Global Mining Investing $69.95, 2 Volume e-Book Set. Buy here.
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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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Monday, August 18, 2014

The market upside is looking a little 'tentative' in the short run

Asset prices are relatively high. In such times, you have to question when or what can undermine them, and what will not. The reality is that the stimulus of the previous few years has meant that conditions are rip for economic growth. There is however considerable concern about the sustainability of that growth given that a lot of the past growth was fuelled by debt finance in the West. You might wonder however why we cannot expect more of the same. The reason is that there is considerable concern about the prospects of higher interest rates. The reality is that there is no reason for central banks to raise interest rates more than modestly to end the 'ultra-easy' monetary policy. The reason not to do that is simply that the economy is not strong enough. Those fears are however positive in some respects because 'fearful' mortgagees are rapidly paying off their debts, and that is of course preparing the way for another cycle of spending moving forward

For these reasons, you can expect a sustained growth in the global economy, on the basis that:
1. The fundamentals are good, i.e. Asia and other emerging markets keep getting richer, with strong rates of economic growth, income growth, high rates of urbanisation, strong population growth. Its all good.
2. Interest rates are ultra-low, so moving back to neutral policy will not greatly affect spending since that nominal rise in interest rates will only be taken when it won't hurt spending. i.e. The Fed will wait for signs of an overheated market before it raises raises, to establish a sustainable growth outlook
3. There is no sign of inflation simply because there is no wages pressure. Moreover there will not be wages inflation for another 15 years or more, i.e. There will be no wages spiral for over a decade. So we don't need to worry about 'cost-of-living' inflation.
4. There is every reason to expect asset inflation. This process has been well-entrained since 2000. Ultra-easy interest rates have been around for a long time. The Fed and the Western governments were not interested in sustainable economic policy, they were interested in running the economy as 'fast or as hard as they could get away with', without paying the consequences. This might strike people as sensible. i.e. Its actually the same policy as applied on the Titanic. Now, do they understand the global economy so well? Well, you'd have to wonder. They simply can't know what can thwart it. The greatest threat would have been SARS. But they might well get away with it. In any respect, the fundamentals are good. So whilst you can expect bursting equity and property markets, you can expect them to rebuild or recover in the current market. You should however look to trade these positions however to maximise wealth. This means using 6mth or shorter charts to pick entries and exit points.

On that note, looking at the following charts for the Dow Jones, we can see that:
1. The long term trend for the market is at its highs, and that it has downside to 15,000 points. I'd even expect it to go to support at 14,810 points.
2. The short term 6 month trend has seen the market rise back above the Moving Average. We will be interested to see evidence that this trend continues. Certainly the 176 point rise today is a positive lead.
We should not however overlook the fact that the market is getting peakish, and there is a need for a little short term scepticism if we are going to trade this market efficiently.

I'm looking for a market peak around 17,100-17,300 points; from which I think you can expect a substantial correction .The most logical correction would see a fall back to the 14810-15,000 point level. One already gets some sense that one's buying is getting 'sold into'. i.e. One gets the sense that for every order one places, there is a 'bigger player' getting out. This is most apparent in the less liquid stocks. Looking ahead, I'm expecting a very lucrative recovery from any sell-off. I'm expecting the next rally will offer a lot of profits based around a lot of Mergers & Acquisition (M&A) activity. This next rally I think will get consumer spending momentum going again.





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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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