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Resource boom will lead to bust, claims fund manager

July 28th, 2011

AUBJ – July 27 –The booming Australian resources sector is a bubble waiting to burst, a leading fund manager has claimed.

Simon Marais, managing director of investment management firm Orbis Australia, said: “It’s been so good for so long, and commodities are called commodities because for the vast bulk of them, they’re not rare, and there’s nothing to distinguish them — they’re simply price takers.

“There are also periods where they do extraordinarily badly as the 15 or 20 years before that, and it’s always dangerous to buy these things once they’ve done well for five or six years.”

Marais said that the period of over-investment taking place in the industry is currently undergoing would lead to an eventual collapse and remarked that the investors should channel their interests in safe-haven sectors such as Australian utilities.

“Everybody is pouring money into increasing capacity… and what happens eventually, is the excess capacity overwhelms the demand,” he commented.