It appears the miners have finally run out of luck and are at the verge of collapse with the Madometer signaling it’s time to buy:
It may appear counterintuitive, what with commodity prices continuing to tumble, but when it comes to some of the market’s larger beaten-up mining stocks, it may just be a great time to buy…Take BHP and Rio… earnings multiples for both stocks (on a trailing basis) are currently trading at more than a 40 per cent discount to historical valuations, which compares to a modest premium for the broader market. They’re even trading at a discount to what we saw back in 2005 and 2006 as well. Historically, they rarely trade lower.
There are headwinds. Concerns over the Chinese economy are unlikely to abate in the short-term, and if commodity prices continue to decline, asset writedowns are likely. That said, these should be viewed, and likely will be by larger market players, as short-term cyclical dynamics rather than significant structural events. The structural changes have largely already occurred:China has slowed and the commodity price boom is over.
