Yesterday, I put together a piece in Fat Tail Daily on the potential pivot from US Tech to commodities… Where relative values could begin to align with historical norms.
A key reason why investors should be focusing on undervalued resource stocks.
You can revisit that piece here.
And Monday’s dramatic market action undoubtedly added to that idea.
The world’s largest listed company, Nvidia, fell 17% on Monday.
Shedding $600 billion in a single day of trading!
But as I pointed out, what this latest development shows is the gradual unwinding of US dominance.
You see, America is already losing the race in high-end manufacturing, such as automotive, Li-ion batteries, renewable technologies, and even building components for nuclear reactors.
China has catapulted ahead.
Meanwhile, America and the West lost their pursuit of securing supply chains of raw materials years ago and are unlikely to ever regain them.
That’s because China dominates extraction and processing thanks to its vast network of highways, railways, and shipping lanes connecting Asia, Eastern Europe, South America and Africa. Forging partnerships that will be difficult to break.
And as this Reuters article shows, China is moving ahead with fusion power, a path that could position this manufacturing giant as entirely energy-independent.
And now, China appears to have added another feather to its cap: potentially leapfrogging the US in the global AI ‘arms race.’
Why Investors need to look East from now on
China is taking the West to task, and I can’t see any reason why this trend will slow down.
That’s why you need to look beyond the superficial reporting on the Chinese economy.
Like this article from the ABC last year, reporting on ‘Beijing’s economic oblivion.’
The narrator’s downbeat outlook on China ultimately led to his bearish take on iron ore, aluminium, and copper.
That was in July 2024, a time of miserable sentiment in the resource sector and a major low in the market. It was a prime buying opportunity!
At my paid readership group, we bought several copper plays and an iron ore miner during last year’s mid-year low.
And we were able to do that by looking past the biased reporting on the Chinese economy.
Given how important this issue will be in the years ahead, I suggest you start looking at different viewpoints to what the mainstream offers.
Of course, that’s what we offer here at Fat Tail!
But over the coming weeks, I’ll be sharing other sources that I think you should read or listen to.
One of those is Louis Vincent Gave.
Louis runs an investment research firm out of Hong Kong and is acutely aware of the opportunities in this part of the world.
My colleague, Greg Canavan, happened to chat with Louis last year, and you can revisit that interview here.
Finally, I just want to leave you with this, something I wrote in Fat Tail yesterday:
‘Going “all-in” on America has been an excellent trade over the last 80 years.
‘But Asia now looks set to take an increasingly larger share of growth and, perhaps more importantly, global influence.
‘As an Australian investor, you should view this as an opportunity, not a threat.
‘As China emerges as the world’s largest superpower, I expect it’ll ignite the Asian sphere:
‘Indonesia, Thailand, Vietnam, Korea, and India will benefit from this “changing of the guard”—from US hegemony to a new central Asian superpower.
‘All this will be bullish for commodity demand as growth takes shape across the region.
‘As an investor, it’s time to look forward.
‘The future is in Asia, and that’s how you should position yourself.’
Until next time!
Regards,
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James Cooper,
Editor, Mining: Phase One and Diggers and Drillers
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