: In the chat this week I shared a PDF of one of the tranches I am allocating to GOLD options. This tranche only needs $5,ooo/Oz gold by DEC ‘28 in order to profit and provides 3-5x the upside of price appreciation in the bullion. I’ve kept the tranche small as it’s totally possible that we experience more sharp and vicious sell offs to come as various states and institutions may need to sell (albeit reluctantly) in response to pressing liquidity needs.

So patience is what I’m practicing. the last thing I want is to be out of bullets if/when the true sell off arrives.

To summarise, Here’s a list of things I’m watching:

Media

I have a number of appearances coming up this week. Main topics I’ll be speaking on are: Royalty & Streamers, Exchanges & Water.

In the meantime, I re-iterate that my main framework for assessing the macro-economic environment is the global liquidity index tracked and published by . I am a premium subscriber and consider it one of the most useful and informative subscriptions I have.
If you haven’t already you really should watch the conversation I had with him recently.

That’s it for this compendium, take care out there. Markets are in for pain unless we see results from the Strait situation very quickly. Be intelligent, do your own due diligence and in the words of the great man…

Benjamin

— The royalty King

If this analysis is useful, Machina Capitalis goes further.

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Disclaimer: This publication is intended solely for documenting my personal journey with trading and investments for income and travel purposes. I am not a certified financial advisor nor am I a financial professional and none of the content provided should be construed as investment advice. It is essential to conduct your own thorough research and consult a registered financial service provider for appropriate guidance. I cannot guarantee the accuracy or completeness of the information presented. Any actions taken based on the information shared in any of my work are done at your own risk and discretion. Past performance is not indicative of future results. All investing involves risk, including the potential loss of principal. There is no guarantee that any investment strategy, including those discussed here, will achieve its objectives or generate profits. You should carefully consider your investment objectives, risk tolerance, and financial situation before making any investment decisions.

Get your tickets to the RULE SYMPOSIUM 2026

Market Musings

The Big Story: Liquidity Is Tightening (Again)

If there is one thread tying everything together this week, it’s this:

Liquidity in the west is drying up.

It’s not collapsing, but tightening at the margin.

We’ve got:

• Sticky inflation

• A hesitant Fed

• Ongoing QT

• A quietly strengthening dollar

It’s the kind of environment where asset prices could gap down as outflows/redemptions occur due to the increased marginal dollar coming out of capital markets and into the ‘real economy’ spending.

This dynamic is discussed at length in my latest interview with Michael Howell

Gold

Gold’s price declined sharply this week (11%), the worst weekly sell off in years. To paraphrase a Bessent-quote, this occurred due to there being more sellers than buyers, with over $1billion in combined outflows in a single day, March 19, from the major ETFS: GLD and IAU.

My early thoughts are that this looks like profit taking. Flow data suggest that investors were de-grossing gold exposure after an earlier run-up, not abandoning the asset class structurally. Remarkably, despite the sharp uptick in recent outflows, the gold price is still positive YTD and now the RSI is in oversold territory.

Capital flowed across to dollar denominated instruments and now the US 10yr yield is up 4.5% and the DXY; a measure of the dollar’s relative strength is also on the rise.

My take: price action is best understood as a cross-asset liquidation and profit-taking after 9 straight months of net inflows. Gold entered the week after a very strong run and once oil-driven inflation fears pushed yields higher larger players considered rebalancing.

Given liquidity in the west is drying up on an ever expanding numerator of aggregate debt level precisely at a time where fiscal deficits are assured to blow out even further due to the current conflict it’s only a matter of time being monetary policy is adapted to compensate. I expect more monetary easing to come, be it in 6,12,18 months and as that liquidity enters the system I expect net inflows to resume in gold and BTC vehicles. Ad interim of course, there’s likely some further downside.
I am positioning by looking at various options on acquiring my favourite precious metals royalties, which have sold off recently - in the case of GROY to the tune of 22%.

TRK Remarks

Water remains on my mind as my number one growth commodity. I’ve almost finished a 14 page research report which will be made available to subscribers only. The first issue is a deep dive on the hydro-requirements of Data centres and the associated investment implications.

Here’s a teaser:

“ A 1 GW hyperscale campus in the Permian Basin is not a 10× scale-up of a conventional data centre. It is a water event of regional significance, consuming more fresh water equivalent per day than the entire City of Midland's municipal supply..”
My modelling shows that the necessary infrastructure for the 1GW prototype DC will need the equivalent of 202 million barrels of water per year to operate at nameplate capacity which, at going rates estimated in the basin implies $428 million in annual running costs for the water alone.

Wishing you all the best.
— Benjamin
The Royalty King

Disclaimer: This publication is intended solely for documenting my personal journey with trading and investments for income and travel purposes. I am not a certified financial advisor nor am I a financial professional and none of the content provided should be construed as investment advice. It is essential to conduct your own thorough research and consult a registered financial service provider for appropriate guidance. I cannot guarantee the accuracy or completeness of the information presented. Any actions taken based on the information shared in any of my work are done at your own risk and discretion. Past performance is not indicative of future results. All investing involves risk, including the potential loss of principal. There is no guarantee that any investment strategy, including those discussed here, will achieve its objectives or generate profits. You should carefully consider your investment objectives, risk tolerance, and financial situation before making any investment decisions.

PS: Oh, and don’t forget to check out my other publication , think of it as my live trade journal operating an income portfolio of options and exotic trades.

Machina Capitalis

The Gold Carry - Turning Idle Bullion Into a Yield Machine

The Gold Carry…

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16 days ago · 1 like · The Royalty King

I’ll be attending the Rule Symposium (online) this year.

If you’re serious about commodities, capital cycles, and long-duration thinking, this is where the real conversations happen.

Secure Your Spot Here

The Australian Securities Exchange (ASX: ASX) is the only practical venue through which Australian equities can be cleared and settled. It holds a function so systemically critical that its regulator has described its stable operation as essential to the integrity of the entire Australian financial system . Curiously however, it is currently priced as though that monopoly were in question. It is not.

Today’s article hits close to home, given the antipodean roots of this author having spent most of his childhood in Terra Australis.

It’s often easy to miss the opportunities closest to us and as evidence I was surprised to learn upon my perusing of global exchanges, that one of the worst performance stock exchanges globally (and the worst in south east Asia) is none other than the ASX, The Australia Stock Exchange. I mean, stone the crows, even the bloody kiwis are doing better! (NZX).

It’s not very often that an investor can form a buy thesis on an exchange and frame it as a ‘turn around, or special situation’ yet it appears that is in fact the case here which, given the enviable business model that exchanges nejoy, might provide a discounted entry into the monopoly toll road on the Australian economy. An economy which stands to benefit greatly from an anticipated boom in natural resources.

Exchanges occupy a rare position in capitalism. They are toll collectors on financial activity. Every trade, listing, capital raise, hedge, or margin requirement passes through their infrastructure. The marginal cost of processing an additional transaction is close to zero, while the fees are recurring and difficult for market participants to avoid. This results in a business model characterised by:

• network effects
• regulatory moats
• low capital intensity
• very high operating margins

Few industries possess all four simultaneously.

For a primer on the exchange’s business model and why it might be the best in the history of publicly traded markets see the below white paper.

The Australian Economy — What The Conventional Misses

The conventional view of Australia is not wrong, it is just incomplete. Australia is a resources-heavy economy with significant China exposure, a relatively small domestic population of 27 million and a history of commodity cycles that have provided sensitivity for government finances and corporate balance sheets.

The ASX 200 index is roughly 30% financials and 20% materials. Simply put, when iron ore falls, the index falls. When the banks get in trouble, the index gets in trouble.

A $10 change in the price of Iron Ore can correspond with a $0.5-$1 Billion swing in associated government revenues and affect GDP to the tune of ~$5.2 Billion. Such an impressive statistic highlights the sensitivity of the Aussie economy to global commodity demand.

The Mining Boom as an Exchange Boom

Current geopolitical re-arrangements have led to a new type of ‘arms race’ in that governments globally are now intent on adjusting their supply chains and engaging in a high stakes scavenger hunt in order to secure the raw inputs need for the manufacturing of goods which underpin the economies, militaries and technology development of developed nations.

Such a circumstance necessarily means a new breath of life (and more importantly, an awful lot of capital expenditure) into developing critical mineral deposits, something which Australia has in abundance.

In fact, Australia holds the world’s largest reserves of lithium, the second-largest reserves of cobalt, the largest identified deposits of nickel sulphide, and is one of the world’s dominant iron ore and copper producers.

The boom for mining is a boom for ASX listings, IPOs, secondary capital raises, derivatives hedging, data licensing, and clearing volumes. The ASX doesn’t need to pick the winning commodity or the winning miner. It just needs the activity to continue and structural global demand for critical minerals suggests it will, and for a very long time.

There is also the matter of the gold price. Australia is the world’s second-largest gold producer. Gold is at or near all-time highs. Gold companies are raising capital, hedging production, and listing new vehicles and the ASX is the primary venue for all of it.

Blunder Down Under

Given the positive nature of the aforementioned, the reader may be wondering why a business with such a privileged position would sell off so heavily?

This is because, to quote the spider man movie, “With great power comes great responsibility”. Continuing the logic: with great responsibility, comes even greater regulatory scrutiny.

Unfortunately, a failed technological gambit threatened to disrupt trading activity and pushed ASX into the crosshairs of the Australian Securities Investment Commission (ASIC).

A few years ago the ASX attempted to replace the 1994-era CHESS system using distributed ledger technology. The project which began around 2015 was abandoned in November 2022 resulting in a $250 million write-down. ASIC subsequently sued ASX in the Federal Court, alleging that statements made in February 2022 that the project remained “on-track for go-live” and was “progressing well” were misleading and deceptive.

A truly embarrassing error occurred on Christmas Eve 2024 when a group of trades failed due to faulty code in CHESS. Apparently this code contained instructions that had existed since 2014. Not a good look.

A formal inquiry into ASX was launched in 2025 and the results are now known:

• ASIC has imposed an additional $150 million capital charge on ASX, to be accumulated by June 2027 and held until remediation milestones are met to ASIC’s satisfaction.

• Consequentially, the dividend payout ratio has been cut. Return on equity targets have been trimmed. Attempt 2 at CHESS replacement is underway with a new consultancy team and is targeting a new clearing system by mid-2026 and a settlement system by 2028-29.

Longer term readers will recognise these dynamics, that is: a situation in which a quality business model is experiencing a temporary difficulty and a dividend cut which the market does not have the patience to see through even when a fairly solid timeline is available.

Similar situations can be found in the archive including, but not limited to: $MSB, $HE, $SJT, and so far, as of the time of writing, patience and extending one’s time horizon past the standard calendar year and out towards 2-3 years has paid off.

The opportunity arrives thanks to the market, which is fixated on the ASIC run-in and is pricing this as a tired infrastructure stock. What it actually is, when you strip away the noise, is a royalty on the Australian financial system, backstopped by a compulsory private retirement scheme and an endowment of resources that the is growing more valuable by the day.

The ASX is not losing its position as the central counterparty for Australian equities settlement next year, or the year after.

Now let’s cast an eye over what it might be worth to an investor with a view towards the future.

Read more

An informal dispatch on markets, money, and the mindset behind it. Free, always. For those who want to go deeper, the links are at the bottom.

Get your tickets to the RULE SYMPOSIUM 2026

Market Musings

The big story: Middle East conflict dominates

The week was defined by a rapidly escalating conflict involving Iran, which rattled risk sentiment across all Asian markets. Oil prices surged after Iran reportedly closed the Strait of Hormuz, and the shockwaves hit export-heavy, energy-importing economies hardest.

Asia is bleeding. Is this a flush or a fracture?

Asian markets are selling off hard this week. My take: Likely due to the region’s reliance on products which transit the Strait of Hormuz.

The question I ask is how much of this is due to leverage?

Because depending on the extent of this being the result of levered liquidation and who is being closed out, there may be forced selling across the board.

Owning exchanges is a nice place to be during volatile times.

Asia’s Pain is Texas’ Gain

Meanwhile, West Texas is quietly becoming one of the most interesting infrastructure stories on earth. Data centres need land, power, and water and the Permian Basin has all three in abundance, and the landowners sitting on that acreage are starting to look like the new landlords of the AI age.

Which brings me to two names I've been long on since late January: LandBridge (LB) and Texas Pacific Land (TPL). As of this morning they're up +51.32% and +75.94% YTD respectively.

Iran And The Icarus Setup

Brent has ticked up to around $81/bbl. Here’s the scenario I’m gaming out:

If the US and Israel succeed in redirecting control of Iranian oil flows — roughly 1.8 million barrels per day — that supply tilts westward and away from China (not completely but in theory). On the surface: bullish for the West, a strategic headache for Beijing.

This is where I keep coming back to two ideas.

Doomberg’s Icarus print: the idea that a forced supply surge could create a price spike before leading to an eventual crash.

Nassim Taleb’s observation that he has never seen a shortage that wasn’t eventually followed by a glut.

If Iranian supply is not interrupted for a prolonged period and is redirected, we could be setting up the perfect bull trap in energy. Spike first. Then the floor gives way 12–18 months later. The tail risk is that this time is ‘for real’ and the conflict drags on and results in large scale infrastructure damage, negatively affecting supply and this would send oil prices to the moon in sharp fashion.

I’m positioned well in any event.

The Royalty King’s Remarks

LB Earnings: Sensational. Exactly What I Expected.

LandBridge reported and the numbers were, frankly, everything I laid out in my preview piece.

The market reacted well. I wasn’t surprised. When you do the work, I mean really do the work, earnings are a confirmation.

If you want to understand how I built that pre-earnings thesis, the full walkthrough is in my previous piece:

MEDIA

Rick Rule | A 1-on-1 Lesson With A Legend.

