 Good day, film investors. Sleetium stock just took another blow, tariffs, recession concerns, delays in battery production, battery development technology, and we see really significant declines. Living down what, 60% SQM, 40% Albury Marlowe that we discussed, even 50 and more percent over the last year, year and a half. Those are very significant declines and declines one wishes to look into to see whether there is this discrepancy between fundamentals and let's say market sentiment. The more I look into the lithium sector the more I understand it, I see it will be a lot about timing because as we have seen stocks are very volatile which means ups and downs are something we have to take as a given thus perfectly timing and staging or balancing an entry point will be crucial. The best thing we can do is just to follow John Templeton and as he did buy at the point of maximum pessimism. So where will be the point of maximum pessimism when it comes to lithium stocks? It will be when there will be oversupply of lithium like it is expected in 2019 perhaps going into 2020 so and then when there will be car makers that are delaying production or things like that. So over the next year, two years that's what we are going to watch. There will be an oversupply of lithium and consequently lower earnings, lower margins pressure on lithium producers but on the long term the strength seems really really strong really important car producers like Volkswagen are just getting into the lithium game just getting into EVs and they plan to produce a lot of them over the next decade. So the trend really seems strong. Let's look at SQM, put it into the lithium perspective. I did the video on Albert Marle. Let's see how it fits the investment which one is better and it is always good to research stocks in a sector because those give you a perspective on the whole sector. One by one you put the pieces of the puzzle together and you get to a meaningful risk reward investing conclusion. So company overview, Sociedad Chimica e Minera de Chile is of course a Chilean company that produces not only lithium but also fertilizers iodine potassium and other industrial chemicals. 50% of the cross profits last year came from lithium 22% from fertilizers 16% from iodine and the rest from potassium and other. However all those products are volatile in price and consequently SQM's major profit contributors also vary. SQM lived through a fertilizer boom from 2008 to 2013 where fertilizers were the biggest contributor to gross profit. Then iodine was booming around 2012 and then 2016 lithium boomed while fertilizers and iodine really really declined as profit contributors. So very important to look at all sectors here for SQM to try to understand what is the picture. So let's start with the lithium business. The story is the standard one expected huge growth over the next decade conversion from carbonate to hydroxide as the batteries are getting complex and solid state. I'm not going into technology here but that's the expectation for from most lithium producers. But there is something very very important with SQM. It has leases on the Salar de Atacama mine which expired in 2040. So Corfo the Chilean agency has had a lot of disagreements with SQM. They wanted to revoke the license a few years ago but then when the previous owner renounced to the ownership they decided to just put higher taxes on it. So if we look at the table here as lithium prices go up the new agreement is that SQM has to pay even 40% in fees of royalties or taxes how you want to call it. And that's a big big blow to the company because yes you are exposed to lithium prices but if those go up you pay more and more in taxes and this is a big big issue for SQM. Further after 2040 we don't know whether the government will renew the lease at current terms or as they have changed recently or they will want 50% of the profits in a joint venture type agreement. So it's a risky risky situation depending on the politics in Chile and that's always a risk. However SQM is not only Chile they are investing in Australia so they will be on the lowest cost side of the hard rock lithium producers from Spodiumene. So that's a good one. They expect to triple production over the long term over up to 2025 of lithium so that is a good sign but we have to keep in mind the taxes and the possible losses of the leases in 2030. When we look at fertilizer business it's an always volatile business and it is a business with significant let's say oversupply over the last years due to the high investments and lower interest rates over the last years. I've looked a lot over the last years in fertilizers and of course not good for SQM because potassium nitrate prices have been going down add the yuan depreciation on this chart and you see how the picture is even worse. Potassium, normal potassium and potash prices have rebounded a bit they are for the specialty nutrition that SQM make they are important so but still much much lower than historically. With fertilizers it's very important to have specialized fertilizers where you don't compete with just the commodity but you try to add value and SQM has specialty fertilizers that are used mostly with high-valuated products like fruit and vegetables of course there is always competition it depends on the price of the potassium potash commodity so the margins will depend on the demand and supply there is a lot of supply there are a lot of projects demand is also growing so it will be also always a fine balance but I don't think we'll see again another 2013 very soon because that was a very special situation 2008-2013 with low investments and higher growing demand so I expect for the future to be conservative stable profit margin with fertilizers nothing fancy then we also have iodine SQM is simply the lowest cost producer those are used in x-ray as x-ray contrast medias pharmaceuticals lcd's and other and it is an interesting play but again produced from the same place for the leases so it's again under risk over the long term so over the long term very very risky now let's look at SQM's earnings models the booms have passed for SQM as I said first was the fertilizer boom then the iodine now we have the lithium boom and we have to see where will this finish and what will be the next boom will lithium continue to boom or not net income in the last quarter is already down 25% compared to the previous quarter higher taxes lower lithium costs and okay they are going to grow production three times of lithium but that's just 50% of the current profits further SQM has a 100% payout ratio for the dividend good financials good balance sheet but 100% and the dividend yield is still just 5% so even if they grow they are kept by the higher taxes in chili don't forget the 30% dividend tax from chili and stock so that's something that I was reminded when I looked at a year ago when we analyzed chili stocks and then we the conclusion there was that stocks in chili are the most expensive South American stocks most expensive South American market and SQM falls perfectly into that description if we look at Albert Marla that we made a video a week ago it is much cheaper much less fast much less fast win the Chilean government and if lithium explodes it seems like a better bet than SQM because SQM is chili and chili has been always considered a stable country in South America therefore it has higher valuations and valuation it was is what makes your return over the long term therefore I will okay look at SQM follow it a bit but not cover it because Albert Marla and other lithium plays seem cheaper and better and give you higher upside for perhaps even lower risks this is a very very big risk to put it into a picture perspective over the long term taxes issues the implications of the Chilean government so I don't like it that much prefer something simpler with higher upside and lower downside however from an owner perspective Chunky did pay 4.1 billion for 22% stake in the company valuing the business at more than 18 billion just not even a year ago so if you want to buy now with a 60% discount to what they paid well there is the stock market that gives you such a huge discount just over the last eight nine months from when an owner went in I'll put the link to my chili video in the description below feel free to watch it to see how it is much more expensive and then we'll stick to we'll continue to follow the other lithium stocks Albert Marla live and an excellent spin-off situation an interesting spin-off situation and spin-off dynamics there that might create interesting buying opportunities but given the crash what's going on lots of stocks individual stocks really crashing turquoise hill and so so there are always opportunities even if the market is at all-time highs tomorrow we'll discuss my prediction for the next 10 years will there be a stock market crash given the Tuesdays and the last five seven days downturn in the stock market and on Friday on Sunday we'll discuss how Buffett is prepared for what's going on thank you for watching look forward to comments and I'll see you in the next video