Why we're Down on China but Up on South32

South32's report for the first quarter of the 2016 financial year was released to the market this morning. The production numbers were good, as expected, and management are indicating there is more cost to come out of the business than suggested at the time it was spun out of BHP Billiton. We expect the efficiency gains will go on for many years, following the well worn path of many an unloved business spun out of corporate behemoths. Still, South32 is a commodities business, not a predictable revenue generating machine like Brambles' spinoff Recall. Cost cuts and efficiency gains are going to help, but it is commodity prices that will determine whether this investment is a successful one or not. On that front, our disclosure of a stake in South32 has surprised many. "I thought you guys were China bears?" We were. And we are. But as I explain in this video, that is now the consensus view. And it is exactly why South32 is so cheap.