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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Wednesday, August 27, 2014

An imminent correction in global equity markets is coming

In previous blogs I have alluded to the fact that the next 10-15 years will be punctuated by a succession of boom-bust events. The reason is that the fundamentals for the global economy are very good. The problem is that there is a process of adjustment under-way, and the Fed and other central banks are making sure that it comes sooner rather than later. They are doing so because, having caused an economic crisis by attempting to sustain the unsustainable boom, they are now attempting to sustain the 'normalcy' of the current 'persistent recession'. Well, recession if you are unskilled labour in the West. If you are skilled, or living in emerging markets, you're probably not going to feel what is about to happen.
I'm expecting in the next week, maybe even overnight, a correction to start in the S&P500. I expect the S&P500 to start falling from around 2000 at present to a support level of 1600pts. That's a 20% fall. I'm actually expecting the ASX-200 (Australian) market to fall back from 5624 to around 4950-5000 point mark. The reason is that resources are priced low, so the Australian market is relatively subdued anyway.
In either case, after these 'asset price' corrections, these markets will recover quickly, and I fully expect that by the end of 2015, they would have reclaimed those losses. The reason is because the current rally was too strong, too fast, and the evidence or justification for it will probably not emerge to later in the year.
I reiterate the global market outlook is fundamentally good. Its just in the short term assets are overpriced, and there is a need for a correction to allow reasonable value to be sustained. The reason I've expecting a correction is because:
1. Asset prices are very high - the best evidence is probably this Forbes media article, which was published back in July 2014. Since then, the S&P500 has climbed even further to 2000pts. They didn't pick a 'level'. They were purely going off fundamentals. Well, now you have a technical 'indicator'.
2. The uptrend has been broken - see the chart above - care of Google Finance
3. The S&P500 is at an important psychological level - its not breaking the 2000 point level convincingly, but rather wallowing around it. I would argue that it is being sold into. Even in the resources market, for the last 2 weeks, I have sensed that the market was being 'sold into'. People were unloading, expecting a correction.
4. You don't get a rally after a persistent rally like the one we've just had. The market needs a correction. It has been 7 years since the last correction - so we are due for another. Now, also note that this 'bubble' is bigger than the last 'bubble'.

Now, there are people arguing that this will be the end of the world...swarms of locusts will inherit the Earth. I'm not in that crowd. I'm arguing that this is simply an opportunity cost that you can avoid. It would be sad if you retained your shares now, because you can buy them back cheaper soon. But if you don't, do it at a reasonable price, just hold them because you'll probably get a bad re-entry price anyway. In any case, you probably have cash to buy more later - and you should do that. Don't sell during the collapse because you might get really bad prices. Maybe you want to hedge your bets if you are uncertain...if stocks are akin to gambling to you. I suspect however there will be some logic in what I say. I'm not even arguing that there is some imminent rise in interest rates. I think interest rates are staying low. There might be a modest increase in some countries worried about 'bubbly asset prices', but it will be intended to discourage you buying property rather than to 'tighten lending' to slow the economy'...in which no one is spending except on investment property. 

Whilst you are waiting for this correction, which is not long off, I hope you will take the opportunity to acquaint yourself with my latest publication 'Global Mining Investing'. These will be great stocks to own, whether to invest or trade moving forward. We actually want to teach you how to invest; but moreover we want to use investing to teach people how to think analytically. It will have applications in other areas of your life. Critical thinking is an undervalued tool, and we will be exploring stocks using your mind and our experience. We are discovering you from outsourcing responsibility for your money. We want to empower you, so you develop a sense of efficacy in investing. Of course we want you to profit as well - financially as well as intellectually. But we think it will mean more to you if you made the money yourself. Some of you will not have as much time. You'd be surprised how much time you do have when you are supported by other investors, potentially your partner and kids, as well as your passion for learning and profiting from your learning.

Asian property markets outperforming Japan Foreclosed Guide Philippines Property Guide
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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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