Growing up, I never imagined I’d have access to someone like Rick Rule. Ultra-wealthy. Decades in resource investing. A genuine legend in every sense.

Above is the link to yet another immensely valuable conversation where Rick literally helps me work through my framework for valuing mining companies in real time. Not so much a polished interview but rather a working session where you’re all invited.

If this landed with you, the single best thing you can do is forward it to one person who you think would get something from it.

All the best.

— Benjamin, The Royalty King

If you enjoy this kind of analysis, you might also like

I’m offering founding member rates for a limited time.

Worth a look 👉 : Funding freedom through borderless cashflow generation.

Portfolio Snapshot — March 2026

*The Croupier Collection is still being quietly built in the background.

Disclaimer: This publication is intended solely for documenting my personal journey with trading and investments for income and travel purposes. I am not a certified financial advisor nor am I a financial professional and none of the content provided should be construed as investment advice. It is essential to conduct your own thorough research and consult a registered financial service provider for appropriate guidance. I cannot guarantee the accuracy or completeness of the information presented. Any actions taken based on the information shared in any of my work are done at your own risk and discretion. Past performance is not indicative of future results. All investing involves risk, including the potential loss of principal. There is no guarantee that any investment strategy, including those discussed here, will achieve its objectives or generate profits. You should carefully consider your investment objectives, risk tolerance, and financial situation before making any investment decisions.

I’ll be attending the Rule Symposium (online) this year.

If you’re serious about commodities, capital cycles, and long-duration thinking — this is where the real conversations happen.

Join us here: https://cvent.me/XOqdLa?via=BenjaminDemase

Two main investment themes have dominated the thinking in this publication for some time now. The first is monetary debasement. The second I loosely call ‘consumer commodities’: the idea that years of underinvestment in supply will eventually collide with surging localised demand, potentially in spectacular fashion.

2025 was a big year for the debasement angle. Gold along with Royalty & Streaming companies featured so heavily that along the way I stopped being the ROI guy and became ‘The Royalty King.’ When your own readership rebrands you, effectively the market has spoken and it seems wise to listen.

2026 turns the page. The consumer commodities thesis moves to the foreground and within it, one asset class above all others demands attention.

Water.

Mirar el río hecho de tiempo y agua y recordar que el tiempo es otro río, saber que nos perdemos como el río y que los rostros pasan como el agua

— Jorge Luis Borges, ‘Arte Poética’ (1960)

(To look at the river made of time and water and remember that time is another river to know that we are lost like the river and that faces dissolve like water.)

Of all the commodities one might consider, only two can genuinely claim to be perpetual in the state in which they’re naturally found: land and water. Gold is timeless yet it requires refining and processing. Oil also is refined before use and undergoes a complete state change once consumed as does every other commodity in practical terms.

Land simply exists. It’s immovable, unreproducible and indifferent to the passage of time.

And water?

Water is even more peculiar. In its usable state, it too is naturally scarce and constrained by geography and infrastructure. It is also consumed and can undergo state changes - like most other commodities. Yet unlike any other commodity, water possesses a natural refresh rate in its state of end-consumption. (Sticklers may point out lumbar has a refresh rate through forests etc. yet a tree requires a phase transition of sorts before being consumed: from seed to tree, which is in turn milled etc.)

Given the right conditions, nature replenishes water. The aquifer refills. The river runs again. It is the only commodity in existence where scarcity and renewal coexist but only when nature’s schedule is allowed to run uninterrupted.

Just as available land per capita shrinks alongside population growth and forces human ingenuity to constantly find higher and higher uses for every acre, the same growth, and the technological appetite that accompanies it, is now bearing down on water with a force that may test the limits of nature’s ability to refresh it. This convergence appears unique in human history. The stakes are not abstract given humans survive only days without water. History has consistently demonstrated, those who provide solutions to civilisation’s most pressing problems tend to be rewarded handsomely for doing so.

This mini-series will focus on exactly those companies — the ones positioned to solve and monetise the coming water constraint in various ways.

Newer readers can get up to speed with the demand pressures of water from ‘AI’ datacentres here:

Today’s company is on the cusp of relieving demand pressure in southern California. And as it happens, it does so through the signature business model that regular readers of this publication will recognise immediately: capital-light, toll both-type economics.

Cadiz Inc. (NASDAQ: CDZI) has existed in various forms since 1983, sitting on 45,000 acres of land in California’s eastern Mojave Desert, above one of the largest undeveloped groundwater aquifers in the American Southwest. Long time shareholders have been decimated by the ‘California risk’ as this genuinely impressive asset has unfortunately been encumbered by regulatory delay, political opposition, and a balance sheet that required a patience that few investors possess.

That patience is now being rewarded.

What Cadiz owns is deceptively simple: land, water, and pipe. Specifically, 2.5 million acre-feet of water supply, 220 miles of pipeline infrastructure threading through the corridors between California’s major water systems, and the rights to extract, store, and deliver water to agricultural and municipal customers across Southern California. The asset is not depleting given the aquifer recharges. The pipeline, once built, will move water for decades. This is precisely the kind of infrastructure that fits the perpetuity framework outlined above — not a mine that exhausts itself, not a well that pressures off, but a system that, once operational, functions more like a toll road than a commodity centric company.

The business model reinforces the analogy. Through the newly formed Mojave Water Infrastructure Company (MWI), Cadiz is bringing in outside capital to finance construction — up to $450 million in total equity — while retaining 49% of water storage rights and all existing water supply purchase contracts. The company monetises the flow. Long term readers will recognise the architecture immediately. The infrastructure carries the water. The aquifer replenishes.

Construction is no longer theoretical. The Northern Pipeline is targeted for completion at end-2026, the Southern Pipeline by end-2027. The first tranche of project financing — $51 million from the Lytton Rancheria of California — has been executed under a definitive agreement. Steel has been secured, repurposed from the cancelled Keystone XL pipeline. The permits are advancing under federal emergency water infrastructure provisions. The pieces are falling into place with a specificity that distinguishes this from the Cadiz of prior years, when the same assets existed but the path to revenue did not.

The market, far from being efficient, appears completely oblivious to an opportunity which, based on management’s own NPV estimate for already contracted cash flows, is 4x the current market capitalisation. Let’s now take a deep dive into the valuation.

Read more

An informal compendium of Market musings trade updates and personal insights.

The Royalty King’s Remarks

The year has started strongly, with performance across all portfolios already well into double-digit territory. I don’t usually highlight this—by design. In 2026 I’m operating with an almost religious commitment to shutting out noise and avoiding short-termism. That said, an exception is warranted for the new publication .

As a one-man operating company, its explicit mandate is near-term income generation through options selling and more exotic structures, where transparency around results matters. To the early founding members: thank you. Year-to-date returns now stand at 32.34%, achieved with only partial capital deployment and the core allocation still to be put to work. The theme is simple:

Funding freedom through borderless cashflow generation.

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A Lesson In Grip Strength.
Texas Pacific Land spent much of the past year grinding through a deep drawdown—testing patience, headlines, and weak hands—before sharply recovering as fundamentals quietly reasserted themselves. Those who sold near the trough did not lack intelligence; they lacked understanding. They had copied the thesis without internalising the business. TPL’s value does not hinge on quarterly sentiment or commodity noise, but on irreplaceable land, water, and infrastructure that compound regardless of market price action. This pattern is not even new, in fact TPL has experienced ~5 50% drawdowns in price over the last 10 years (depends on how you count) on its way to deliver a 33X return!

The same pattern repeats across markets. The investors who sold TPL at the lows are often the same ones who will sell Bitcoin in volatility—not because the asset changed, but because their conviction was never earned. You can copy trades, models, and ideas. What you cannot copy is understanding. And without understanding, conviction fails precisely when it is needed most.

Market Musings
The two main forms of debasement - resistant money in my view are gold and bitcoin.

YTD gold is + 14% vs the USD while BTC is -24.6%, with bitcoin denominated in gold terms being down 33%.

Over the last 5 years the scorecards sits at 177%, 18% and -54% rounded, respectively as seen below.

I maintain my view that we are in for a period of short term price weakness possibly across the board as debt/liquidity ratios appear to be tightening in western markets and Bitcoin is acting as the ‘crypto-canary in the coal mine’.

It’s worth re-iterating my thesis here:

For the TLDR crowd, I’ve stated my target range for BTC Jan 26-27 at $40-70k and that I’ll be loading up with very levered ways to play should BTC drop <$60K.

Media

Chinese opportunities came up in my latest conversation with Louis Vincent Gave. If you found value in the discussion, I’d appreciate you subscribing and sharing it.

My key takeaway is this: a period of strengthening Asian currencies would have second-order effects that matter—most notably a firmer bid under commodity prices and higher trading volumes across those markets. Given the scarcity of royalty and streaming companies listed in Asian public markets, I continue to express this theme indirectly via exchanges. If commodities—particularly gold—are bid higher, trading activity rises, and the royalty and streaming businesses I own should benefit materially.

Wishing you all the best.
— Benjamin
The Royalty King

Disclaimer: This publication is intended solely for documenting my personal journey with trading and investments for income and travel purposes. I am not a certified financial advisor nor am I a financial professional and none of the content provided should be construed as investment advice. It is essential to conduct your own thorough research and consult a registered financial service provider for appropriate guidance. I cannot guarantee the accuracy or completeness of the information presented. Any actions taken based on the information shared in any of my work are done at your own risk and discretion. Past performance is not indicative of future results. All investing involves risk, including the potential loss of principal. There is no guarantee that any investment strategy, including those discussed here, will achieve its objectives or generate profits. You should carefully consider your investment objectives, risk tolerance, and financial situation before making any investment decisions.

Spies, soldiers, refugees, collaborators—winners and losers on all sides of the war. They argue, negotiate, bluff, and scheme. Allegiances shift. Outcomes are uncertain. But while the world outside convulses, Rick’s café remains open. Drinks are poured. Information is exchanged.

With that as a grounding metaphor, turning our attention to financial markets it’s prudent to ask

‘ Who gets paid regardless of what happens in the world?

Hugo Navarro · Benjamin Demase

Most investors focus on predicting which assets will outperform and how political shifts will affect markets. What policy changes might alter the trajectory of prices. These views evolve constantly, driven by headlines and sentiment. Capital reallocates. Winners and losers rotate. These debates shift with every headline and as participants and positions rotate, fortunes are made and lost.

But the venue doesn’t change.

Every trade, regardless of intent or result, passes through an exchange. Capital changes hands. Positions are opened and closed. Volatility rises and falls. And through it all, the exchange collects its fee—indifferent to who was right, only that activity occurred.

This paper is about those venues. About exchanges as the permanent meeting place of capital, where bulls and bears, hedgers and speculators, locals and foreigners all transact under the same roof. Exchanges don’t try to predict direction but rather they monetise volume. In a world fixated on picking winners, exchanges quietly profit from ensuring the game never stops.

Every transaction, profitable or not, results in revenue for the exchange.

Before we dive into today’s deep-dive, I’d like to introduce my collaborator, of Undervalued and Undercovered. Hugo specializes in uncovering overlooked cyclicals and under-the-radar small-cap opportunities, applying a disciplined value investing framework. His sharp eye for asymmetric setups has driven a 70% return in his model portfolio in just a year. If you find this analysis insightful, I highly recommend subscribing to Hugo’s research—especially if you’re looking for deep, fundamental work that the market hasn’t fully priced in.

Undervalued and undercovered

I am a passionate investor eager to share my reports on companies that are undervalued compared to the market and their peers, and are undercovered by analysts.

By Hugo Navarro

And make sure to leave a like and a restack! If we reach 60 likes and 25 restacks, we’ll team up again and record a podcast about exchanges.

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A Brief History of Exchanges — Adapting, Not Disappearing

The impulse to create organized venues for trading claims on future cash flows is ancient. In Rome around 1 BC, the fora hosted trading in publicani—shares in tax farming operations where private consortiums bid for the right to collect provincial taxes. These were tradable interests with defined revenue streams, bought and sold in public spaces where price discovery occurred through open outcry. The fall of Rome and the subsequent contraction of long-distance commerce made such formalized trading dormant for centuries.

The revival came with the Italian city-states. Between the 12th and 16th centuries, Genoa, Venice, and Florence developed organized markets where government debt instruments, primarily bonds issued to finance wars and expeditions, could be traded. These were the original secondary bond markets. They provided liquidity for claims that had already been issued. The Venetian prestiti traded at discounts or premiums based on the Republic’s perceived creditworthiness, establishing the principle that securities have market-determined prices distinct from their face value.

However, the first recognizable stock exchange, where equity ownership in a company could be traded, was formed by the very inventors of the company structure itself.

The Amsterdam Stock Exchange was established in 1602 by the Dutch East India Company (VOC) which, not coincidentally, was the first joint-stock company formed in history.

Necessity being the mother of invention, the VOC needed a place which provided liquidity for shareholders who wanted to trade their positions. This provides an important insight: exchanges exist to monetize the secondary consequences of capital formation in addition to capital formation itself.

By 1688, there were an estimated 360 companies trading on the Amsterdam exchange, with impressive trading volumes given the absence of the internet. The London Stock Exchange formalized in 1801, though trading shares had occurred in London’s coffeehouses since the 1690s. The New York Stock Exchange was founded in 1792 under a buttonwood tree on Wall Street, initially trading just five securities. Today that number stands closer to 2,300.

The initial template established by these institutions: a recognised venue, standardized trading hours, membership requirements, and the ability to charge for access to liquidity has proven adaptable and has survived across radically different political, technological, and economic contexts as the reader is about to discover.

