It’s an act of heroism to be a contrarian investor amid today’s market meltdown. But it’s at times like these when others are losing their nerve that you can make your fortune. The question is whether investing in beleaguered mining giants Anglo American (LSE: AAL) and Glencore (LSE: GLEN) is brave or simply crazy.

Crazy days

Any investor who tried to catch these two falling knives over the last year will be counting their fingers today. Anglo American has lost 80% of its share value in that time, while Glencore is down 72%. The bloodbath has continued in the last chaotic week, with their shares collapsing 20% and 12%, respectively.

Both company’s woes can be summed up in a single word: China. The long-standing question over whether the world’s second-largest economy is facing a hard or soft landing looks settled, and the answer isn’t the one we wanted. On Thursday, China posted the wholly unwanted record of having its shortest ever trading day, with the stock market closing in just 870 seconds after regulators invoked its new (and now abandoned) circuit breaker for the second time in a week. The share selling frenzy has been described as “hysterical”.

Burn baby burn

The Chinese government is burning through its reserves as it tries to prop up its currency and prevent further capital flight. But even if it avoids a hard landing, its appetite for commodities will continue to diminish as the government shifts its economy away from industry and infrastructure and towards domestic consumption. If Anglo American and Glencore are to escape their plight they can’t rely on a revival in Chinese demand, which is bad news, given that this is what drove them during the glory growth years. No other country is set to pick up the slack.

Anglo American has responded in pretty much the only way it can, by cutting investment, selling assets and slashing jobs, as well as refocusing the business on its most profitable areas. It has also scrapped its dividend. If it hadn’t, it would be yielding an insane 24%. Today you can buy the stock for 244p but Barclays Capital has set a target of 225p, suggesting it could have another 8% or so to fall. Given current volatility, it could manage that in a day. With pre-tax profits expected to fall from £1.54bn to $1.1bn this year, and earnings per share (EPS) set to drop a further 36%, contrarian buyers should be under no illusions about the scale of the threats that lie ahead.

Lonely are the brave

Troubled Glencore has slashed capex and cut its debt burden by $8.7bn, while targeting another $3bn of reduction measures to shrink it to £13bn. It also boasts $2bn of free cash flow at spot prices and has increased its liquidity to more than $14bn. It will need every dollar, as commodity prices and demand continue to struggle. Trading at just 5.5 times earnings, it’s certainly cheap and its prospects look better than Anglo American’s with earnings forecast to rise from £859m in 2016 to £1.16bn this year. EPS should jump 19%.

My problem is that I struggle to trust any forecast at the moment, given the China meltdown. If I had to choose, it would be Glencore. Frankly, I’m not brave enough to buy either today. Maybe one day I’ll rue my cowardice.

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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.