9:02 24/05/2017 Re: India Direct Correction
Previous post: "Major miners, at best, your own experiences aside, seem to be single digit return vehicles over the longer term." Should have read: "Major miners, at best, your own experiences aside, seem to be LOW single digit return vehicles over the longer term."
6:39 24/05/2017 Re: Raising the funny money!
"They will have had to pay coupons on bonds which they will no longer have to do when they buy them back." R - Apology, I misread it somewhat -- it's a straight debt reduction as you rightly point out. Games - must have been suffering from brain ache that day
18:14 23/05/2017 Re: India Direct
Rhigos, Indeed, you've mentioned these figures before. I first bought RIO maybe 10 years ago at around #45.00 or some such, I did make one or two trades around then that made a small amount of profit (I'm talking 5% here and there on a tranche), then it was mostly down hill for years along with the end of the super-cycle. In fact I made the point on this board several years ago now that for years the Chinese Premier(s) had been telling us all that they were aiming to transform their economy from an emerging economy with infrastructure building building on a large scale into a more mature, western style consumer led economy, yet many of us kept averaging down in mining stocks in the belief that somehow demand would continue and prices remain high anyway. The stupidity on my part was fantastic. The Chinese leaders were telling us year after year what they intended to do. The same guys who had turned on the super-cycle were warning they were going to turn it off. I was watching the merger and acquisition activity as people supposedly much better in the know than I were obviously paying no attention either. I had made a ton of money on Joy Global and to a lesser extent on Caterpillar, yet I was fully aware that their sales were dropping and disappointing quarter after quarter and had already pulled out of those bellwethers of the global mining industry. Meanwhile previously uneconomic reserves were being brought on line by the majors, including RIO, as usual about 5-10 years behind the demand cycle, and all were 'buying growth' by taking over other miners. I would guess more than 50% of all that extra production ended up being written off. RIO did a rights issue which I took part in and managed to make quite a nice bit of cash on, but the overall trend was ever downwards from about 2010. I would offer the excuse that I think the picture was slightly confused by the financial crisis, where a big drop off in demand was seen, but recovered quite sharply, but from the peak of that recovery the trend downwards started and is really still only just off the bottom it finally reached. A very steep drop due to the extraordinarily steep upward curve of 'the super-cycle-, which, of course, you caught from 1997, but which I only ever got the tail end of. Confusing the picture further was I was making money hand over fist on gold, and, not entirely deaf to the words of the Chinese, I had invested in FCSS, an investment trust fund focussed on the emerging middle classes in China, but which failed to make money year after year. That was partly due to Adam Bolton, the fund manager with a great track record in the UK behind him, being taken in by accounting practices in Hong Kong that would be considered fraudulent in the UK. He also purposely avoided infrastructure plays, and he included housing in that, which was where most Chinese consumers spent their first wave of wealth. That fund is now doing ok, and retail sales in China continue to put in double-digit growth figures month after month, whereas the fall in infrastructure spend has the general GDP figures down at 6.9% (I think was the latest) which is a bit higher than where the Chinese leadership said they intended to take it while the mining companies were still trying to grab more reserves for ever greater supplies. I've been repeatedly warned about India (and having spent time there, I'm quite prepared to take on board just about anything people say about the economy). However, as the fund figures show, despite hurdles being thrown up constantly against inward investment, the recent debacle (yet internally applauded) of withdrawing certain cash notes from circulation at short notice to catch out many non-tax payers who make up probably the greater part of the economy, and unbelievably stupid *internal* trade barriers, business continues to thrive in many areas, in a chaotic, Indian kind of a way. It wont ever be another China, it is far too chaotic and democratic for that, but the government bureaucracy is in place as is the population, so it will be just as big an economic super-power, its just a matter of time, in my opinion. The reason I went for funds is because a) no way was I going to find time to research Indian companies and b) probably just about any given company in India could fall flat on its face due to some financial scandal at any given moment. Funds, as you know, give you some protection from that. I always intended to put more into the same funds, or possibly another fund based on India, but a couple of blips of downward prices when I should have struck, were too close in time to my first purchases. After that it was a case of having maybe missed the boat. That's silly, really, I'm convinced there are many years more of 7%-8% growth to come out of India, maybe hitting double figures at some point (often predicted by IMF and others, but never achieved, as is typically Indian also) and i should really have invested more and probably will sometime this year. I've put it off because I did have exposure to India within some other funds (no longer the case, hardly) and I still had a large part of my original holding in RIO when I first bought the funds, which, as I've explained, Sam Walsh was saying India would be RIOs major source of revenue medium term (November 2014 he made that speech, from memory). I've been expecting a bit of a global economic wobble for some time now and have a whole list