The Commodity Forever Cycle (23/10/2012)
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
Gary Rutter
:
Excelent “rant” Roger. Australia’s biggest company dig’s stuff out of the ground and sells it for what ever price it can get, is worth just over $100 billion and going down. America’s biggest company sells the latest technology for way above market average price’s, is worth close to a $trillion and going up. Australia may be the lucky country, but it sure ain’t the smartest!!
A great piece. Cheers. Gary
Roger Montgomery
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Gary,
Perfect point Garry, hope you don’t mind if I Tweet that!
Andrew Legget
:
Very good “rant” Roger. What you mention about the pricing power of companies is a very important thing to remember. At the end of the day there is no real difference between iron ore from Australia and that from some foreign land so there is no incentive or competitive advantage for the Australian businesses in that regard.
Contrast this with a company like Cochlear or ARB where patents, innovations and reputation mean that they can raise their prices without too much fear of an adverse reaction from their customers.
I still remember a quote a year or so ago from the CEO of one of my overseas watchlist companies, Tiffany’s. Basically translated it simlpy said “our costs have increased so we have had to raise our prices but our customers don’t care” (obviously this was said with more corporate PR speak). Now that is the type of company i like to own.
Of course, there may be a breaking point where they are left worse off due to a price increase but they know this point better than I do and by doing it gradually then it isn’t a likely scenario that this would be hit in the short term.
tom.newton.944
:
Hi Roger,
I’ve been “watching” you for a couple of years now……bought the book when it was first released….it changed my world (and super fund) and have read your blog regularly. Congrats on that great call on the resources boom. Your image of the train carriage with 50,000 Indians on top, will stay with me for some time. It saved me big time. Recently I have subscribed to Skaffold. Its very helpful and pays for itself without doubt. I presume that it will be upgraded over time. I don’t envy your job as fund manager. It must be tough to employ your fund’s inflows in this market……so few good stocks with both liquidity and value. My portfolio is looking pretty damn good at the moment, thanks in a large portion to you. Got smashed by SMX today, though, but the thing is…Skaffold gives me perspective…I bought some more. Ha! when I fire it up tomorrow it will probably be a C5..Good health & good luck, Tom