… Live in the Tails!  

https://podcasts.apple.com/au/podcast/mining-stock-daily/id1418050443?i=1000672690415

This is a great 40-minute listen for those who need a framework to understand what is happening in China right now. PauloMacro explores the implications of recent stimulus measures on global markets, the challenges facing the Chinese consumer, and the potential future of commodities like copper. The discussion highlights the complexities of China’s economic landscape, including the balance between real estate and manufacturing, and the need for consumer sentiment to improve for sustainable growth.

The setup is based on the view that there are 2 main issues to solve for China – a deflating real estate sector and low consumer confidence, especially amongst the Millennials in the Tier 1 and 2 cities. Paulo makes the case that China now fully understands both issues and the recent announcement of stimulus to support these two ailing pillars of growth for China is the Mario Draghi equivalent of “…whatever it takes”. Don’t concern yourself with the quantum of the stimulus….the fact that it’s happening is the important part.

I won’t steal his thunder as it’s a great listen. He prefers to position for undervalued plays on thematic where the opportunity cost / holding cost is so low that even if the view of the investment is a little out on timing or direction…. you can still make money…..seeking out under-priced convexity.

Personal Note: Your author began his career in the Institutional Capital Markets business at RBC Capital Markets in London, in early November 2000. We had just seen the NASDAQ tech wreck come and go and could already see money flows leaving the sector looking for “long tails” or under-priced convexity in Global Materials and Energy equities/commodities. It started as a trickle but then a steady flow as money moved into hated, under-owned, and unloved sectors that had been capital-constrained for years. Sound familiar? We started seeing positioning for mining and energy names, mining and energy service sector, and then all the sectors, economies, and markets leveraged to lower interest rates and global growth. Think ASX, TSX, Africa, Emerging markets…the whole lot.

In December 2001, China entered the WTO and the rest is history. We turbocharged Global Mining and Energy capital investment for the next decade.

Personally, having lived this story almost 25 years ago the rhyming of this cycle to 2001 is pretty close to script. I see the recent China support for their ailing real estate market and consumer confidence issues as the 2 strategic pillars for Chinese domestic growth and we are all along for the ride. It starts as a trickle and becomes a flood. Since September 2024, the cost of not being LONG enough of the Global Materials and Energy sector is too high. Just ask Rio Tinto and BHP.