Ringing a bell for commodities producers


Anglo Suspends Dividend (Ringing a bell)  We are watching collective capitulation by shareholders and management (a sign of the beginning of the end of the bear trend).

Anglo Restructuring

Remember the panic of bankers back in ’09?


A repeat for global miners in 2015/16?

Global Mining Indices

At lows, commodity price narrative is pure supply and demand with LIMITLESS SUPPLY (oil) and anemic demand (China slowdown) while at highs the narrative for commodities is driven by financial speculation (China boom/Commodity Super Cycle).   Buy low and sell high.

2 responses to “Ringing a bell for commodities producers

  1. One question:
    Is there any method, reasoing, or “signal” to conclude that we are in the bottom? Maybe the market goes deeper later on.
    For example, apart of Supply-Demand I am not sure if QE (quantitative easing) has impacted commodity pricess, credit bubbles, USD strength….and any other factor (apart of geopolitical ones that are impredictable without inside information)

    • There is no one signal, price or exact time to tell if we are in a bottom or top. A bottom or top is a process. Note gold mining equities in 2010/2011, they topped for 14 months. Note the S&P 500 bottom in 2008/09.

      The reason I am now mentioning energy (oil) or mining as WHERE (search) to look for the beginnings of a bottom:

      Consensus that prices will go lower or stay lower for longer. (If you read about it on the front pages, then it is in the market/discounted).
      Prices below all but the low cost producers, so oil, nat. gas and mineral producers are shutting down production, laying off staff and cutting capex.
      But it does take time for the cuts in production to lead to better balance in supply/demand. The leads/lags are impossible to forecast accurately.

      All you want is to put the odds on your side. Are we closer to a top than a bottom over the next five years?

      Of course QE has an effect==it distorts the production structure. Thus the bust will be bigger and take longer to turn, so patience and money management are critical–don’t wade in all at once and choose well-capitalized companies.

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