The Australian Economy’s Getting a Pay Rise, but it’s Still Depressed

I’m putting my head down this week, getting together a recommendation report for my paid readership group.

That’s got 100% of my focus.

So, in the meantime, I thought I’d share a piece I wrote for my paid readership (last week), which offers a decent platform on why I think you should start getting active in this market.

And I don’t mean everything, I mean commodities.

This is a different take on what you might be hearing across the mainstream right now. Enjoy.

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There’s a strong sense of pessimism in the air right now, especially in Australia.

The longest losing streak for the ASX200 since 2018, a flood of blue-chip ASX earnings downgrades, falling property prices…

A hawkish RBA governor who’s giving the finger to the Australian economy and hell-bent on hiking rates. According to them, inflation is the only thing that matters.

But don’t forget the oil crisis.

Yep, that’s still rotting away in the hot Middle East sun, as we all await our deliverance from one of the worst fuel crises in history, fertiliser shortages and scarcities across dozens of critical petrochemicals.

But according to reports, the worst is still to come.

It’s all rather doom and gloom.

As I said, welcome to the age of scarcity. We were among the first to detail this new era. In fact, the report we wrote back in 2022 was titled just that… ‘The Age of Scarcity.’

But now that the herd has finally arrived at our viewpoint, I can’t help but think about the opportunities….

We’ve done well over the years by doing the opposite of what sentiment suggests. And right now, that sentiment is drenched in pessimism.

But here’s the thing…

Iron ore is sitting comfortably above $100 per tonne. All the fears of a flood of new supply coming from Simandou have dwindled. Chinese imports remain firm.

Meanwhile, another one of our major exports, natural gas, is finally coming to the party, breaking out of its historical lows. Same with coal prices, our energy exports are surging. No wonder.

Then there’s copper; futures are trading just 3% away from all-time highs. The economic bellwether, Dr Copper, gets touted when rising copper prices align with fundamental strength in the global economy. But when things appear dire, pundits presume Dr Copper has got it all wrong. Like now.

But prices matter more than opinions; the fact is, copper is in a price boom. And just because it is high doesn’t mean it can’t move much higher from here.

Then there’s the precious metals basket… Gold’s pulled back, but it’s still monumentally high. This is a healthy consolidation phase after a record run-up.

That’s why we recently put our golden child back as a buy in the portfolio, Capricorn Metals [ASX: CMM]. But its pull-back was incredibly short-lived. The buying window lasted just a few days before it surged well above our buy-up to limit. Quality doesn’t go on sale often.

Then, looking at some of our other important exports… Lithium is undergoing its second major bull market cycle in its history.

Uranium, a commodity for which Australia has a huge runway for increasing output (given we hold the world’s largest reserves), is undergoing a price renaissance thanks to the global pivot back to nuclear.

We’re living in one of the most prosperous times ever in terms of our economic breadbaskets…

In fact, I’d argue that commodity prices today are now broadly MORE bullish than during the early 2000s commodity boom.

The key difference being that investor excitement hasn’t followed the surge.

Sentiment for mergers and acquisitions and mine developments is more reflective of depressed market conditions. Not record commodity prices.

But that has to change. And it will. And when it does, the changes will be rapid.

Right now, from small-time investors to big businesses, sentiment in this country is more in line with a recession than with a major mining boom. Yet, we’re MUCH closer to the latter.

To me, that smells like an opportunity. We’ve been here many times before… When the herd is overwhelmingly bearish, it pays to think and act differently.

And that’s exactly what we’ll be doing. And I’ll be kicking that off next week.

So, stay tuned, I’ll be looking to get at least one, possibly two, recommendations out the door.

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By the way, if you want to get access to this week’s recommendation, fresh off the press, as well as our entire buy-list, you can join our loyal list of paid readers here.

Until next time.