From Alaska to Mongolia, and South Africa to Brazil, old strategic plans are being trashed.
“It would take a brave soul to wade in with both feet into commodities,” says Brian Barish, who helps oversee about $12.5 billion at Denver-based Cambiar Investors LLC. “There is far more capacity coming on (line) than there is demand physically.” — “the only way that you fix the problem is to basically shut capacity in, and you do that by starving commodity producers for capital.”
// Projects on the drawing boards for a decade are now being abandoned. From mines to ports to railways. Investors this year are clearly dumping future commodities based holdings.
The Bloomberg Commodity Index, a measure of returns for 22 components, is poised for a fifth straight annual loss
This news WAKE UP CALL harks back 24 years… This index slide is the longest slide since the data begin in 1991.
It’s a reversal from the previous decade, when booming growth across Asia fueled a synchronized surge in prices, dubbed the commodity super cycle. Now, that output is coming to the market just as global growth is slowing.
Investors need to brace for a “long winter,” with the commodities bear market predicted to last for many years and oil dropping to as low as $35 a barrel, said Ruchir Sharma, who helps manage $25 billion as the head of emerging markets at Morgan Stanley Investment Management in New York.
Goldman Sachs has an even dimmer outlook.
AMONG THE CONSEQUENTIAL STRATEGIC CHANGES… … are these two. 1) Chesapeake Energy Corp. has cut its workforce by 15 percent. 2) Caterpillar Inc. may shed 10,000 jobs as demand slows for mining and energy equipment. 3) The big railroad freight companies in the lower 48 are again storing locomotive power.