Don’t believe everything you hear

The head of Australia’s Fortescue Metals reassured everyone that there wouldn’t be an oversupply of iron ore. He pointed to stability in China, an upturn in demand and new supplies would be slow to come onstream. He added that demand is more important than supply.

Have we learned nothing? Very few CEOs of mining companies, or any company, are good fortune tellers. They never saw the collapse of the world’s economy in 2008 or the prolonged slowdown in China. They are always the first to announce good news and the last to acknowledge reality.

No one really knows what is going on it China and no one trusts Chinese statistics. If China says growth rates are slightly below 7%, which would have triggered a market panic a few years ago, but all the indicators point to a lower rate. Some economists say that China’s economy has been getting worse, pointing to deteriorating corporate finances.

And who would ignore supply. At best it’s an unbalanced equation.

The bottom line, never trust what any CEOs say, they are paid to wear rose-color glasses.

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