First, about price, I think share price could detach from any analysis, either technical or fundamental. Therefore I won't expect anyone could be correct at any given time. Just to show recent one, is differential between msft,amzn,goog,nvdia vs their peers, let alone others. However if the argument is if I have to be careful about iron ore, we have discussed many times here, I still won't worry about iron ore for reasons down below, but I'll be more careful about recession hedging play. Every analysis has their own speciality and since I only focus on my focus, global macro, I worry more with recession. Other than that, I did sound about US tech thesis in December here in relation to their hedge in commodity issue. This YTD alone, the tech have run 50-80% while commodity since predicted that time was down 10-15%. This spread is too big for my portfolio to start hedging each other again or filling in back the commodity factor. However this is my own personal portfolio management, should be different to other.
Firstly, in my own opinion about iron ore, iron ore is different from other commodity. In my own opinion, iron ore is like oil, they do have some kind of "cartel", tell me I'm a dreamer or illusionist, but that could be a reality. About copper yes it's quite volatile with dr copper breakin low. Copper doesn't have much competitive advantage to run as a cartel but copper might have a good card to play in the energy transition thesis. I think people don't realize much how much economy the sustainable energy has. Research says world needs 10T$ of sustainable materials in 10 years but in January I had calculated that any country could benefit immediately from investing in sustainable energy. Basically is like this: every $ electricity we consume is 60% waste. With sustainable energy and battery, this could increase efficiency up to 80%, therefore only 20% waste, immediate 2-3x more $ efficiency. I did calculate, this amount could easily reach 10-100T$ within 10 years and any country could immediately benefit from it to combat current issue of inflationary, where money supply is basically much higher than economy could afford, therefore any country should immediately invest on productive investment, e.g sustainable energy. Back to the commodity, yes you could be correct iron ore may crash, similar to oil but again, I would say that when recession is really bad. We have discussed about this for times in many years here, there's a lot of "mysterious unknown activity", even in Brazil and Africa Simandou to support my thesis of cartel above. There were a lot of iron ore issue in past years, the biggest was when it was down from 200 to 80, but these producers stays healthy well, tell me why.
Secondly, yes is to look into China. There should be something going on in China in December 2022. Their currency is too strong and it has affected their manufacturing industry. They could continue to neglect their darling property but it could impact their darling manufacturing as shown in their currency. I think they might start hidden economy easing without triggering inflation. I won't say China has everlasting construction boom but I'd like to know what China will do to strengthen their economy at the moment. When iron ore dropped from 200 to 80, China property was very bad, remember property bankruptcies everywhere? I think I had shown thattime, we should look into how iron ore is consumed. I forgot the number but it was like: (1) 20-30% in commercial property (2) 20-30% in residential property (3) the rest is where people neglected, manufacturing Iron ore is not all about construction. All consumer demands, households products are all consuming iron ore and that's huge. Few years back when people worry about iron ore due to the issue in number (2) residential bankruptcies factor, I've shown that number (1) is not affected, let alone (3). Currently US has come up to picture because of their manufacturing activity (which unfortunately could challenge world in next 10 years) and I believe China should as well. This manufacturing bull could trigger huge amount of iron ore consumption.
Third, as usual, bhp is country darling company as we have discussed here for many years. It's not something we can neglect easily when a lot of funds have been circulated around it, just like the US big tech thesis.
BHP Price at posting:
$42.15 Sentiment: Buy Disclosure: Held
Iron ore is not all about construction. All consumer demands, households products are all consuming iron ore and that's huge. Few years back when people worry about iron ore due to the issue in number (2) residential bankruptcies factor, I've shown that number (1) is not affected, let alone (3). Currently US has come up to picture because of their manufacturing activity (which unfortunately could challenge world in next 10 years) and I believe China should as well. This manufacturing bull could trigger huge amount of iron ore consumption.
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