Wars and Political Collapse

During the Napoleonic Wars (1803–1815), European exchanges remained operational even as governments fell and reformed. The London Stock Exchange stayed open throughout both World Wars.¹ The NYSE actually saw increased trading volume during WW1 despite the exchange experiencing its longest closure ever from July 31, 1914 to April 1, 1915.² Amazingly, by 1929 the daily trading volume had risen more than tenfold from pre-war levels.³

Hyperinflation and Currency Collapse

The Weimar hyperinflation (1921–1923) destroyed the German mark where at its peak, prices doubled every 3.7 days.⁴ Yet the Berlin Stock Exchange remained open and liquid throughout. Traders simply re-priced securities in gold marks, then Rentenmarks, then Reichsmarks. The mechanism adapted and continued to provide its essential function.⁵

When the ‘Bretton Woods standard’ collapsed in 1971, exchanges didn’t contract but rather they expanded and enjoyed a host of new offerings. Currency volatility created demand for new instruments (futures, options, swaps), and exchanges provided the infrastructure upon which they traded. The Chicago Mercantile Exchange (CME) launched currency futures in 1972.⁶ By 1980, financial futures exceeded agricultural commodities in trading volume.⁷

The Great Depression and Regulatory Transformation

The 1929 crash represents perhaps the most severe stress test. U.S. stock market capitalisation fell 89% peak-to-trough (1929–1932).⁸ Many companies disappeared. Yet exchanges survived and emerged with enhanced structural authority.

The Securities Acts of 1933 and 1934 didn’t disintermediate exchanges; they formalised their role as gatekeepers.⁹ The SEC effectively granted exchanges the status of self-regulatory organizations. An existential threat became a moat: listing requirements, disclosure obligations, and trading surveillance became the services exchanges provided and charged for.

Whilst it took the Dow until 1954 to fully recover to its prior 1929 high, the NYSE trading volume in 1960 was five times what it had been in 1929.¹⁰

Technological Revolutions: From Pits to Packets

Trading the tape (1867)

With the advent of the stock ticker, transmitting of prices over telegraph lines, came the fear of a threat to the business model of the exchange trading floor as the ticker enabled price discovery outside the physical exchange and could theoretically have decentralized trading.¹¹ Instead of disruption, exchanges monopolized ticker access, charging for real-time data feeds. The technology that threatened to disintermediate became a new revenue stream. This is a pattern that would repeat.

Electronic Trading (1971–2000)

The NASDAQ launched in 1971 as the first electronic stock market without a physical trading floor.¹² Here was another threat supposed to render traditional exchanges obsolete. Instead, it forced modernisation and revealed that exchange value resided not in the trading floor but in the network effect of liquidity. By the 1990s, most exchanges had hybrid models and trading volumes exploded: average daily NYSE volume grew from 11 million shares in 1970 to 1 billion by 2000 or a 90x increase in 30 years.¹³

High-Frequency Trading and Fragmentation (2000–Present)

Regulation NMS (2005) fragmented the U.S. market, enabling alternative trading venues and dark pools.¹⁴ Critics predicted the death of traditional exchanges. Instead, exchanges simply adapted and became more insulated, selling speed itself via co-location services, direct market access, and proprietary data feeds.

ICE acquired the NYSE in 2013 for $8.2 billion.¹⁵ CME Group’s market capitalization exceeded $60 billion by 2021.¹⁶ Exchanges have thus far embodied the concept of anti-fragility given they thrive on volatility and seem to gain from noxious stimuli meant to hurt them.

The Recurring Pattern: Disruption as Revenue Opportunity

What emerges across four centuries is a consistent dynamic: exchanges invariably benefit from disruption. They don’t produce assets as such; they monetize the infrastructure required to trade them and the birth of every new asset class usually brings with it a whole host of associated new derivative products to trade. Much like every barrel of oil produced in the Permian basin brings with it 4 barrels of produced water, every new asset class listed on an exchange has the potential to bring 4 or more new tradable products such as: options, futures, futures options, ETFs and derivatives on the ETF. When new technologies threaten trading methods, exchanges either acquire the technology or replicate its functionality.

Unlike banks (which take principal risk) or brokers (disintermediated by technology), exchanges operate two-sided networks where liquidity begets liquidity. As long as markets exist, the institution aggregating liquidity extracts rent from that aggregation.

The insight for investors: you’re not betting on specific products, technologies, or geographies. You’re betting on the persistence of price discovery as a service worth paying for which as we’ve seen is a service that has survived every economic, political, and technological regime change in modern history, emerging from each disruption with higher volumes and broader product sets.

Markets mutated and exchanges monetized the mutation.

Exchanges, Participants & A New Term ‘Structural Alpha’

The structural asymmetry between direct market participants and those who own said market creates a category of investment that is qualitatively superior across economic cycles.

The Participant’s Dilemma: Directional, Cyclical, Fragile

Most market participants, be they retail individuals or institutions, share a common vulnerability: they must be right about direction. A long equity position requires the market to rise. A short position requires it to fall. A commodity trader needs to correctly anticipate supply, demand, geopolitics, and weather patterns. Even the most sophisticated quantitative strategies are fundamentally directional bets on statistical relationships holding to allow ‘mean reversion’ into the future.

This directional dependency makes participants inherently cyclical and fragile.

The Commodity Trading Catastrophe (2010-2016)

Consider the fate of commodity trading firms during the super-cycle collapse. Glencore, one of the world’s largest commodity traders, saw its market capitalization plummet from $60 billion in 2011 to under $20 billion by September 2015. A 65% decline as commodity prices collapsed.[^17] The company was forced to suspend its dividend, sell assets, and raise emergency capital to survive.

Noble Group, once Asia’s largest commodity trader with a market value exceeding $6 billion in 2014, essentially ceased to exist by 2018. Its shares fell 95% as commodity prices turned against its directional positions.[^18]

These were the biggest around. Their failure was structural: when oil fell from $115/barrel in June 2014 to $26/barrel by February 2016, and iron ore dropped from $135/ton to $40/ton over a similar period, no amount of operational excellence could overcome being on the wrong side of the market.[^19]

The Prodigal Active Manager

The asset management industry illustrates participant fragility from another angle. Active equity managers must not only generate positive returns but they must beat their benchmark consistently enough to justify their fees and retain assets under management. Those employing an active management strategy have had a torrid time over the last two decades due to the popularity of ‘ passive investing’ via ETFs.

From 2009 to 2019, 89% of large-cap U.S. equity fund managers underperformed the S&P 500 over a 10-year period.[^20] This isn’t an indictment of individual skill; it’s a mathematical consequence of being a participant in a positive-sum game with fee drag. When the market declines managers face redemptions. From 2000-2002, equity mutual funds experienced $200 billion in net outflows as investors fled falling markets.[^21]

The cyclicality is structural. In bull markets, assets under management grow, but so does competition. In bear markets, performance suffers and redemptions accelerate. The business model is effectively pro-cyclical.

Banking: Directional Risk in Disguise

Banks appear to operate infrastructure, but their profit model is predominantly directional. A bank lending $1 billion in commercial mortgages has made a directional bet on:

• Real estate values (credit risk)

• Interest rates (duration risk)

• Economic growth (employment and income risk)

• Monetary policy (refinancing risk)

The 2008 financial crisis demonstrated this fragility at scale. Lehman Brothers, Bear Stearns, Washington Mutual et al. failed because of their directional exposures primarily to residential mortgage-backed securities.[^22]

Even after the crisis, with enhanced capital requirements and stress testing, banks remain fundamentally directional. European banks, laden with sovereign debt exposures, saw their market capitalizations fall 50-80% during the 2011-2012 European debt crisis.[^23]

The Exchange Advantage: Volume-Driven, Direction Agnostic

Exchanges occupy a categorically different position. They do not normally participate in markets directly but rather they facilitate them. This distinction creates structural advantages:

Transaction Revenue, Not Directional Profit

An exchange earns fees on each trade executed, regardless of whether the buyer or seller profits. When oil falls from $115 to $26/barrel, the CME Group which operates the NYMEX energy futures exchange doesn’t suffer the same fate as Glencore above.

During the 2014-2016 oil price collapse, while Glencore and Noble Group faced existential crises, CME Group’s energy trading volumes increased. In 2016, the CME’s average daily volume for crude oil futures reached 1.13 million contracts, up from 890,000 in 2013 - a 27% increase.[^24] Price volatility, which destroys directional participants, generates trading activity that enriches the exchange.

The mathematics are elegant: if a commodity trading firm loses $1 billion on a position, that loss came from trades where the exchange collected fees on both the opening and closing transactions. The exchange profited twice from the same market movement that may have bankrupted the participant.

Operating Leverage and Resilient Margins

Exchanges are characterized by extreme operating leverage: the marginal cost of processing an additional trade is effectively zero once the infrastructure is built. The low fixed costs structure allows a free call option to ‘right tail’ risk yet shields substantially from ‘left tail’ events.

Consider the year 2020, disastrous for most publicly listed companies. Yet ICE, which owns the NYSE, reported operating and net income margins on par with the prior year as did its peers.

Furthermore, consider some examples of performance during market stress:

2008 Financial Crisis:

• S&P 500: -37%

• CME Group: -68% stock price. Revenue +45% YOY. Net Inc Margin +4% YOY [^27]

2020 COVID Crash (Q1):

• S&P 500: -20% (peak to trough -34%)

• Energy sector: -50%

• ICE: - 14%

The ICE dropped less during the Q1 crash and recovered faster.

The Empirical Record: Exchanges Vs Indices

The performance difference between exchanges and active participants is empirically observable across decades and market cycles. But what of the passive investor’s battle cry:

“You can’t beat the index, so buy the index”?

Well, as a matter of fact, over long periods of time, exchanges themselves have generally outperformed the very indices they facilitate. Whilst perhaps counter-intuitive at first, examining the operations of the two investments in question makes it clearer.

When you invest in the S&P 500, you own a basket of 500 companies whose fortunes rise and fall with economic conditions. When you invest in the company that operates the exchange where those 500 companies trade, you own the toll booth through which all their activity must pass.

The difference between an index and an exchange may sound subtle but performance differential is anything but, as the reader is about to discover.

*From Horizon Kinetics Q3 Commentary Page 6.

The ETF Explosion:

The growth of passive investing and ETFs has inadvertently become one of the most powerful tailwinds for exchange revenues in modern financial history.

The Mechanics of ETF Trading.

When an investor buys shares of an S&P 500 ETF, three separate transactions occur:

1. The investor buys ETF shares on an exchange (exchange collects fees)

2. Periodically, the ETF provider may need to rebalance underlying holdings (exchange collects fees)

3. Authorized participants create/redeem ETF shares through underlying stock baskets (exchange collects fees)

The growth in ETF assets under management doesn’t just represent passive buy-and-hold behavior; it generates a massive increase in underlying trading activity, much of which is invisible to investors.

U.S. ETF Assets Under Management:⁵

• 2002: $102 billion

• 2012: $1.3 trillion

• 2022: $6.5 trillion

• Growth: 6,270%

Average Daily ETF Trading Volume:⁶

• 2002: 35 million shares

• 2012: 950 million shares

• 2022: 4.2 billion shares

• Growth: 11,900%

Note that trading volume grew nearly 2x faster than assets under management. This advantages the exchange as assets compound at market rates, but trading activity compounds faster due to rebalancing, arbitrage, and increasing portfolio turnover.

Index Rebalancing: The Hidden Revenue Stream

Major index rebalancing events generate extraordinary trading volumes. When a company enters or exits the S&P 500, every index fund and ETF tracking that index must execute the change. With over $15 trillion benchmarked to the S&P 500, even a 0.1% rebalancing represents $15 billion in forced trading activity.

Tesla S&P 500 Addition (December 2020):

• Tesla market cap at inclusion: $658 billion⁸

• Estimated index fund trading: $80-100 billion⁹

• NYSE/NASDAQ volume on rebalancing day: 2.3x normal¹⁰

• Exchange revenue impact: Undisclosed, but CME reported record options volume¹¹

The companies being added or removed from indices experience significant volatility around rebalancing dates. The exchanges, by contrast, simply collect fees on the billions of dollars in forced trading activity.

Quarterly Rebalancing = Recurring Revenue.

Beyond headline additions and deletions, indices undergo quarterly rebalancing to maintain market-cap weights. As stock prices diverge, index funds must buy outperformers and sell underperformers to maintain target allocations.

Index funds can collectively trade ~$200 billion per quarter in rebalancing activity alone.¹² At an average exchange fee of 0.0003% per transaction, or $2.4 million annually from a single index’s mechanical rebalancing.

Now multiply this across:

• S&P 500, S&P 400, S&P 600

• Russell 1000, 2000, 3000

• MSCI indices (World, EAFE, Emerging Markets)

• Dow Jones indices

• NASDAQ indices

• Sector and thematic indices

The recurring, non-discretionary nature of index rebalancing creates an annuity-like revenue stream for exchanges that happens like clockwork.

The Structural Moat: Why Don’t Exchanges Attract Competition?

The barriers are structural:

1. Network effects: Liquidity attracts liquidity. The most liquid venue captures the majority of trading, creating natural monopolies.

2. Regulatory franchise: Exchanges are granted regulatory authority as self-regulatory organizations, a privilege that cannot be replicated.

3. Switching costs: Market participants cannot easily migrate to new venues. Existing exchanges control access to established liquidity pools.
   

4. Technology moat: Decades of infrastructure investment and integration with clearing systems, data feeds, and participant systems create enormous switching costs.

A bank or broker cannot easily pivot to become an exchange. A failing hedge fund cannot transform into a marketplace operator. The business models are fundamentally distinct and the authors here argue that the exchange holds what we dub ‘structural alpha’ outperformance that derives not from superior insight or timing, but from occupying a structurally advantaged position in the financial ecosystem.

Exchanges vs Financial ‘Peers’

This advantage even extends against their closest industry peers, the banks, brokers, and asset managers that participate in the same markets.

Major banks underperformed exchanges by substantial margins, despite operating in the same financial ecosystem:

Bank Performance 2002-2026

Average CAGR 5.75%

Ave CAGR 14.5%

The total market capitalisation of the above group of banks sits at $1.8 Trillion at the time of writing yet the largest 4 exchanges in the USA can be purchased collectively for $283 Billion.

