The hardest thing to do is not spend money when the boom is on. We all know commodity prices go up and down, we all know cycles will go through the market, but we do not know when they will stop. One of the great examples is the mining industry, from 15 plus years the growth of China propelled up commodity prices which meant money was flowing into the big global mining companies. This meant they were buying up more resources, often not close to their core assets because they could. With the increasing commodity prices, deals were coming and closing and everyone in the system was happy. China has slowed down their growth, and the major mining companies are awash in debt. Anglo American company is in debt $ 5.6 billion and CEO Mark Cutifani said part of the problem was we spent money on stupid things. To get out of the mess, they do have some great assets ( relatively low cost mining and huge reserves) and will have to scale back the size and scope of the company. Assets that were bought near the height of the commodity boom will have to be sold.

Linking to dividend paying stocks, when the purchases were made and expenditures to bring the assets to market, there were many reports which showed the large number of pluses why the spending should be done. There were very few negatives, for the forecasts did not know when the cycle would change. When the cycle began to go down and prices fell, Anglo American kept spending for the clues were not obvious (although hearing about ghost cities in China seems to be a good clue). When the decline happened all the global mining giants felt the pinch of lower commodity prices, some a little better than others, but what do you do when the market collapses? The lesson might be when the boom is on be prepared to exit quickly for the downtime will be years to work through, maybe next year is a great time to buy the best assets at a healthy discount.

There are more questions than answers, till the next time – to raising questions.