On the back of the worst March quarter since 2008, indicators show the end of the current cycle is in sight. Trump’s jostle with China is more of a concern than his ‘war of Tweets’ with North Korea, and coupled with the inability of investors to rely on central bank... Show More
Over the past quarter, much of the small-cap index outperformance over large caps has been due to the excellent returns of small resource companies. Given their cyclical nature, is that a reason to look elsewhere? The following note makes it clear that we think not. Show More
Unlike industrial companies such as Amcor or Transurban, profits for mining companies are inherently cyclical. The earnings from mining companies are subject to booms and busts, largely outside the control of their management teams. This occurs as ultimately any company producing a commodity is a “price taker” not a “price... Show More
The cyclical positioning of metal prices has improved over the past month while remaining consistent with a below average cyclical trough (as illustrated in the updated chart). Show More
The International Monetary Fund has flagged that it will be publishing revised global growth forecasts on 19 July to take account of the impact of the UK referendum decision to quit the European Union. Another growth downgrade would come as the latest in a lengthy series of negative revisions to... Show More
Metal prices are constantly referred to as being volatile . ‘Volatility’ is frequently used as a substitute for ‘uncomfortably low’ in market descriptions. Volatility should diminish through the trough of the cycle. Consistent with that expectation and contrary to common usage, metal price volatility is nearly as low as it... Show More
Despite a 20% rise this month, the small resources share price index – the best pricing indicator for the bulk of Australia’s listed resources companies – remains near the level at which it was trading 15 years ago. The seemingly strong return is indicative of leverage near the bottom of... Show More
Cyclical positioning remains poor. New World Bank forecasts have highlighted the absence of the growth acceleration needed to move the cycle forward. US dollar strength has added downward price pressures in the metal markets. A currency reversal will be needed for an improvement in cyclical conditions. Lower sector volatility has... Show More
Australian pre-tax mining profits were 42% lower in the March quarter than a year earlier, according to data published by the Australian Bureau of Statistics. Profit over the four quarters ended March 2015 of $32.9 billion was less than half the cyclically peak profit of $78.3 billion over the year... Show More
Our bottom of the cycle theme is playing out globally. In a late 1990s style market (the model for current resource sector equity market conditions), net outcomes will remain flat but trading opportunities around the mean will persist. Freeport McMoRan, the world’s largest listed copper producer, is two thirds below... Show More