Given various exchanges outperformed the average major bank by such a wide margin this author suggests the above market price discrepancy might represent one of the biggest mysteries in capital markets today.

Brokers: Disintermediated by Technology

The broker-dealer model faced potentially severe structural headwinds, as technological innovation and regulatory changes compressed commission revenues.

Broker-Dealer Performance

Whilst major brokerage platforms did well, they still lagged many exchanges and are often serial share diluters.

When Robinhood, the zero-commission pioneer went public in 2021, its largest expense line was payments to exchanges and market makers for order routing.[^55]

Performance During Volatility Spikes

An unusual characteristic of exchange operators is their positive relationship with market volatility which is precisely the opposite of most equity investments.

In the case of CME Group, periods of elevated volatility have historically coincided with materially stronger revenue growth, reflecting higher trading volumes and increased demand for risk transfer. When volatility rises sharply, activity accelerates; when markets are calm, growth moderates but remains positive.

The result is an equity business with an embedded hedge against market stress. Few operating companies benefit from disorder. Exchanges do. That asymmetry—earning more when volatility rises—has proven to be a rare and valuable attribute over full market cycles.

The negative correlation between exchange performance and broad market performance during stress periods creates natural portfolio diversification benefits. An allocation to exchanges reduces portfolio volatility.

Performance During Macro Transitions

Beyond crisis periods, exchanges have demonstrated adaptability during major macroeconomic regime changes—transitions that often disadvantage other sectors.

Rising Interest Rate Environment (2022-2023)

When the Federal Reserve engaged in its most aggressive tightening cycle in decades, growth stocks and long-duration assets sold off sharply as higher rates compressed valuations and raised discount rates. Technology-focused benchmarks such as the NASDAQ-100 fell significantly in 2022 before rebounding in 2023, while many unprofitable and high-duration tech stocks suffered deep drawdowns. By contrast, exchange operators weathered the tightening period with resilience: derivatives volumes and rate-hedging activity remained robust, supporting revenue growth even as broader markets fluctuated. CME Group’s stock, for example, declined in 2022 but recovered in 2023, while ICE continued to benefit from diversified trading and data-service revenue streams.

Inflationary Period (2021-2023)

Similarly, when inflation reached 40-year highs in 2022, exchanges benefited from increased hedging activity in commodity and currency markets.

CME’s commodities and energy trading volumes in 2022 increased 27% year-over-year, driven by inflation hedging demand.[^105] ICE’s energy futures volumes increased 18%.[^106] These are businesses that don’t just tolerate inflation—they monetize the uncertainty that inflation creates.

Zero Interest Rate Policy (2009-2021)

Conversely, during the extended period of near-zero interest rates and compressed volatility (2014-2019), exchanges faced an arguably less favourable revenue environment. Yet even during this challenging period—arguably the worst possible environment for a volatility-dependent business—exchanges remained consistently profitable and continued to grow.

Low-Vol Period (2014-2019)

Above: Even in their most challenging environment, exchanges outperformed the S&P 500’s return during the same period demonstrating that the floor on exchange performance remains high relative to alternatives.[^110]

Having examined the history and performance of exchanges to date, this paper now turns forward. The future is to be shaped by: stablecoins, tokenisation, and 24/7 global markets and thus demands a different lens: one fluent in both market structure and modern technology.

For that reason, I hand the pen to a younger, more neuroplastic brain whose brilliance is adept at examining operating models and what the future may bring. Hugo Navarro now takes the reader on a global tour of the model in practice, deep-diving into 29 publicly listed exchange operators aiming at ‘clipping the ticket’ on the panoply of newly tokenised products now trading 24/7, who sit at the intersection of capital markets and emerging infrastructure.

– Benjamin Demase

As my good friend Ben has explained, exchanges are one of the best business models: capital-light, high-margin, high-ROIC, and net beneficiaries of inflation and volatility, among other factors that are prominent in today’s markets and likely to persist.

In this second part of the article, we will go deeper into how these companies actually work. We will break down their revenue sources, discuss the catalysts and trends that can drive massive outperformance, and review a list of 29 publicly listed exchanges—essentially all the major exchange operators that are available in public markets.

Revenue Model Breakdown

Exchanges today derive revenue from multiple business lines. They are not just fee collectors; they are also data and software providers, offering data and services that are extremely difficult to replicate.

The classic core of exchanges is transaction-based revenue – fees from trading, clearing and settlement – which still contributes roughly half (or more) of revenue for many operators. For example, at Deutsche Börse, ~35–40% of 2024 net revenue came from trading and clearing fees. Likewise, JPX (Japan Exchange Group) generated about 40% of its FY2024 revenue from trading services (exchange fees) and ~21% from clearing services . These fees rise with higher volumes and new product offerings, and they directly leverage market activity.

Another critical segment is listing and issuer services. Exchanges charge companies to list and to maintain listings (annual fees). This is a smaller but steady stream – often ~10–20% of revenue. For instance, listings made up ~20% of ASX FY2024 revenue (A$208M of A$1.03B) , ~14% of Euronext 2024 revenue (€231.9M of €1.627B) , and about 11% of JPX revenue . While listings are cyclical (dependent on IPO activity), they provide high-margin recurring fees from an installed base of listed companies.

Market data and indices have become the fastest-growing revenue source for many exchanges. Selling real-time data, historical data, and index licensing can generate 15–30% of revenues at larger groups. For LSEG, data & analytics (including Refinitiv terminals and FTSE Russell indexes) contributed roughly around half of total revenue in 2024 . Similarly, Nasdaq now gets almost half of its revenue from its Market Technology, analytics segment, and from data-driven “Investment Intelligence” and index businesses (grouped under its Capital Access Platforms) . Even more trading-focused groups have sizable data units – e.g., CME derives about 12% of revenue from market data. These information businesses are coveted for their high margins and subscription-like stability.

Exchanges also increasingly earn technology services and connectivity fees. This includes colocation (clients paying to place servers in exchange data centers), trading software, and platforms sold to other markets. Nasdaq and Deutsche Börse have been especially active here.

Finally, post-trade and ancillary services round out the revenue mix. Clearing houses and depositories (often owned by the exchange) collect clearing fees, custody fees, and sometimes earn net interest on collateral balances. For example, Clearstream (Deutsche Börse’s post-trade arm) and related banking services accounted for ~30% of Deutsche Börse’s 2024 revenues . Likewise, B3 (Brazil) and SGX (Singapore) derive significant revenue from their clearing, settlement, and depository services.

In sum, today’s exchanges are not only about fees. They are data providers with proprietary datasets, which give them a strong moat, and they are also service and software providers with high retention rates and meaningful pricing power.

In other words, you get the best of both worlds: a royalty on trading volumes and a growing stream of recurring data and software revenue. Contrary to popular belief, AI is unlikely to disrupt exchanges’ data and software services in a meaningful way because these businesses are built on proprietary datasets. You might be able to replicate the interface and even some functionality, but you would still need to buy the underlying data from the exchanges.

Analyzing at all of the exchanges:

The best way to find a great company is to look at all in its peer group. As the great Peter Lynch said, in investing the one who turns over more rocks wins. So we will look at all of the major publicly listed exchanges out there to understand this asset class better and maybe even find some favorites.

Bolsa Mexicana de Valores (BMV) (BOLSAA.MX)

Region exposure: Mexico (domestic equities), plus group exposure via Indeval (CSD), Asigna (CCP), SIF ICAP (OTC/brokered markets).

Market cap: $1.2b

Margins & Valuation: 54.6% EBITDA vs 59.1% (5Y avg); 6.75× EV/EBITDA; 7.00× forward EV/EBITDA .

Revenue / earnings split (FY2024): Revenue mix: CSD (Indeval) ~29%, Information services ~18%, OTC (SIF ICAP) ~17%, Issuers ~12%, Cash equities ~12%, Derivatives ~6%, Other ~5%.

Exchange description and valuation notes:

BMV trades at a single-digit multiple, which is incredibly cheap for an exchange. With a meaningful portion of revenue coming from data and information services, it has a solid mix that reduces its reliance on Mexican trading volumes alone.

The valuation is easily explained by the “EM discount,” but the business mix is closer to a market-infrastructure stack with meaningful recurring components than to an old-style, fee-only exchange.

Overall, the business quality is higher than you would typically expect from an emerging-market exchange. If interest in Latin America and Mexico increases, BMV has significant upside through both higher earnings and a potential multiple re-rating.

Intercontinental Exchange (NYSE: ICE)

Region exposure: US-centric earnings base with global scale (energy, rates, mortgages/data, clearing).

Market cap: $96.2b

Margins & Valuation: 66.1% EBITDA vs 50.2% (5Y avg); 17.54× EV/EBITDA; 16.17× forward EV/EBITDA.

Exchange description and valuation notes:

The valuation of ICE is on the high end for most exchanges, yet I don’t think it’s especially high given the quality and diversification of the business. Just look at the table below: they’ve compounded EPS at around 15% over the past 20 years. That’s not something you see often. They may be too large to fit the kind of hidden opportunities we typically look for, but ICE is still a prime example of how well the exchange model can work over the long term—especially as a case study in how accretive M&A can be in this sector.

Hong Kong Exchanges and Clearing (HKEX: 0388)

Region exposure: Hong Kong / China access (Stock Connect, IPOs), plus global commodities via LME.

Market cap: $67.9b.

Margins & Valuation: 65.5% EBITDA vs 69.7% (5Y avg); 13.45× EV/EBITDA; 11.49× forward EV/EBITDA.

Revenue / earnings split (FY2024): Revenue mix stated broadly Cash market ~42%, Equity & financial derivatives ~20%, Clearing ~20%, Data/connectivity/other ~15–20% .

Exchange description and valuation notes:

HKEX is a “gatekeeper” asset: its valuation is anchored to China risk-premium, but its economics are driven by connect volumes + issuer cycle + derivatives + clearing, with a meaningful (and growing) data/connectivity component. It’s a great way to get exposure to the Chinese and Asia market, but it comes with the usual risks. The valuation is in the mid range for exchanges reflecting premium economics and large size but China’s risk premium.

London Stock Exchange Group (LSE: LSEG)

Region exposure: UK-listed, but economics are global via data/analytics, indices, FX, and post-trade.

Market cap: $51.8b.

Margins & Valuation: 53.1% EBITDA vs 47.4% (5Y avg); 10.81× EV/EBITDA; 10.55× forward EV/EBITDA .

Revenue / earnings split (FY2024): Mix stated as Data & Analytics + FTSE Russell = majority (~60%+ of income), with Post Trade and Capital Markets smaller but strategic.

Exchange description and valuation notes:

LSEG is the archetype of the “exchange → data platform” transition. The multiple has compressed mainly due to the UK “risk premium” and money flowing out from the UK, LSEG has been in place for centuries and its diversificated outside the UK despite having exposure to it. For those reasons the current multiple could represent an opportunity.

Competitive set is Bloomberg / S&P Global / CME / ICE / Nasdaq depending on segment; they have some higher competition in the data and analytics side, might deserve lower multiple from that angle

Nasdaq (Nasdaq: NDAQ)

Region exposure: US-led with meaningful Europe footprint and global market-technology clients.

Market cap: $49.3b.

Margins & Valuation: 37.7% EBITDA vs 33.0% (5Y avg); 18.81× EV/EBITDA; 17.09× forward EV/EBITDA.

Revenue / earnings split (FY2024): Mix stated as Market Services ~51%; remainder from market technology + anti-financial-crime + analytics/workflow.

Exchange description and valuation notes:

Nasdaq is another of the biggest exchanges out there, its valuation reflects a premium as its related to US tech stocks, that’s also the reason why it has been selling off aggressively over the past weeks with the meltdown in SaaS.

Core competition is NYSE/ICE in listings and LSEG/ICE in data.

Deutsche Börse (Xetra: DB1)

Region exposure: Europe/Germany with global scale in derivatives, clearing, and post-trade.

Market cap: $47.1b

Margins & Valuation: 48.1% EBITDA vs 46.9% (5Y avg); 13.75× EV/EBITDA; 13.50× forward EV/EBITDA.

Revenue / earnings split (FY2024): Mix described as broadly split across Trading & Clearing (~40%), Post-trade/settlement and data/analytics make the rest

Exchange description and valuation notes:

I see Deutsche Börse as being valued similarly to Hong Kong Exchanges: strong economics and good diversification, but with exposure to a less attractive region like Europe. That’s why its valuation tends to sit in the mid range for exchanges.

Cboe Global Markets (BATS: CBOE)

Region exposure: US-heavy, with Europe equities and global derivatives expansion.

Market cap: $29.4b.

Margins & Valuation: ~30% EBITDA vs 29.6% (5Y avg); 17.39× EV/EBITDA; 16.27× forward EV/EBITDA .

Revenue / earnings split (FY2024): Mix stated as Options ~50%, with remainder across equities, futures, FX, and data.

Exchange description and valuation notes:

Cboe is essentially an options pure play with embedded growth call options (0DTE, rising retail engagement, and global derivatives expansion). It’s one of the cleaner ways to express a “volatility bull case” over the coming years, as options and other new products see broader adoption among retail investors and as 24/7 trading becomes more widespread.

Singapore Exchange (SGX: S68)

Region exposure: Singapore-based gateway to Asia; strong international derivatives franchise.

Market cap: $15.3b.

Margins & Valuation: 63.8% EBITDA vs 58.2% (5Y avg); 20.76× EV/EBITDA; 20.47× forward EV/EBITDA.

Growth: they target 6-8% organic revenue growth over the medium term in their multi asset strategy.

Revenue / earnings split (FY2024): Mix stated as roughly Equities ~27%, Equity derivatives ~27%, FICC/commodities and data/other remainder.

