Big Gold Miners #2 : How low will Anglo Am go?

[rigger]

 

 

I suspect the leaders RIO and BLT have a bit further to fall once the fund mangers throw in the towel. Best not to stand in the way...

Agreed.Given where Anglo is,they're too high.

[drbubb]

Your Money is trapped in Resource shares until further notice

 

- says Casey Research

 

Friday was another devastating trading session for resource stocks.

 

/ click on symbols, to see charts /

 

The “bluest” of blue chip resource companies, BHP Billiton (BHP), dropped 5.3% to reach a new multiyear low. Shares are down 74% from their 2011 high.

Coal mining giant Peabody Energy (BTU) also hit a new multiyear low. Leading agricultural chemical firm CF Industries (CF) hit a new 52-week low. Other well-known resource names hitting new lows include Anadarko Petroleum (APC, oil and gas), Southwestern Energy (SWN, oil and gas), Royal Dutch Shell (RDS-A, oil and gas), National Oilwell Varco (NOV, oil drilling rigs), Mosaic (MOS, agriculture), Eagle Materials (EXP, construction aggregates), and Cloud Peak Energy (CLD, coal).

 

The story here is simple: The global economy is barely growing. And the easy money policies of global central banks allowed resource firms to borrow enormous amounts of money, which led to enormous amounts of new supply.

This has many resource industries locked in a vicious cycle. Prices are falling, so many producers have increased production to make up for them. The increased supply causes prices to fall further, which leads to more production…and so on.

This cycle will end with absurdly low resource prices and a wave of bankruptcies. We’ll eventually get an amazing opportunity to buy resource stocks at fire sale prices. But, for now, the trend here is still down.

[rigger]

This cycle will end with absurdly low resource prices and a wave of bankruptcies. We’ll eventually get an amazing opportunity to buy resource stocks at fire sale prices. But, for now, the trend here is still down.

Thanks for that Doc.

 

The more I see the way this has developed,the more I'm coming to the view that I'm going to sit and wait for either the bankruptcies or the rights issues.

 

When we come out of the other side,this may well be the buy of the century.