of things to buy after the next big crash, another Indian fund being one of them. When I visited India as far back as the mid nineties, the one thing that did strike me was the absolute yearning for education the kids had, especially when it came to computers and software. I was a pretty sharp, up-to-date IT consultant at the time and was quickly left behind in conversation by young coders, especially systems-level coders. When someone did you a favour, rather than accept money from you they'd ask you to send English computer text books for their children once you got home. Things are always 'about to improve' in India, and then it never quite happens as anticipated. However, as you can see from the fund performance, they've not done terribly, and they haven't completely shone either. I'm OK with 15% a year return, and they have out-performed that so far. They can afford a couple of bad years and remain within target parameters (after all, the 2 years in question you could easily match the performance in many different funds, especially the Aberdeen A.M. larger cap fund +20% Y/Y). Of course, if I can identify a couple of bad years coming up, then I'd prefer to side-step them by selling and re-buying when an upturn is on the cards. Meanwhile, I've had it with major miners really. I'm sticking with Glencore because of their marketing arm protection, but I'm not very happy with their growing dependence on Cu. They will take a big hit if there is a global downturn, Cu being the traditional indicator of how well the world economy is doing. But generally, all major miners have performed poorly in recent times. Lead times are so long and costs so great that there is always going to be an element of luck about timing with them. I prefer small cap miners which are much higher risk but more easily understood and multi-bag returns when you hit a good one (or if you sell at the right time in a bad one, come to that). Major miners, at best, your own experiences aside, seem to be single digit return vehicles over the longer term. I've had some minor success trading them short term, but no more than that, and I don't believe where ever going to see the likes of the super-cycle again. I'm also increasingly aware of the risks attached, Coal is a very obvious one (Glencore have recently put their coal assets up for sale in Australia, following in the footsteps of RIO) but more generally, as materials technology develops, it could be that demand for certain metals could fall off very sharply due to new breakthroughs. Also, a lot of metals are pretty-much 100% recyclable, and more and more countries are gearing up effectively to recycle scrap metals in significant amounts - and that makes supply and demand figures very hard to be sure about. Anyway, congrats on your RIO exploits. I think if we took a poll of investors since your first buy in 97 of how people have done in major miners, your results would tend to be an outlier statistically speaking. Or maybe its just me. Whichever is the case, it seems that, in general, it is better for me to commit much less of my portfolio to miners. I've done a lot of research into the sector over the years (much of it posted here and on the GLEN and ANTO boards) and the more I do the more obvious it is to me that my money would have been better employed elsewhere.
13:05 23/05/2017 Re: India Direct
Eadwig, You do not seem to have had much luck trading RIO. I have been invested in RIO since 1997 it was by far my largest share holding for a long time. In Feb 2006 it was 14.5% by value of my total share holding. I have traded RIO 34 times over the years. Cheapest I bought at was 738.5 in 97 and the most I've sold at was 6250 on 16 Apr 2008. I have never sold RIO at a loss. When they were in trouble in Dec 2008 I bought a significant amount of shares at 1075 and a couple of months later sold most of them at nearly double that price. Have made more money out of RIO than any other share I have bought. Wish I could do this well more often. My exposure to India is via VED. At the moment showing a 57% loss on average purchase price. Could be worse, at one time over 70%. Still a significant paper loss of 1.66% of portfolio value. India has regularly failed to perform as well as anticipated. From what I hear though things should improve in a year or so.
12:30 23/05/2017 Re: Raising the funny money!
One has to assume it works in their favour, ultimately.
12:27 23/05/2017 Re: EV Boom (again)
LKH, GLEN has started moving with copper price recently, now that it has such a large part of its revenues tied up with Cu, which I'd prefer it didn't, frankly. (I.e. more revenues balancing its Cu revenues). In fact its movements have been mirroring the Cu price far more accurately than ANTO's weird share price movements have. As a percentage of profit margin, ANTO will always be the biggest beneficiary of any Cu use. Games, "It's an awful lot of copper EW -- any idea how much lithium is needed?" Lithium amounts weren't mentioned, however, I expect this might be based on the Chinese government's possible decision to go with NMC battery technology as standard. Each of Manganese, Cobalt and Nickel. Ie. NO lithium. There is a very good article about Cobalt speculation here. The good part is running through the needs of various battery technologies. Bookmark it is my advice, I have a feeling its the sort of thing we might be checking quite often over the years - especially if we can get weight requirements like these from different sources. http://seekingalpha.com/article/4062008-chinas-green-vehicle-revolution-reshuffle-cards-cobalt Too many diagrams and graphs to copy and paste. sorry. Lithium still used in lots of other batteries, of course.
12:18 23/05/2017 Re: Raising the funny money!
gamesinvestor, "Rio Tinto said it will use the Company's strong liquidity position to further reduce gross debt." They are not raising money they are buying bonds they have previously issued (debt) with cash. They will have had to pay coupons on bonds which they will no longer have to do when they buy them back.