Exchange description and valuation notes:

SGX often trades “expensive” compared to other exchanges, it is not a pure equities venue: it monetizes Asia hedging demand (FX/commodities/rates) with durable clearing economics and a strong dividend profile, while offering sustainable and diversified growth. The key sensitivity is whether international derivatives remain structurally sticky versus competing offshore contracts. Competitors include HKEX, CME, ICE (contract competition).

Euronext (ENX Paris: ENX)

Region exposure: Pan-European (multi-country cash equities + derivatives + post-trade).

Market cap: $14.8b.

Margins & Valuation: 62.0% EBITDA vs 60.3% (5Y avg); 12.76× EV/EBITDA; 13.12× forward EV/EBITDA.

Revenue / earnings split (FY2024): Mix stated as Trading ~34%, with meaningful post-trade + data/tech contributions.

Exchange description and valuation notes:

Euronext is the consolidator play: the equity is effectively an investment on M&A + synergy extraction in European market infrastructure. The multiple is cheap as the European market is less attractive than the US one, which gets us to a valuation in line with other peers in the same situation, great economics but unattractive underlying markets.

TMX Group (TSX: X)

Region exposure: Canada core, with global data/analytics and energy/OTC adjacency.

Market cap: $9.6b.

Margins & Valuation: 33.4% EBITDA vs 38.2% (5Y avg); 15.05× EV/EBITDA; 14.56× forward EV/EBITDA.

Revenue / earnings split (FY2024): Mix stated as GSIA (data/analytics/Trayport) ~45%, with remainder across capital formation, trading, clearing, trust.

Exchange description and valuation notes:

TMX Group is another example of strong economics and a meaningful share of recurring, data-related revenues. However, its valuation still reflects its relatively pure exposure to Canada—more attractive than much of Europe, but less than the U.S.—which tends to place it in the middle of the range. Competition is mainly from offshore substitution for listings and trading.

*A comment from Benjamin: There does exist a lesser known Canadian exchange: the Canadian Securities Exchange (CSE/CNSX) tailored toward junior companies. The shares are not publicly available (yet) however investors can gain exposure on a look-through basis via investing in Urbana corp.

Moscow Exchange (MOEX) and SPB Exchange (Russia)

Both Russian exchanges are currently not available for many investors to trade. This is a clear example of the black swan risks that can arise when an exchange is heavily dependent on a single geography, which can expose it to war-related events. This is also one of the reasons emerging-market exchanges tend to trade at lower valuations than developed-market peers.

Trading halts are a particularly important risk for exchanges. They don’t just prevent you from exiting a position; they can also materially reduce the underlying business’s revenues while the market is closed.

Tel Aviv Stock Exchange (TASE)

Region exposure: Israel domestic equities and bonds; strategic push to deepen markets.

Market cap: $3.7b.

Margins & Valuation: 42.0% EBITDA vs 37.2% (5Y avg); 44.57× EV/EBITDA

Revenue / earnings split (FY2024): Mix stated as Trading & clearing ~38% vs other services (incl. data/connectivity/index/other) making up for the rest.

Exchange description and valuation notes:

The multiple looks “expensive” because the market is underwriting a mix shift away from pure transaction fees. The TASE bull case is simple: a small exchange can grow earnings quickly if it (i) expands data and connectivity monetization, (ii) strengthens the listing pipeline, and (iii) captures a larger share of local savings flows into market products. Competition is mainly offshore dual listings—Nasdaq and NYSE siphoning liquidity—rather than another Israeli venue.

Bursa Malaysia (RIC: BMYS.KL)

Region exposure: Malaysia (cash equities, derivatives, data).

Market cap: $1.9b.

Margins & Valuation: 53.4% EBITDA vs 58.3% (5Y avg); 12.80× EV/EBITDA; 11.75× forward EV/EBITDA.

Revenue / earnings split (FY2024): Exact % mix not provided here

Exchange description and valuation notes:

Bursa is a classic high-margin local monopoly with a strong dividend posture. The valuation is typically capped by modest domestic market growth, but upside phases occur when Malaysia gets (i) higher retail participation, (ii) stronger IPO pipeline, or (iii) better data/product monetization.

Hellenic Exchanges (FRA: HEE)

Region exposure: Greece (cash equities).

Market cap: $417.9m.

Revenue / earnings split:

Margins & Valuation: 45.5% EBITDA vs 39.3% (5Y avg); 6.29× EV/EBITDA; 7.56× forward EV/EBITDA.

Exchange description and valuation notes:

It looks cheap due to the “Greek discount,” and it has performed well recently as the country has started to post stronger growth. Liquidity is still thin and investor interest remains limited, but does it really deserve to trade at a lower valuation than Mexico? There is room to expand data services and other non-trading revenue streams.

NZX (RIC: NZX.NZ)

Region exposure: New Zealand (cash equities), plus funds/wealth tech and niche derivatives adjacencies.

Market cap: $279.4m.

Margins & Valuation: 40.2% EBITDA vs 39.7% (5Y avg); 10.46× EV/EBITDA; 10.77× forward EV/EBITDA.

Revenue / earnings split (FY2024): Mix stated as Markets ~52%, Funds (“Smart”) ~36%, Wealth tech ~8%, Regulation ~3% (earnings split not provided).

Exchange description and valuation notes:

NZX is small but interesting because it’s not just an exchange. If the platform monetizes funds and wealth-management rails effectively, it can look less like a micro exchange and more like a market-services compounder. Competition is mainly offshore listing substitution for larger issuers.

B3 (Brasil Bolsa Balcão) (RIC: B3SA3.SA)

Region exposure: Brazil (dominant domestic venue; multi-asset)

Market cap: $18.4b (from Excel).

Margins & Valuation: 70.0% EBITDA vs 73.8% (5Y avg); 13.97× EV/EBITDA; 14.00× forward EV/EBITDA.

Revenue / earnings split (FY2024): 69% markets, 6% capital markets solutions, 10% data and analytics, 16% technology and platforms.

Exchange description and valuation notes: B3 has a very complete offering, with multiple products across most key segments of Brazil’s financial markets. As a result, its valuation depends primarily on Brazil’s macro environment and regulatory backdrop. Overall, it’s a relatively safe, capital-light way to gain exposure to Brazilian markets.

CME Group (Nasdaq: CME) (Derivatives play)

Region exposure: US-based, global derivatives benchmark venue

Market cap: $110.8b (from Excel).

Margins & Valuation: 84.0% EBITDA vs 75.7% (5Y avg); 22× EV/EBITDA; 22.34× forward EV/EBITDA

Revenue Mix: Predominantly derivatives trading and clearing fees (~81% of 2024 revenue) – spanning futures and options on interest rates, equity indexes, energy, metals, FX, etc. CME’s franchise includes the Fed Funds and SOFR futures, WTI crude, corn, the S&P 500 E-mini, and many benchmark contracts. Market data is ~12% of revenue.

Exchange description and valuation notes:

CME is the purest listed play on derivatives and a clear beneficiary of uncertainty, hedging demand, and speculation. Its premium valuation reflects both its premium margins and its pure exposure to the derivatives model.

MIAX / Miami International Holdings (NYSE: MIAX)

Region exposure: US options (multiple options exchanges) + equities venue (Pearl), expanding via acquisition/roll-up.

Market cap: $3.5b.

Margins & Valuation: 9.5% EBITDA vs 2.8% (5Y avg); 36.00× EV/EBITDA; 16.67× forward EV/EBITDA.

Revenue / earnings split:

Exchange description and valuation notes:

MIAX is best framed as an options platform: scale matters because the economics improve with market share and technology leverage. The elevated EV/EBITDA likely reflects one-off costs from the recent IPO and profitability that is not yet fully annualized; once you adjust for one-offs and annualize recent growth, the multiple should sit closer to 18x.

MIAX is not a long-established operator. It’s a clear example that, with sufficient capital and time, you can carve out a competitive position in this industry. With close to a fifth of the U.S. options market, it is probably the fastest-growing exchange operator out there and looks highly promising.

ASX Ltd (Australia) (RIC: ASX.AX)

Region exposure: Australia.

Market cap: $7.8b.

Margins & Valuation: 62.7% EBITDA vs 67.9% (5Y avg); 12× EV/EBITDA

Revenue / earnings split:

Exchange description and valuation notes:

ASX is a classic defensive monopoly with regulated-like characteristics. The valuation screens cheap given the strong growth and momentum in its key revenue-generating segments. It is also valued broadly in line with European peers, while offering better underlying market exposure—Australia provides meaningful commodity-linked exposure, which can be a structural tailwind.

Japan Exchange Group (JPX)

Region exposure: Japan (cash equities + derivatives + clearing).

Market cap: $12.0b.

Margins & Valuation: 65.4% EBITDA vs 65.8% (5Y avg); 13.57× EV/EBITDA; 14.67× forward EV/EBITDA.

Revenue / earnings split (FY2024): Mix stated as Trading services ~40% and Clearing ~21%, plus listing/info/other.

Exchange description and valuation notes:

JPX is “high-quality but slower”: strong moat, high margins, but growth is structurally moderated by Japan’s market dynamics. Competition is limited domestically; catalyst sensitivity is primarily Japan equity cycle + reforms,

Warsaw Stock Exchange (GPW) (RIC: GPW.WA)

Region exposure: Poland / CEE hub.

Market cap: $860.9m (from Excel).

Margins & Valuation: 35.5% EBITDA (FY0) vs 43.3% (5Y avg); 15.00× EV/EBITDA; 12.37× forward EV/EBITDA (from Excel).

Revenue / earnings split:

Exchange description and valuation notes: GPW’s valuation looks cheap, reflecting its exposure to Central and Eastern Europe. However, the exchange is seeing stronger growth driven by higher market participation and strong index performance in Poland. In addition, with a relatively small share of data- or service-based revenues today, GPW has a significant opportunity to evolve into a more modern exchange and diversify away from pure transaction fees. This is the kind of setup that helped drive “10-bagger” returns for the Tel Aviv Stock Exchange.

Short notes on smaller / frontier listed exchanges

• Dar es Salaam Stock Exchange (DSE.TZ, Tanzania) — A small, domestically focused venue that lists and trades shares, bonds, and REITs, and plays an explicit “capital markets development” role in Tanzania. It began operating in the late 1990s and remains a relatively low-liquidity market where incremental participation (new listings, pensions/retail flows) can move volumes disproportionately.

• Jamaica Stock Exchange (JSE.JS, Jamaica) — A frontier exchange with an unusually important Junior Market alongside the Main Market, designed to broaden SME access to equity funding (including policy/tax-support features).

• Bolsa de Valores de Guayaquil (BVG.GQ, Ecuador) — A very small Ecuadorian listed exchange operator whose core purpose is enabling local securities trading and disseminating real-time market information. Like many micro-cap exchanges, the investment case is less about “taking share” and more about whether the domestic market deepens (issuer engagement, product adoption, local savings participation).

• Macedonian Stock Exchange (MB.MKE, North Macedonia) — The country’s principal exchange, established in 1995 with first trading in 1996. Its flagship benchmark is the MBI10 blue-chip index; the market is structurally thin, so price discovery and liquidity are the binding constraints—but reforms and foreign access vehicles (where available) can matter a lot at the margin.

• Bolsa de Comercio de Santiago (BOLSASTGO.SN, Chile) — Chile’s historic primary exchange (founded 1893) with trading across equities and fixed income, and relevance for broader regional integration initiatives. A key domestic competitive reference point is the Bolsa Electrónica de Chile, which operates as a second major Chilean trading venue.

• Bolsas y Mercados Argentinos (BYMA, Argentina) — Argentina’s main exchange operator, structurally tied to domestic capital market functioning and—crucially—ownership of most of Caja de Valores (custody/registry infrastructure). In practice, the equity behaves like a high-beta expression of Argentina’s macro regime (FX/inflation stabilization vs relapse), where “market normalization” can rapidly lift activity, but policy risk dominates.

• Bolsa de Valores de Colombia (BVC.CN, Colombia) — Colombia’s listed exchange group with meaningful “market infrastructure” character (not just trading), and a strategic orientation toward building scale and regional relevance through integration initiatives (nuam). The investment reality is that liquidity constraints and domestic market depth matter as much as competitive dynamics.

• JSE Ltd (JSEJ.J, South Africa) — Africa’s largest exchange by market capitalisation and a diversified, multi-asset market-infrastructure operator.

Current Valuations

After looking at all the listed exchanges, a clear pattern emerges: the larger the exchange and the more attractive the underlying market, the higher the valuation. We see single-digit valuations for many emerging-market exchanges, low-teens for Europe and parts of Asia, and high-teens to twenties for U.S. exchanges. There are also exceptions: higher-growth exchanges can trade at elevated current valuations, effectively pricing in future growth.

Margins are high across the sector, ranging from the low 30s for the least profitable operators to the mid-70s for the strongest and most profitable ones.

There is some correlation between valuations and margins, but valuation correlates more strongly with growth, market quality, and scale than with margins alone.

Future Catalysts

My colleague Benjamin has already explained how exchanges behave during different economic and macro regimes, so here I will add two additional catalysts that can drive periods of massive outperformance.

First, the shift from fee-based revenue to service/data-based revenue. A clear example is the Tel Aviv Stock Exchange, which delivered a 10-bagger return. When exchanges move from a transaction-fee model toward data and services, growth can accelerate and multiples can re-rate, because the business becomes more diversified and resilient. For more mature exchanges, new product lines can also be a major driver. New futures contracts or other products are costly to build and may take time to become profitable because they need volume to scale. But once they achieve product-market fit, they can scale dramatically with minimal incremental costs. If a mature exchange launches products that the market adopts, it can reaccelerate growth.

Second, M&A. Acquisitions are a real opportunity for exchanges because significant synergies can be extracted from these operations. However, they are difficult to execute: regulation is tight and antitrust hurdles are meaningful. When these transactions do get done, they often create substantial shareholder value.

