Global Mining Investing $69.95, 2 Volume e-Book Set. Buy here.
Author, Andrew Sheldon

Global Mining Investing is a reference eBook to teach investors how to think and act as investors with a underlying theme of managing risk. The book touches on a huge amount of content which heavily relies on knowledge that can only be obtained through experience...The text was engaging, as I knew the valuable outcome was to be a better thinker and investor.

While some books (such as Coulson’s An Insider’s Guide to the Mining Sector) focus on one particular commodity this book (Global Mining Investing) attempts (and does well) to cover all types of mining and commodities.

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Tuesday, January 29, 2013

Outsourcing and offshoring

If I listen uncritically to these clowns at The Economist I might be forgiven for thinking that the Universe is about to tilt on its axis. Again? Well, I think not. Listen to this video post by The Economist and think about what they say. I acknowledge that there is some truth, and certainly value in what they say, if only by being wrong, but I'll offer the following rebuttal.


There are some problems with these arguments:
1. Guangzhou is expensive - there are still rural China and other countries like India, Pakistan, Bangladesh, Africa.
2. Just land costs can be a big factor for some companies in West
3. Western labour prices are cheap because they have not been used...so unskilled labour is cheaply priced in West compared to the runaway high cost of skilled labour.
4. The productivity upside in emerging markets is greater
5. Automation is not a new benefit - it will always be there.
6. There are strategic reasons why you invest in third world - accessing new growth markets
7. A great many components are still made in China...so don't you want to establish near your component source? If not your market for strategic reasons.
8. They take a case of a Lenovo plant to be built in USA - ignoring the fact that Lenovo will have many plants around the world, and its parts will mostly come from China/Taiwan/Malaysia. They ignore the strategic motivation for US basing for US customer customised assembly. This is not common, and true for high-value, customisable product.
9. The high cost of shipping is reason for localised production and the focus of global growth is towards Asia & emerging markets, not back to uncompetitive, cost-stripping developed countries, which have zero-population growth. If they greatly expand their immigration programs, this will make a difference. My guess though is that these Asian immigrants will buy much of their products from Asia on their annual trips there.

I acknowledge that this trend is occurring. I would however suggest that it will take 20 years rather than 2015 as they suggest. It is in fact in the service sector where this is happening the greatest. Now consider that Asians are increasingly being allowed to come to Western countries on a work visa if they are under 30yo. This is a great opportunity to develop language skills and cultural appreciation. Of course the appeal is lost if you end up speaking your native language in a souvenir shop. Certainly the ready access to global cable is not enough for people to speak English well. But its a big start on their parents. The biggest obstacle for the people in these cultures is values I would suggest....and the internet is transformational. The Philippines is a clear leader in this regard.


Asian property markets outperforming Japan Foreclosed Guide Philippines Property Guide
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The Philippines property market remains one of the strongest in Asia thanks to rising incomes, rising population and rapid rates of urbanisation. The administrative reforms of the Arroyo government have given way to improved administration under Aquino. ASEAN countries can be expected to achieve even greater price gains than Western markets, demonstrating that this super cycle is far from over.

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Investment Strategy

If you are investing for the long term, you still need an investment strategy. Dont be fooled by the rhetoric of fund managers. The reason they advise you to 'buy & hold' is because they dont want to compete with you in sell-offs. Markets and industrial sectors are cyclical, so they demand trading to get the best returns. Fund managers actually cant hope to match the performance of small investors (if you are half good) because they have to manage huge amounts of funds and charge you a fee besides.
MY ADVICE is (i) look at a range of market indices and decide upon what level of correction would give you the justification you need to get in & out of the market. It might be a 5-10% retracement or a break of trend. (ii) Diversify if you dont have an intimate knowledge of the company or management. More than 30% in one company is aggressive.

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The NZ property market is shaping up as one of the most attractive property investment markets for the next few years. High yielding property and the collapse of the NZD make NZ the perfect counter-cyclical investment if you buy right! In addition, there is no capital gains tax, transfer taxes, VAT/GST or wealth taxes in NZ, so rest assured that NZ property is tax-effective! Learn more now!

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