News: Sedgman cuts guidance on mining services sl, page-5

re: News: Sedgman cuts guidance on mining ser... MM, people overlook just how much companies like this were over-earning during the past 4 or 5 years.

I saw a chart the other day which showed long-term mining sector capital spending in Australia as a percentage of GDP.

It shows the figure in a cyclical range over many decades between 2% and 5%. And then in the past commodity boom it suddenly shot above 10%.

The chart showed it just starting to roll over now, suggesting to me that there is still a lot of pain ahead as we revert to the mean.

And even when demand does recover some day, there is so much new capacity that has been put in place over the past 5 years that it will take even longer for margins to start to rise, even if activity does.

Lots of idle drills, cranes, trucks, engineers, etc.

I'd avoid this sector entirely.