Therefore, when evaluating any specific exchange, beyond the market backdrop and macro positioning, you should look for company-specific catalysts that could reignite growth. If both the macro setup and company execution are in your favor, you may be looking at a massive winner.

The Investment Case For Exchanges - Hugo’s Take

You will probably invest in an exchange if you believe the underlying market will rise, or if you expect higher trading volumes, more listings, or greater demand for data. That’s what I like about exchanges: at the macro level, if you like a region and see it as an attractive investment opportunity, exchanges can be one of the best securities to express that view. They don’t just benefit from higher asset prices — they also benefit from increased attention and activity. They win in multiple ways, whereas buying individual securities in a country typically makes you money in only one way.

For bottom-up investors, exchanges can also offer opportunities for large returns that are not purely driven by the macro backdrop or by what the underlying market is doing. If you invest in a consolidator that executes strong M&A, or if you identify an exchange ahead of substantial and successful product launches, you can generate outstanding returns.

Personally, I see exchanges as one of the best ways to gain exposure to regions like Asia or Latin America. If my thesis is correct, the exchange doesn’t just earn more because asset prices rise and demand for data increases — it can also see a multiple re-rating. Most importantly, I avoid exposure to single-company dynamics and long-tail risks, which can be unpredictable in emerging markets. In many cases, you also benefit from low probabilities of direct competition and from business models that are difficult to disrupt.

From a risk perspective, what matters is that the valuation you pay is reasonable relative to peers. For example, if you buy B3 at the same valuation as Nasdaq, you are unlikely to make as much money. Also, beware of competition and consolidation. Local exchanges may be quasi-monopolies domestically, but if local companies prefer to list abroad to access deeper capital markets, you won’t capture that value — so watch for that risk.

– Hugo Navarro

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References
Full source list and citations are available here:
royaltyking.notion.site/Exchange-Whitepaper-References

Disclaimer: This publication is intended solely for documenting my personal journey with trading and investments for income and travel purposes. I am not a certified financial advisor nor am I a financial professional and none of the content provided should be construed as investment advice. It is essential to conduct your own thorough research and consult a registered financial service provider for appropriate guidance. I cannot guarantee the accuracy or completeness of the information presented. Any actions taken based on the information shared in any of my work are done at your own risk and discretion.

I’ve often been asked to share my portfolio, something that has always given me pause. Copying without comprehension or conviction is usually a curse rather than a blessing.

That said, as a thank you for the tremendous support I’ve received for The Royalty King and its sister publication — — premium members will today see the three investment portfolios I actively run behind the paywall.

The portfolio for Machina Capitalis is excluded and available only for those subscribers as I consider it an operating business.

It’s important to note that, unlike many portfolios shared on Substack, these are not paper portfolios. My own capital is invested in each one and allocated according to the principles outlined in the accompanying footnotes. Each portfolio serves a distinct role, with a defined strategy and capital allocation framework, as described below.

Crassus Investments
A blended portfolio of royalties, exchanges, and select special situations. This is a closed-end portfolio: capital is fully allocated, aside from occasional de minimis cash from dividends, which is typically redeployed promptly.

The Royalty King Portfolio
A collection of royalty and streaming investments spanning large-cap metals claims, through to obscure, micro-cap, and exotic royalty trusts unknown to most market participants. This is an open-ended portfolio, with funds added opportunistically over time.

The Croupier Collection
A global portfolio of exchange operators, clearing houses, select asset managers and brokerages — the financial croupiers of the world’s capital markets. This is an open-ended portfolio, initially spun out of The Royalty King, with long-term capital now being actively and continuously allocated as opportunities arise.

The portfolio weightings at cost are as follows:

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Recent market action has served as a reminder of something investors tend to forget during long, orderly trends: volatility is not an aberration — it is the market’s native state. When assets as large and liquid as Microsoft or gold can experience 8–10% daily swings, it behooves investors to focus less on being “right” on direction, and more on business models positioned to benefit from trading activity itself, regardless of price direction.

As my friend James Davolos is fond of saying, “business models matter” and perhaps the most resilient models centre themselves on collecting a fee on volumes.

The exchange model exhibits this by collecting fees on the volume of transactions taking place in their given domain. Regardless of whether prices rise or fall, the exchange clips the ticket on volume, turnover, listings, delistings, restructurings, and even on products reflecting volatility itself.

This is why some of the most experienced macro investors have consistently gravitated toward exchanges as a preferred form of exposure, particularly in emerging markets undergoing transition. Both and Jim Rogers have spoken over the years about their preference for owning the infrastructure of markets rather than the markets themselves, at least initially. The logic is simple: when capital floods in, the exchange benefits; when capital exits, the exchange still benefits; and when markets restructure or reprice, the exchange often benefits most of all.

Japan now fits squarely into this framework.

Long dismissed as a stagnant, fully priced, post-growth economy, Japan is instead revealing the characteristics of a ‘re-emerging’ market. After a multi-decade balance-sheet reset, the country is experiencing a slow yet persistent rise in governance reform, shareholder accountability, foreign participation, and corporate activity. Importantly, these changes do not require heroic GDP growth to matter. They require capital to move, incentives to realign, and markets to re-engage.

In that environment, particularly in a country and culture with which I am unfamiliar, the safest way to gain exposure is not by attempting to select future winners within the market, but by owning the platform through which the entire market operates and likely undergoes a repricing.

That platform is the exchange.

Japan as a “Re-Emerging” Market

Japan’s economy has been famous for its decades-long stagnation. The most telling evidence is not economic growth, but time. Japan did not reclaim its 1989 equity market capitalisation peak until 2024, a 35-year reset with few historical parallels.

During this period, Japan’s relevance in global equity benchmarks collapsed. At the height of the asset bubble, Japanese equities represented approximately 37% of global market capitalization, more than double the country’s share of global GDP. Today, Japan accounts for roughly 4.9% of global equity indices, despite remaining the world’s fourth-largest economy.

What differentiates the current environment is that reform is no longer discretionary. Over the past decade, governance changes have been enforced in what has historically been a very opaque corporate environment. A few to note:

• Companies with explicit shareholder return targets expanded from roughly one-third to two-thirds of the market

• Shareholder Transparency (2025-2026): Amendments to the Companies Act aim to uncover beneficial owners behind nominee accounts, strengthening the Large Shareholding Reporting Rule to ensure better transparency on ownership.

• Takeover Bid (TOB) Rule Enhancements: Rules are being amended to require, for example, the justification of offer prices in M&A deals to better protect minority shareholders.

These appear to constitute a structural rewiring.

Royal Rumination: What if Japan is not “cheap” because growth is weak; it is under-owned because its capital markets spent decades prioritising stability over returns and now that is being reversed?

Why Not Just Buy The Index?

If Japan is being structurally repriced, broad equity indices are an inefficient way to capture that process. Not only because exchanges usually outperform an underlying index as explored in these two pieces:

but also because the Nikkei or ETF: EWJ doesn’t really represent Japan’s domestic economy as well as one might expect.

EWJ holds only 183 companies out of nearly 4,000 publicly listed Japanese firms. Of those holdings, the top 50 account for roughly two-thirds of the fund, leaving the vast majority of the domestic corporate ecosystem underrepresented.

Therefore, perhaps 95% of Japan’s listed companies are effectively not represented in the index.

This matters because index construction systematically biases exposure toward large, multinational exporters, whose revenues, and capital allocation decisions are often more reflective of global conditions than domestic reform. Yet the aforementioned changes currently reshaping Japan are occurring across the system, not merely within the largest constituents.

As a result, index exposure might more accurately capture Japan’s past, rather than its present transition. The repricing is broader than the index, yet the index cannot expand to reflect it without first being pulled forward by the very activity it excludes.

Japan Exchange Group Inc. TYO: 8697, JPXGY

When a market is being structurally rewired, the most reliable way to gain exposure is not by attempting to select beneficiaries within the system, but by owning the infrastructure through which the entire system must operate.

This is why JPXGY becomes the preferred expression of the Japan thesis, at least from The Royalty King’s point of view.

JPXGY is not a bet on which companies improve governance fastest, nor on which sectors lead the next cycle. It is a royalty on Japan’s capital re-engagement itself. As Japan transitions from a market defined by inertia to one defined by participation, JPXGY monetizes the change regardless of direction, sector leadership, or narrative.

Historical Context: Why Japan Is Different

Japan occupies a unique position in economic history. It is the only country to transition from feudal society to industrial economy to global power without being colonized.

It is also notable that Japan was a primary contributor to the legendary long-term performance of the original Templeton fund.

Templeton allocated aggressively to Japanese equities through his global funds, long before Japan entered global benchmarks.

• Outcome:

  • Over roughly 20 years (1960s–1980s), Japanese equities compounded at approximately 15–20% annualised

  • Japan became the single largest contributor to the long-term performance of the Templeton Growth Fund.

Valuation & Notes

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Up to this point, stablecoins have barely featured in these pages - not from neglect, but from prioritisation. Still, they’ve always sat quietly on the agenda. A recent reminder arrived unprompted with perfect timing, when I received an email from Wise informing me that one of my accounts would be deactivated. The reason: a portfolio held under my investment group had exposure to cryptocurrency - apparently an unforgivable transgression in the increasingly sanitised, compliance-first world of UK-domiciled payment processors.

An excerpt follows.

”Hello Benjamin,
After reviewing your Wise account information, we’ve decided that unfortunately we can’t offer our services to you going forward..
We’ve deactivated your Wise account.. We have noticed on the website that you had previously provided, CRASSUS INVESTMENTS PTY LTD, there was a portfolio with bitcoin investments…”

Just like that, I was required to nominate an alternative account to which the funds will be (hopefully) repatriated. A stark reminder that maintaining multiple accounts around the globe is prudent.

At a deeper level, this example invites a more interesting question. What explains such a severe response, given that, at least for now, holding cryptocurrency remains entirely legal in the United Kingdom? The answer, I suspect, has less to do with legality and more to do with control.

What follows may guide the reader toward an explanation.

American Bankers Association (ABA)

“Stablecoins are unique among digital assets in that they mimic commercial bank money and could disintermediate core commercial bank activity like deposit taking and lending.”

The user experience of crypto is, quite simply, superior. Having used USDt to pay my law firm in Argentina last year while preparing a property purchase, I was struck by the efficiency: an agreed amount transferred directly to the counterparty via a simple QR code scan - an instantaneous transfer without intermediaries (banks).

As far as the core functions of banking are concerned, depositing and transferring, traditional banks appear to hold no meaningful advantage over crypto-based rails. Settlement is faster, friction is lower, and counterparty certainty is higher.

Where banks retain an edge is not in functionality, but in privilege. The generation of yield on savings deposits remains largely the domain of the banking system, not because of a technological constraint, but because legislation continues to favour regulated intermediaries over open monetary networks.

International Monetary Fund (IMF)

“ The IMF recognizes that stablecoins and crypto assets could have implications for monetary policy effectiveness, financial stability, and capital flow management — especially as adoption grows.”

*emphasis mine.

Personally I see the above as a screaming advertisement for the benefits of crypto given that monetary policy effectiveness means debasing said money’s purchasing power.

**Update - Wise has since re-activated my account after I informed them I shall not be liquidating any crypto holdings and helpfully offered to transfer my entire holdings with them to a different bank. It appears that on review of losing the business of my account that they opted for discretion over valour.

Stablecoins may represent the most disruptive force in capital markets today. Accordingly, I continue to allocate capital deliberately toward beneficiaries, most notably select exchanges positioned to capture pecuniary interests in trading and derivatives volume and on-ramping as this architecture scales.

More to come, to keep abreast become a premium subscriber to The Royalty King’s Report.

Subscribe now

Market Musings

The Australian dollar has appreciated almost 7% against the USD on a YOY basis.

Net capital flows into Australian financial assets have turned positive year-over-year, while higher gold prices lifted export earnings to roughly A$47 bn in 2024–25, despite physical production rising only modestly from ~290 T to ~300 T. An investor or entrepreneur with a source of income denominated in AUD currently can buy USD denominated assets at a 7% discount.

Gold however, remains a superior savings instrument. The graph below demonstrates that a US saver could simply avoid the weakness in currency cross/rates buy saving in gold and then, if necessary, convert the gold into the desired fiat currency.

Royal Ruminations

AI capex embeds asymmetric, potentially systemic risk: either margins compress at the platform level through over-investment, or capital downstream is abruptly withdrawn. In both cases, expectations are fragile, and even portfolios with minimal index exposure remain vulnerable to correlated, liquidity-driven sell-offs in the event leverage begins to unwind.

What happens if/when ETF capital flows switch from being the marginal buyer to the marginal seller?

Res Politica

I recently returned from Argentine Patagonia and was in the Chubut province when arsonists set fire to Parqué Los Alerces. Disappointingly, this has lead to a campaign of false accusations against Israelis and the resurgence of the spectre of something known as ‘Plan Andinia’: long-standing conspiracy theory alleging a secret plot to establish a new Jewish state in Patagonia.

The timing is uncanny given I’ve been reading ‘Iosi, el espía arrepentido’ which details the confessions of a federal agent sent to infiltrate the Jewish community in Buenos Aires to uncover details of this alleged plan. “Iosi” details how this was, in fact, a hoax and the information he gathered led to the bombing of the Isreali embassy and AMIA (Asociación Mutual Israelita Argentina) in Buenos Aires in 1992 and ‘94 respectively.

Media

An enjoyable conversation with . Steve’s Silver Tsunami theme is one I have invested in. US seniors collectively hold an estimated $75-80 Trillion. My investments to benefit from this theme are of my signature capital-light inflation-volume beneficiaries: JXN, FOA, ABX, WRB, JOE et al.

Hugo from offers insight into European small cap value stocks, I have allocated some funds in my personal account towards some names based on his research. He is set to launch a value-opportunity fund this year, which I eagerly await to review.

