Life, in one way, is a collection of stories about the path not taken.
By choosing one job, you forsake all the potential others. It’s the same with anything. Economists call it opportunity cost.
You can apply it to your attention as well.
All we’re hearing about right now from the mainstream media is the collapse of several US banks and the plight of Credit Suisse. Now we also have Deutsche Bank in the mix too.
What nobody is focusing on is the positive changes going on for the macroeconomy. Today’s Daily Reckoning Australia will rectify that!
Let’s briefly muse on the banking issue before we get there. CEO of ANZ Shayne Elliott quite rightly compares it to the ‘Savings and Loans’ crisis in the 1980s.
What he didn’t mention is that during that time, thousands of US banks failed.
The whole sorry debacle dragged on over the whole decade. The seeds of the issue were sown a decade earlier in the inflationary years of the ’70s.
Here’s my point: The US economy roared in most of the ’80s after the recession of 1981–82. So did the US stock market.
The bank troubles were ultimately a sideshow to the real action: the development and expansion of the computer industry.
The seeds of today’s banking issues were also sown in the previous decade with the absurd rates that sat so low for so long. Then came the fastest tightening ever. Something was always going to break.
While this no doubt continues to crank up volatility and worry in the short term, I don’t see it stopping the march of astonishing tech progress happening around artificial intelligence and, say, genetic engineering and treatment.
Don’t allow your focus to be misdirected away from opportunity.
Here’s the other thing about today that nobody is paying attention to…
China’s back, as far as the global economy is concerned.
Australia’s big miners are already in Beijing for their piece of the action too.
From today’s Australian Financial Review:
‘The chief executives of Australia’s three biggest mining companies have used their first visit to China in three years to praise the country’s post-pandemic recovery that will continue to drive demand for commodities as they pledged to work closely with Beijing to tackle climate change.’
That’s not all, either. China is cultivating diplomatic ties and influence across Asia through its Belt and Road Initiative to build infrastructure.
See the story here:
‘China is investing billions of dollars in trophy development projects across Asia, including Indonesia’s new capital Nusantara, as part of its campaign for greater influence in the contested region.
‘As Beijing’s Belt and Road Initiative (BRI) infrastructure funding program enters its second decade, the focus has shifted to East Asia, according to an analysis by the Green Finance & Development Centre at Fanhai International School of Finance, Fudan University, Shanghai.’
Hello! This looks very bullish for commodity prices.
And if it’s sustained, I don’t see how the mining industry can meet the demand without higher prices to incentivise further investment.
Construction costs and financing expenses are only going one way currently, and that’s up.
And think about the price of copper. For all the angst in the headlines, it’s wobbling its way back up after being smashed last year.
One report last week wrote:
‘That dynamic has been caused by a decade of underinvestment in already producing and new mines. It usually takes between nine and 12 years to bring a copper operation online and into production, the fund manager says.
‘Increased geopolitical tensions are placing additional pressure on supply, particularly for companies exposed to Panama and Peru, with government intervention and social unrest disrupting operations at some of the largest copper mines in the world.
‘“Over a three, five and seven-year period, we’re very optimistic on copper,” Mr Sitch says. “We want leverage to the rising price, so our focus is on quality producers in tier one jurisdictions like Canada.”’
It’s a great time to be picking over junior resource stocks.
Again, that’s what the big boys are doing. Twiggy Forrest — Fortescue supremo and Australia’s richest man — made a bid for nickel play Mincor last week.
That’s a credit to my colleague James Cooper, who had previously recommended the stock to his subscribers.
I don’t doubt there will be more takeovers in the junior resource space.
As my friend and resource fund manager Hedley Widdup told me, ‘it’s a great time to have cash!’.
I watched a presentation from a small-cap fund manager last week. He said the last 18 months in the sector have been the worst since the GFC.
Get that? The GFC!
Today’s economy is nowhere near as bad as that. Values all over the market are staggeringly cheap.
The only thing that needs to change is investor sentiment!
If you’re prepared to switch yours to a more opportunistic one — where you’re willing to put a bit of cash down on tiny companies for a shot at making a great return — be sure to check out James Cooper’s latest presentation this Thursday.
It’s all about James’ new premium trading service, Mining: Phase One, that looks solely trading small mining stocks right at the point of a potential massive rerating based on drill results.
James is going to name one such mining stock…in full…ticker symbol, backstory, everything…in his upcoming presentation.
Learn more about it, and secure your spot in Thursday’s event, by clicking here.
Best wishes,
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Callum Newman,
Editor, The Daily Reckoning Australia
