SMSF’s short banks and long miners at precisely wrong moment

I have to write this story every few years. Whenever we have a positive iron ore cycle, investors make the same old mistakes. In particular, they assume that the mining cycle of plumped-up dividends is sustainable:

  • SMSFs have gone shorter banks for fear of lower dividends.
  • They have rotated to miners for higher dividends.
  • The shift is almost one-to-one and has pushed miners to very high levels of SMSF holdings.

The last time I had this fight was with journalistic legend, Trevor Sykes, who was advising all and sundry to buy miners in the “Sykesnado” of 2015, right before dividends got slashed.

Mining dividends are a value trap. They are never sustainable because high commodity prices always end with high commodity prices as supply responds. That’s why they are called “commodities”. They have no competitive edge.

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