Wishing you all the best.
— Benjamin
The Royalty King

Disclaimer: This publication is intended solely for documenting my personal journey with trading and investments for income and travel purposes. I am not a certified financial advisor nor am I a financial professional and none of the content provided should be construed as investment advice. It is essential to conduct your own thorough research and consult a registered financial service provider for appropriate guidance. I cannot guarantee the accuracy or completeness of the information presented. Any actions taken based on the information shared in any of my work are done at your own risk and discretion. Past performance is not indicative of future results. All investing involves risk, including the potential loss of principal. There is no guarantee that any investment strategy, including those discussed here, will achieve its objectives or generate profits. You should carefully consider your investment objectives, risk tolerance, and financial situation before making any investment decisions.

Royalty King’s Remarks

2026 is off to a strong start with markets repricing risk and narratives shifting fast.

Savings

Debasement and the erosion of true purchasing power have long been central concerns of mine, which is why gold and bitcoin serve as my primary savings instruments. I have been vocal in framing gold as the most reliable hurdle rate, operating from the belief that over this cycle, most investors will fail to even keep pace with its performance.

Upon review this view does not appear misplaced.

The proposition of investing is to entertain slightly higher risk than a savings instrument with the aim of a superior return, thus increasing purchasing power over time. As Warren Buffett has long reminded investors when faced with analogous environment :

“Unfortunately, earnings reported in corporate financial statements are no longer the dominant variable that determines whether there are any real earnings for you, the owner. For only gains in purchasing power represent real earnings on investment… High rates of inflation create a tax on capital that makes much corporate investment unwise - at least if measured by the criterion of a positive real investment return to owners. This “hurdle rate” the return on equity that must be achieved by a corporation in order to produce any real return for its individual owners - has increased dramatically in recent years. The average tax-paying investor is now running up a down escalator whose pace has accelerated to the point where his upward progress is nil…”

“As we said last year, Berkshire has no corporate solution to the problem. (We’ll say it again next year, too.) Inflation does not improve our return on equity”

- Warren Buffet’s 1980 letter to shareholders (emphasis mine)

The above requires some serious reflection.

Particularly the last line.

Is there a class of businesses for which inflation enhances, rather than erodes, return on equity?

Long-term readers will recognise the answer immediately. If that’s you, congratulations, you are already ahead of the curve. Such businesses have long been central to the focus of this publication.

Over the past 26 years, gold bullion has compounded at approximately 11% per annum, establishing itself as a benchmark savings instrument for purchasing-power preservation.

Yet the same period reveals a structural advantage available to those willing to move one layer up the value chain. Royalty and streaming businesses tied to precious metals compounded at 16–18% annually converting gold exposure into equity returns.

For many investors, the simplest way to outperform the benchmark savings asset was not leverage, timing, or speculation, but ownership of the royalty & streaming Co.s.

On The Interview With Doomberg

Whilst I agree with many of the points made by , I do not share his contention that gold is not a commodity, but rather money. Every good, that is: gold, you, and I for that, matter, money can be consider a commodity through an economic lens in that it adheres to a supply and demand dynamic. Gold behaves idiosyncratically due to its demand being mainly as a form of storage (money), leading to large stock levels. Its supply is relatively difficult to come by hence its inherently low stock to flow ratio, which in turn solidifies its main use case as being money.

However, history has shown that it is in fact possible to have hyperinflation even in societies on a gold standard when circumstances result in a dramatic new supply of gold entering into an economy. The flood of New World gold into Spain following the conquests of the sixteenth century produced precisely such an outcome whose consequences, according to many economic historians, echoed for generations

The more legally inclined reader might prefer considering whether gold conforms to the following definition of a commodity

Commodity:

“an economic good, such as a raw material, that is interchangeable with other goods of the same type.”
Source: Merriam-Webster

Gold clearly fits the definition.

FAQ

What is your view on Royal Gold Corp (RGLD)?

In brief: I own RGLD and continue to hold it. It might be the cheapest precious metals royalties in the above $20 Billion Market Cap space.

More details in this video

Which commodities Are You Most Bullish on in 2026?

Land & Water. I have been buying land which has water rights and energy royalties for some years now and I believe the party is only getting started.

Consulting

An increasing number of clients are seeking consulting input on portfolio structuring for retirement. In many cases, this involves the integration of royalty-style business models alongside options-based digital income strategies. Enquiries can be directed via private message on Substack.

For non-Platinum members, this service is provided on a pay-as-you-go basis.

Exotic Trades

Updates on two exotic trades, the first of which might be the single best risk–reward combination of 2025, delivering both appreciation and recurring monthly income from an appreciating asset. With the trade having now come home, I am, for the time being, leaving my gold exposure unhedged.

The next trade was closed early as the stop loss level was reached. A small loss, improbable, yet was incurred as per the rules of the trade.

The expected value of its consistent application over time remains positive.

Wishing you all the best.
— Benjamin
The Royalty King

Disclaimer: This publication is intended solely for documenting my personal journey with trading and investments for income and travel purposes. I am not a certified financial advisor nor am I a financial professional and none of the content provided should be construed as investment advice. It is essential to conduct your own thorough research and consult a registered financial service provider for appropriate guidance. I cannot guarantee the accuracy or completeness of the information presented. Any actions taken based on the information shared in any of my work are done at your own risk and discretion. Past performance is not indicative of future results. All investing involves risk, including the potential loss of principal. There is no guarantee that any investment strategy, including those discussed here, will achieve its objectives or generate profits. You should carefully consider your investment objectives, risk tolerance, and financial situation before making any investment decisions.

The commencement of 2026 brings with it an important development: the launch of a new portfolio dedicated to one of the foundational business models covered in this publication: exchanges, brokers, and clearing houses.

Owning The Casino, Not Placing The Chips

These models most clearly embody the concept of investing from a privileged position: being the house rather than the player in the context of a casino. In this way, the investments enjoy a structural, statistical edge over both individual market participants and the collective products that represent them in packaged form; what would be a “syndicate” in a casino context, which is akin to the expanding universe of ETFs in financial markets.

As previously explained in the report below, exchanges outperform the various indices and the associated markets they purport to track and may be thought of as a way to buy a royalty on the capital market activity in a given economy.

This portfolio will be seeded by carving out the existing exchange holdings currently housed within the Royalty King portfolio and consolidating them into a standalone vehicle known as The Croupier Collection.

Funds will be consistently, yet strategically, added to this portfolio to gradually acquire ever more shares in these businesses.

Royalty Economics at National Scale

In the case of a dominant national exchange, this strategy may be understood as acquiring a royalty on a country’s economic throughput — effectively a claim on the financial activity generated by its GDP.

With that in mind, let’s advance through this research report focusing on a promising opportunity with astonishingly little coverage, yet offers an interest in the 13th largest economy in the world, yielding over 6% in dividends alone with a free call option on improving economics in Central and South America under the new “ Donroe Doctrine”.

It’s time to head south of the border to the other United States: Los Estados Unidos Mexicanos.

Read more

In order to get up to speed I suggest you read the following:

San Juan Basin Royalty Trust has spent the past two years caught in a perfect storm of weak gas prices and exceptionally heavy operator capital spending. Those forces pushed the Trust into a deep excess-production-cost (EPC) deficit, forcing distributions to be suspended until the balance is fully repaid, the cash reserve is rebuilt, and the line of credit is cleared.

But the latest production data finally gives us a line of sight into when payments may resume and the answer might be far sooner than the market assumes.

Production Stronger Than Expected

Read more

What stands out is the mood. The region, and Argentina as a whole, feels like it’s turning a corner. I’ve never seen it quite like this—there’s a genuine sense of momentum and optimism.

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Royal remarks
In brief, there isn’t much available today that both fits my preferred business model characteristics and screens as attractively priced. The main exception remains energy royalties, where I already have meaningful exposure across portfolios.

Most junior precious metals royalties I highlighted last year—then trading at steep discounts to book—have since seen those gaps close, largely as expected, driven by sharp price appreciation. Tether’s recent buying activity appears to have accelerated this process materially.

FAQ: When will the income mastermind open?

Patience. My developer (seen below) and I both ran into delays, we’re now targeting a launch by the end of Q1 2026. There’s no urgency with a project like this—I want it to be thoughtful, deliberate, and genuinely exclusive.

It will also be expensive.

The options market isn’t going anywhere, which makes getting the foundation right far more important than rushing to market.

Exotic Trades

Selling options on my physical gold continues to provide a double benefit - the underlying collateral is screaming higher whilst the options provide on average 1.5% per month cash in hand yield.

Given such a strong opportunity exists in one of the safest assets available it makes sense to keep drawing from the same well.

ICYMI

Market Musings

An example of high quality energy assets that appear attractive is left here.

There’s an argument to suggest that Viper energy, VNOM is on offer for a 20-25% free cashflow yield as below. As such, anyone running an insurance-style business model for income might consider selling some longer dated put options if they had the temperament.

At the time of writing the 6 month ATM puts are on offer for $2.40 implying a 13% annualised yield. That might sound boring to some but I’m highly satisfied with my current position in life now and hence the goal is not to be interesting nor even sell subscritpiions as a primary focus but rather to protect and grow my capital in reliable fashion. Boring business is good business.

Insights:

Vaca Muerta is booming!

Normally I like to buy the exchange itself, but that requires local account, which isn’t a problem, however it also requires justification of funds entering Argentina, along with 6-8% transfer fee every time + close to 80% tax rates on any income or gains!

Conclusion - those less familiar with the country but who are seeking exposure are likely best to buy an ETF via ADRs.

Media
I completed my 100th podcast with the notorious Doomberg.

Several more podcasts are in the pipeline and will be published over the coming weeks.

In brief, I sat down with: Marco Roque, CEO of Cassiar gold, Steeeeve of , , and more.

I’m now off with the family to southern Chile and given the wifi isn’t the best, there’ll be a delay in publishing these.

Consulting

Thank you to all clients who have engaged my consulting services. For those interested in a private consultation—including bespoke research, portfolio commentary, and focused work on royalty-style businesses and options strategies for digital income—please reach out via direct message on Substack.

A reminder that pricing across all services will increase effective January 1, 2026.

Wishing you all the best.
— Benjamin
The Royalty King

Disclaimer: This publication is intended solely for documenting my personal journey with trading and investments for income and travel purposes. I am not a certified financial advisor nor am I a financial professional and none of the content provided should be construed as investment advice. It is essential to conduct your own thorough research and consult a registered financial service provider for appropriate guidance. I cannot guarantee the accuracy or completeness of the information presented. Any actions taken based on the information shared in any of my work are done at your own risk and discretion. Past performance is not indicative of future results. All investing involves risk, including the potential loss of principal. There is no guarantee that any investment strategy, including those discussed here, will achieve its objectives or generate profits. You should carefully consider your investment objectives, risk tolerance, and financial situation before making any investment decisions.

Let’s start with some recent Q&A

Q: Are the upcoming price increases going to affect current subscribers?

A: No. All existing subscribers will be grandfathered at their current rate. The new pricing applies only to new members who join after the change (Jan 1st) or for those who cancel and then re-subscribe. The current yearly price, I humbly suggest, is a no-brainer.

Insights

Natural gas has caught the attention of many with its 60% price rise inside of 3 months.

This bodes extremely well for one of more well known pieces outlining the investment thesis for San Juan Trust which you can find here:

Whilst SJT receives pricing far lower than the Henry Hub level, it’s hard to imagine such a price arbitrage remains indefinitely and therefore if one is able to think 6-12 months ahead there’s a possibility SJT enjoys a far more rapid pay down of its excess production costs owed to operator Hilcorp, resulting in the royalty payments returning on a much increased production volume and increased price environment.

In my private consulting I have shared with clients my blended case for payments to be re-instated in 6-9 months depending on the spot price received.

Bottom line: I continue to hold SJT regardless of the c60% increase in price since my entry at $3.80. The trust dished out an average annual dividend of $0.60 over the past 8 years at much lower prices and volumes. Returning to such a level as a base caseimplies a 10% dividend yield today or closer to 16% yield on cost.

Exotic Trade Update

Oct 31 this piece was published sharing some of the lesser-know derivatives trades I use, mainly for income or hedging purposes.

The trade has since paid off in full providing a spectacular cash-in-hand profit whilst structured such that it was impossible to lose money overall. This structure remains a favourite of mine and I continue to deploy it to the tune of 1.5-2% yield per month.

Income and exotic trades will be expounded in 2026 in the mastermind which is currently under construction - apologies for the delay yet this is not an example where time is of the essence but rather quality and compliance considerations take precedent.

Media Appearances

Market Musing

Liquidity today sits in a more fragile equilibrium than most investors appreciate. The TGA has rebuilt toward its upper range, ON RRP has been exhausted, and reserves are doing most of the adjustment work. In practical terms, every dollar of Treasury issuance or QT now has a clearer path into tighter financial conditions. Markets can still rise, but they are rising against a slower current and that current is now visible in the plumbing.

Thanks for reading the Crown Compendium. If you’d like the full research that sits behind these notes, you’re welcome to upgrade whenever the time feels right.

Now I’m traveling back to Argentina to enjoy the holiday season in my second home.

Wishing you all the best.
— Benjamin
The Royalty King

Disclaimer: This publication is intended solely for documenting my personal journey with trading and investments for income and travel purposes. I am not a certified financial advisor nor am I a financial professional and none of the content provided should be construed as investment advice. It is essential to conduct your own thorough research and consult a registered financial service provider for appropriate guidance. I cannot guarantee the accuracy or completeness of the information presented. Any actions taken based on the information shared in any of my work are done at your own risk and discretion. Past performance is not indicative of future results. All investing involves risk, including the potential loss of principal. There is no guarantee that any investment strategy, including those discussed here, will achieve its objectives or generate profits. You should carefully consider your investment objectives, risk tolerance, and financial situation before making any investment decisions.

