Delusion is the Australian media’s specialty. It’s so widespread that it is easier to see it as a mindset than an outright conspiracy but it’s poisonous to the investor nonetheless. Today exhibit is the untouchable nature of Australian miners, from the AFR:
Kate Howitt, portfolio manager of Fidelity’s Australian Opportunities Fund, said Glencore’s “one-directional” leverage to the commodity cycle upswing was always doomed in a down market like the current one and its share plunge gave her more conviction in her strategy of targeting low-cost producers like BHP.
…Romano Sala Tenna, a portfolio manager at Katana Asset Management, agreed with Ms Howitt that it was “not surprising” Glencore was sold off and that investors were recognising its relative risk compared to other miners.
…Michael Evans, co-founder of Quest Asset Management, said while it was “hard to be optimistic about resource plays”, he held BHP on the off-chance there was a recovery in demand for commodities in future.
Despite the slump in BHP’s share price, Gavin Wendt, a resources investment analyst at MineLife, said long-term investors would not rush to sell their BHP and Rio holdings if they had kept them until now.
More fools them. This chart does not illustrate differentiation it illustrates acceleration:
That is, the further into this crisis we get, the further down the cost curve the carnage moves. It is only a matter of time before the big Australian two join their battered brothers in this disastrous paradigm shift.
One might have thought that four years on and 50% losses (on the majors) might be enough to convince professionals that this is an historic bubble and bust. If not then they deserve what they get.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