17:25 22/05/2017 Raising the funny money!
https://www.digitallook.com/news/news-and-announcements/rio-tinto-to-cut-debt-with-25bn-bond-buyback--2683654.html Does this make sense, raising more money to pay down other money at I assume a higher rate? Games
7:03 20/05/2017 India Direct
Two years ago, after Sam Walsh, the then CEO of RIO had made a speech basing RIO's medium-term prospects largely on India and the Indian economy. RIo were doing badly and looked to be going to do worse for a while, so I made a decision to withdraw from RIO and invest around the same amount in funds (approx 4% of my portfolio at the time) focussed on the Indian economy instead. Its almost exactly 2 years since I bought into the Indian funds, and I then withdrew from my RIO holdings as and when I could get a goodish price, but took losses of around 9%, I think. I did keep one tranche in RIO that I had had for years, and I eventually sold that at a loss too, but way above the price of the other tranches, which had been bought much lower. I did an update after a year, which I can't find, and here is update number 2 measured against RIO's performance over the same time. As the anniversary for this event was about 5 days ago, and it has been a volatile week, I've given RIO a generous valuation around the mid point of the week's prices. The funds have returned: Aberdeen Gbl Indian Equity R2 GBP (0PYNID) +40.69% (60% weighting) Kotak India Mid Cap A GBP (KAIAMI) +63.5% (40% weighting) RIO over the same 2 years: 15th May 2015 @2930p to 15th May 2017 @3080p (+150p + 277p div = +427p Total or 14.6% (100% weighting) RIO closed the week at 3167p, so we could be generous and give them that price, adding another 87p in returns. That would give a total of 514p in returns.or +17.5%. Either way, I'm pretty convinced I made the right decision here and these figures seem to prove it, despite the political volatility in India which has been reflected in stock prices to some extent. The one thing I definitely got wrong was the weightings of the funds. I went for safety with the larger weighting. I should have gone the other way. Who knows, when I report next year, it may look like a wise decision.
9:35 19/05/2017 Top pick
Rio Tinto: RBC upgrades to Top Pick with a target price of 4400p. ambitious what? Games - maybe I should add to this? -- or maybe.......
9:48 18/05/2017 Re: EV Boom (again)
Games, "I assume Glencore will benefit most out of the trio BHP-RIO-GLEN?" I expect so. I have BHP-RIO-ANTO (combined 5.1% of wad) and expect that ANTO would do better than GLEN if copper demand surges as a result of EVs as ANTO is a virtually pure copper play. LKH at the LK Wash & Valet
9:03 18/05/2017 Re: EV Boom (again)
EW -- I assume Glencore will benefit most out of the trio BHP-RIO-GLEN? Seems like a reasonable assumption as the growth seems inevitable -- Tesla has changed the whole game and everyone else is in catch up but desperate to put electric at the forefront of new sales. It's an awful lot of copper EW -- any idea how much lithium is needed? One thing to bear in mind though, is that the current battery technology will ultimately be superseded by newer technology (possibly lithium air or sumat) that requires less of all of these elements. Games -- holding BHP-RIO-GLEN (collectively at a modest 2% of my wad)
9:28 17/05/2017 EV Boom (again)
This time Glencore CEO Ivan Glasberg is at it. This is a copy of something I posted on the GLEN board earlier: "Glasenberg says the rise of electric cars will significantly boost demand for minerals including copper and lithium in the coming decades. Electric vehicles require more copper wiring than standard internal combustion engines; for example, the battery in an electric car contains ~38 kg of copper, 11 kg of cobalt and 11 kg of nickel, and Glasenberg says those materials, along with maganese [sic - manganese they mean. GLEN produce all these metals, except lithium, which I hope they steer clear of- Eadwig], stand to benefit from more demand for electric cars. European sales of alternative fuel vehicles, which include fully electric cars and hybrid vehicles, jumped 36% Y/Y during Q1 to more than 235K."
12:42 02/05/2017 NEW ARTICLE: Chart of the week: Why this blue-chip should rally from here
"Has the Rio Tinto rally ended?I have been covering these shares since LSE:RIO:Rio Tinto made their lows late last year when I turned bullish. My latest coverage was on the 6th March when the shares had rallied to the A#36 area from last year's ..." http://www.iii.co.uk/articles/409860/chart-week%3A-why-blue-chip-should-rally-here
12:28 25/04/2017 Re: Goldman down on mining
Games, Ever since the giant vampire squid predicted $200 oil when the price went to $100 I've viewed anything those GS guys say with intense scepticism. I've got 5.2% of my shrunken wad in miners (RIO, BLT, ANTO and S32) and I intend to leave it at that sort of level. Some exposure to vital raw materials seems a sensible thing to maintain. LKH on the flybridge