A clear tendency toward royalty and streaming companies has long shaped the identity of this publication. The preference for them expressed here is hardly accidental. Their attraction lies in the architecture of the model itself: a structure that participates in rising volume without the encumbrances of capex, operating leverage, or the cyclicality that turns producers into price takers. This eventually and inevitably turns said producers into wealth destroyers given that, to paraphrase the great , the real price of most commodities drifts downward over time. A business that thrives in spite of that tendency is, by definition, unusual.

It is now time to explore another business model that deserves equal esteem yet has received far less attention here: securities exchanges and clearing houses.

In brief, I view them as royalties on the entire economic activity of a nation or economic sub sector.

Today’s report begins with broad remarks on exchanges as a category, then moves to the rationale for using them as primary vehicles for “emerging market” exposure. In reality, many of these markets are only emerging in Western perception because when observed through the lens of economics they collectively represent the majority of global trade. Asia is the core focus, while South America will be left for future pieces as it is my second home and already well understood territory.

Premium readers will then find a more formal research report on Hong Kong Exchanges & Clearing (HKEX), an instructive case study that illustrates how exchange businesses capture economic growth more reliably than individual equities or index ETFS.

Just as previous work has shown the superiority of the royalty model relative to capital-intensive operators, this new series will illustrate how exchanges offer a purer, more reliable means of owning a nation’s economic activity. This compounds quietly, almost imperceptibly, over time as it provides asymmetric exposure to economic activity without constant operational reinvestment. Consequently this model outperforms index investing in almost all historic examples.

A conspicuous gap remains in the portfolios I manage: meaningful exposure to Asia. It is an omission difficult to justify when the region accounts for roughly 4.8 billion people or about 59% of the world’s population with a collective GDP of $41.5 trillion. Measured on a purchasing-power parity (PPP) basis, that figure rises to nearly $94.7 trillion, or close to half of global economic output. A region of that scale cannot be treated as peripheral; it is, in many respects, the economic centre of gravity.

For years, I’ve intended to gain deliberate exposure to Chinese and the broader Asian economic expansion, but without anchoring that exposure to the fortunes of any single company. The fate of Alibaba underlines how swiftly a dominant firm can become vulnerable to forces entirely outside an investor’s control. Nor is the risk of being “Gazprommed” overstated; in periods of geopolitical tension, it remains a non-zero probability.

Many investors express their Asian allocation through tech-heavy ETFs. That approach, however, concentrates exposure precisely in the sectors most subject to margin pressure, regulatory variance, and capital intensity. The preference here is for a structure that reflects the entire underlying economic activity, not just one sector and which does so through a capital-light, high-margin model.

Hence the conclusion: exchanges and clearing houses. They provide exposure to a region’s economy without requiring a thesis on which companies will win. Much like royalties outperform operators across a commodity cycle, exchanges often exceed the returns of the very indices built upon their listings.

They achieve this through a simple structural truth: an exchange monetises activity and product expansion, not outcomes.

Every listing, every trade, every derivative contract, every margin call, every settlement (regardless of profit) passes through the same tollbooth. Market expansion, volatility, foreign participation, derivative growth, and even modest fee adjustments all accrue disproportionately to the exchange. Their related indices, in contrast, suffer cyclical noise and charge fees whose long term impact is significant to any value that might be expected to accrue to a shareholder on a per share basis.

Put simply, rather than pay fees, the preference is to collect them.

A non-exhaustive list of the advantages which compound quietly in these businesses:

• Rising trading volumes

• Growth in listings and IPO cycles

• Expansion of derivatives markets

• Volatility spikes that increase turnover

• Foreign capital inflows

• Indirect participation in GDP growth

• Pricing power embedded in fee structures

• High operating leverage on fixed infrastructure

Indices, by contrast, do not benefit from volatility or turnover nor do they reliably reflect the full breadth of a nation’s economic output. Exchanges do a much better job. They are, in many respects, the purest and most durable way to participate in Asia’s (or any other region’s) economic ascent without the fragility of stock-specific risk.

Consequently, exchanges will serve as the preferred vehicle for gaining exposure to Asia. The portfolio already holds the majority of the major venues discussed earlier, with the exception of LSEG, as well as the Philippine and Hellenic exchanges. In addition, the Mexican exchange: La Bolsa Mexicana de Valores has been included for some time. Upon arriving in Buenos Aires next week, a local account will be opened expressly to acquire shares of Argentina’s national exchange, BYMA, a business that remains almost implausibly cheap in terms of valuation.

The focus today, however, is Hong Kong Exchanges & Clearing (HKEX), a particularly instructive example of how an exchange can function as a gateway to an entire region’s economic momentum.

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Executive Summary

Formed in 1961, Mesabi Trust is one of the purest commodity-linked financial assets available to public investors. It is also possibly the ‘cleanest’ example of the capital-light Royalty model with a pecuniary interest in a hard asset.

Since 2000, Mesabi Trust has produced over $509 million in cumulative net income while its market cap at the start of the period was only $39 million. Investors consequently recovered the entire equity value in five years. All further net income to an investor henceforth has been enjoyed for free, resulting in the holy grail of investing arithmetic: infinite ROI.

More astonishingly still, if such a feat is possible, is that an investor who invested in 2000 was doing so on the presumption of ~ 500 million tons of ore reserves. With the annual production level consistently around 4 million tons per year one would naturally expect the reserves to have waned to the vicinity of 400 million tons 25 years later. Yet, as it stands today, the reserves are estimated much higher at some 800 million tons.

This provides a superb illustration of the Royalty business:

• No sustaining capital

• No operating risk

• No Dilution risk

• No management risk

• High-ROE, high-margin cash flow

• Embedded volume and price optionality

• Inflation tailwinds (royalties rise with nominal revenue)

The superiority of the business model becomes apparent when comparing the performance of the royalty trust to the producing Co. CLF, and the base commodity itself.

Despite this record, the market continues to undervalue Mesabi because it misclassifies royalty trusts as short-lived wasting assets tied strictly to a single mine cycle. The reality is that the underlying ore body has hundreds of millions of tons of reserves, supporting decades of future royalty production, with practically zero operating expenses.

Recent distributions, especially the $93.3 million, $72 million of which was awarded from arbitration following a dispute with the parent of the operating Co: Cleveland Cliffs, demonstrate that Mesabi’s income claims remains extremely strong.

INVESTMENT CASE

The trust is simply an entity set up to hold the royalty rights and receive payments. It has no employees, no management nor is it permitted to undertake any business activities outside the trust’s mandate for receiving payments. Ergo, it is neither subject to shareholder dilution nor management mis-allocation of capital. It’s payments are a function of production volume*price for iron produced on its acreage. This structure is key to explaining its revenue growth without commensurate expenses - there are no expenses! (Save de minimus filing and administrative charges).

It is a rare example of a true inflation beneficiary whose performance inclusive of dividends has outperformed even gold’s run over the last 15 years - not bad for a stock involved in a cyclical, industrial commodity.

Additionally, situated inside the USA makes it a beneficiary of any Tariff policy and an indirect beneficiary of the National Security Spending contracts awarded to Cleveland Cliffs. CLF states its first of such contracts is valued at $500 million over 5 years.

The valuation section will show a model for the trust’s likely range of income in detail. In brief, conservative assumptions at today’s price and volume put net income at ~$30 million annually or a 7.5% yield protected from inflation. Upside optionality on increase in price and volume thanks to the trusts sliding scale royalty is embedded for free as of today.

OPERATIONS

In Mesabi’s case that asset is a single Iron Ore deposit, the Peter Mitchell Mine located in Babbitt, Minnesota, at the eastern end of the Mesabi Iron Range.

Unlike miners, who must constantly reinvest, manage labor, battle cost inflation, and cycle through debt Mesabi is a zero-capex trust. which receives a contractually defined royalty on iron ore shipped from Cleveland-Cliffs who operate the mine.

It does NOT:

• Mine

• Operate

• Employ workers

• Maintain equipment

• Borrow

• Reinvest

Mesabi is a financial conduit: it collects cash and distributes it.
This makes it closer to a natural resource bond with equity upside than an operating business.

Reserves & Life-of-Mine

While the trust itself does not publish reserve estimates, Cliffs’ independent 2021 TRS lists:

• Proven ore: 303M long tons

• Probable ore: 519M long tons

• Total: 822M long tons crude ore

Production volumes at today’s level imply its life of mine could continue for another 100 years or more.

History & Cash Flow Through Cycles

If one examines the historical prices for iron ore in the period above it is important to note that the trust maintain positive earnings paid out to shareholders while the commodity itself experience a sharp decline culminating in a nadir of $40/t in 2016 or a 70% brutal drawdown.

A Tale Of Two Business Models - Earnings Power

The most common objection to royalty and streamers by far is the price. Although it’s usually mistakenly referred to as valuation - which will be explored in the next section.

Royalty assets have the unusual quality of paying for themselves many times over, despite appearing optically expensive at the outset.

Before continuing however it’s important to remark on putative earnings vs shareholder’s earnings.

An operator company might report a hypothetical $8 of earnings and ostensibly trade at 8x earnings or a P/E of 8 for a stock price of $64. However, secondary sources cite that such business models frequently require retaining 75% of said earnings to simply continue operations, thereby leaving only $2 to be distributed to shareholders and as such it might be more appropriate to say the OP CO. is trading at 32x available earnings.

In this case of CLF, in the most recent year where net income was positive (because there are years when it is negative) the conversion of Revenue to net income was an anaemic (the pun proves irresistible when speaking of an Iron company) 1.8%.

This is to say that quantitative analysis as to putative earnings used in PE comparisons fails to tell the whole story and should be overlayed with a qualitative consideration of the underlying business model itself.

Comparing the distance between the top line and the bottom line in the case of these two companies speaks volumes.

Versus

In a world of monetary inflation and rising nominal commodity prices, royalty assets quietly compound because they have no mechanism through which inflation can injure their economics. They possess revenue, never cost.

Risks

Any disruption to production or weakening price environment will result in lower royalty payments for the obvious reason that said payments are a product of Volume * Price.

Disputes have arisen at times between the operator and the trust in regards to payments. Mesabi has won arbitration hearings and been awarded any royalties the Op Co has attempted to repudiate plus damages and the agreement actually provides Mesabi with the senior claim on the asset territory itself meaning, should the operator bankrupt, Mesabi retains their interest which is simply inherited by the incumbent.

The main risk is volatility of distributions, not permanent impairment.

Valuation

Such an asset can be valued by considering its likely future cash distributions using a Net Present Value (NPV) calculation.

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Today’s piece is an overview of what’s on my mind currently and some ways I’m continuing to earn yield which I think might come in handy over 2026 should we experience a decent draw down in markets.

A huge thank you to the new subscribers - I’ll keep my thoughts concise and provide links to the ideas mentioned should you wish to get up to speed with the thematics mentioned.

Staying Nimble: Why I’m Focusing on High-ROC, Defined-Risk Trades

Approximately 6 weeks ago I became cautious on the equity side.

With broad equity valuations stretched, liquidity tightening and macro signals get noisy, I prefer to stay nimble, liquid, and opportunistic rather leading into 2026.

Before you panic, relax - I still hold all my main royalty and streamers, I just stopped adding to equities and lightened up insignificant positions around the edges.

My most recent breakdown stands thusly:

My uncle Rick taught me to think of gold as volatile cash, ergo you could say I’m actually sitting now at over two thirds in cash. People’s main gripe with cash is that it holds a negative real yield, yet for those who read my October piece you’ll know how I am earning a real yield on my gold/cash balance to the tune of 1.5% per month.

I have also looked at my equity portfolio and decided to fully insure it over 2026 by buying put options, which were really quite cheap. In fact, they are self-funded by the yield earned from the above tactic and dividends.

So, despite my ostensible bearish posture, I’m actually quite excited to enter 2026 as I I’m in a ‘heads I win’ ‘tails I can’t lose’ position.

If the market tanks, my puts win big and provide a cash injection precisely when it’s most valuable. If it soars, my positions likely do fine.

All the while I get to sit back and observe, completely relaxed and getting paid a real yield to wait.

In conditions like this, my objective is simple:

Maximise return on capital. Eliminate tail risk. Stay flexible.

That naturally draws me to defined-risk premium structures and right now, the most capital-efficient tool in that category is one I haven’t used for ages: the Iron butterfly.

Why the Iron Fly Fits This Market

The iron fly is the cleanest expression of disciplined premium selling.

It’s built for moments when:

• implied volatility (IV) is overstated

• realised volatility (HV) stays muted

• the market narrative is panicked

• but the underlying isn’t actually moving as much

The structure provides:

• Defined risk

• High ROC (commonly 30–150%+)

• Accelerating theta

• Neutral directional exposure

• Capital efficiency without uncovered risk

It’s a way of getting paid when the market is emotional.

How The Iron Fly Works

1. Sell the at-the-money (ATM) call + put

2. Buy wings above and below to cap risk

3. Premium received = max profit

4. Wing width − credit = max loss

5. You win if realised movement < implied movement i.e the asset stays range-bound

It’s extremely negative vega (short-volatility) with guard rails.

The Royalty King’s Rules for Iron Flies

Don’t try this at home - you will lose money!

Enter 30–37 days to expiration (DTE)

The sweet spot for maximum theta for ATM options. Exit before 7 DTE

Enter on a down day (Ideally)

Down days = elevated IV → richer credit, cheaper wings.

Initial profit target: 15–20% of planned capital

Planned capital = 2 × initial capital at risk
A simple, disciplined framework for harvesting gains.

Max loss: 20% of planned capital

Cut losers early. Survive to sell premium again.

Probability of Profit ≥ 50%

These rules keep the strategy methodical and effective.

If you’d like me to take you through two real life examples of this tactic with trades I am putting on as you read this, become a premium reader today and gain full access.

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