I hear what you're saying: What about all the doom and gloom in Europe? Isn't America, still the world's biggest economy, going to fall off the fiscal cliff? Isn't China's growth coming off?
Radar has two words for you: priced in.
As a fund manager said to me, on the demand side, “if these economies muddle through, it won't take much in terms of growth to see commodities prices maintain their current levels because there is so much despair out there.”
On the supply side, it's actually a positive to see the big resource giants like BHP Billiton and Rio Tinto pulling or delaying big projects. This means that the supply of commodities such as iron ore and coal will remain tight for years to come.
Long before the stock broking analysts raise their commodity price assumptions and increase their net present values (NPVs) for the miners, it will be reflected in the share prices. And the big returns will be in the little miners. In the words of yet another small cap fund manager:
“The smaller miners are producers with enormous leverage. You're talking about a 10-bagger if commodities move up and the production issues get sorted out.”