Overseas Markets | ASXnewbie.com - Part 2

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Weekly Ramblings of an Australian Stock Trader - incorporating ASXweekendtrader.com
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Category — Overseas Markets

The Poster-Child for the US Shale Gas Revolution.

The Poster-Child for the US Shale Gas Revolution

There’s been plenty of celestial action in the last few days.

An asteroid, 2012 DA14, missed the earth by a whisker on Saturday morning.

When I say whisker, it missed us by just 27,000 kilometres. But for context, the moon is 384,000 km away, so the asteroid was pretty close. If it had hit planet earth it would have wiped out everything for at least a few hundred kilometres.

And just when all the telescopes were pointed that way, another asteroid snuck up on us from the other direction. It burnt through the Russian skies, injuring 1,000 people as its sonic boom shattered windows.

Two totally unrelated one-in-a-century asteroid events in a single day! Where’s Bruce Willis when you need him? [Read more →]

February 21, 2013   Comments Off

Here’s Why I’m Proudly Bullish About China’s Economy.

Here’s Why I’m Proudly Bullish About China’s Economy

It amazes how anyone can be bearish on China’s economy  when its has just grown FIVE-FOLD in the space of ten years.

That’s right. My name is Alex Cowie — and I’m bullish about China.

It’s not exactly the most popular view in this office, but it’s what I believe.

We’ve had a great few emails recently asking us what we’re playing at, like this one from Phil:

‘Did I miss something? I’m not sure whether you guys have short memories, but what happened to your big predictions of China going bad?’

Well, one of the good things about working here is that no one tells you what to believe. There is no ‘party line’ we have to tow. Most of the Editors are bearish on China.

But I’m pretty much the odd one out. I’ve been unashamedly bullish on China for years now.

In fact in the January Diggers & Drillers newsletter, I’m shouting my pro-China view from the rooftops.

Because thanks to China, I actually think that the big trade of 2013 is to buy the best of the Australian resource market’s beaten up  junior mining stocks

Now I’m not saying this because China just announced the first increase in its annual economic growth rate for two years. If you missed it, on Friday the December quarter GDP jumped to 7.9%, from 7.4%.


China’s Economy Grows for the First Time in Two Years

China's Economic Growth Over The Years

Source: Trading Economics

Any kind of improvement in China’s growth statistics is good news for resource stocks of course. As the world’s biggest consumer of commodities, Chinese economic growth will generate a jump in commodity demand.

But a single jump in quarterly growth isn’t the reason I’m making a Tarzan-like battle-cry for copper, iron ore and coal.

It’s something else altogether — something political — that makes me believe that 2013 will be the most incredible turn around year for the beaten up mining juniors.

Now I can’t give too much away as that would be unfair to paying readers of Diggers & Drillers. But I’d like to share with you a snippet to give you an idea of what I think’s in store for the year:

…I want to go on record today as saying that CHINA IS DOING JUST FINE.

 The China bears like to overlook that the latest growth rate of 7.9% is above target (and never mind that 7.9% is still stellar growth by any standards).

And let’s remember that 7.9% growth today adds far more to China’s economy — and therefore requires more commodities — than 13% growth did when China was a third of the size.

 So I want to start my first letter of the year by telling you the China-bears are about to be forced to eat their words, as it drives the next leg up in resource stocks. This month’s copper stock tip won’t be the only one looking at a 260% gain.

…This [infrastructure spending] will require vast amounts of commodities. I reckon mining stocks are just about to be reminded of what it feels like to have China screaming for more of their product.

And the good news for you is that this comes right at a time when junior stocks in the industrial commodities of copper, iron ore and coal are dirt cheap.

To me this spells out the perfect recipe for what should be the big trade of 2013.

And they really are dirt cheap.

After selling off since early 2011, many good quality mining juniors in iron ore, coal and copper are now less than half the price they were two years ago.

This includes the ones with good, profitable projects, and strong growth prospects ahead.

The first Diggers & Drillers tip of the year is a copper stock, but there will soon be other tips in juniors involved with iron ore, coal, as well as the less well known minor ingredients of steel.

Starting with copper was a ‘no brainer’.

The reason was the price had done next to nothing for 12 months.

That may sound like fuzzy logic, but think about it. There was every reason for copper to collapse last year — the markets were about to crash, China’s economy was supposedly collapsing, and the financial markets were apparently about to implode — Yet Copper held firm all year.

No Worries for Dr Copper in 2013

No worries for Dr Copper in 2013

Source: Stockcharts

I’m expecting the Chinese economy to have a good year in 2013, and as the world’s biggest consumer of copper by far — at 43% of global consumption — the copper price could be in for an increase. And sure enough, China has just set an all-time record for copper imports.

Back in 2010 I made the same case, and the other guys here thought I was nuts. But you can see in the chart, copper rose by over 60% in twelve months.

Now I’m not expecting that to happen again, but a 10-20% rise is possible. The technical chart looks quite bullish to me, and the fundamentals look good too.

So copper was the first industrial metal to kick the year off with.

But as readers of Diggers & Drillers will find out over the next few months, coking coal and iron ore are in hot pursuit.

Dr Alex Cowie

Editor, Diggers & Drillers

This article is contributed by Money Morning. Click Here to Subscribe to their free newsletter.

January 25, 2013   Comments Off

‘The Chinese Economy Will Pick Up in 2013 and So Will the Stock Market’.

‘The Chinese Economy Will Pick Up in 2013 and So Will the Stock Market’

For a view on the future of the Chinese economy, who better to ask than its businessmen? I had the chance to talk to two while I was in Hong Kong and Guangdong over Christmas.

The first, Jim, never went to school. He was working in a Hong Kong factory at the age of nine, where he made just £4 a month — all of which went to his family. Today, he lives in a large house in Hong Kong, has four cars, is a member of the prestigious Jockey Club and thinks nothing of betting a few thousand pounds on the horses at Happy Valley.

Jim has three fine and well educated sons, but he wonders whether they will do as well as he has without the incentive of an escape from poverty. After working for others for several years, he set up his own clothing factory in China, he made a good business supplying customers in Europe, and provided many jobs for loyal and grateful staff. [Read more →]

January 24, 2013   Comments Off

Why U.S. Auto Companies Are Betting Big on China for 2013 Sales.


A combination of hard work and good fortune will pay off for U.S. auto companies in China in 2013, with Ford Motor Co. (NYSE: F) and General Motors Co. (NYSE: GM) both expected to book record sales.

Both U.S. auto companies set sales records in 2012. Sales of Ford vehicles in China rose 21% year over year to 626,616.

GM, which is neck-and neck with Volkswagen AG (VLKAY) for the title of auto sales leader in China, reported combined sales from its joint ventures of 2.85 million vehicles, a year-over-year increase of 11.7% over 2011.

Both Ford and GM have built factories in China, and both U.S. auto companies plan to continue expanding there in 2013.

Ford plans to introduce 15 new models in China and double its production capacity to 1.2 million vehicles by 2015. The company also plans to double its network of dealerships in the country. [Read more →]

January 17, 2013   Comments Off

What the US Housing Industry Desperately Needs.

What the home and mortgage market needs - and it will not recover until then - is a rebooting to current values. To do that, principal amounts must be reset. They need to be reset not by government force, but by letting the market work. Let bankrupt mortgage holders fail.

The housing market has gone nowhere since the meltdown. Some 14 million homeowners are underwater on their mortgages. A good percentage of those people have stopped making their monthly payments.

In the initial wave after the housing crash, there were millions of strategic defaulters: homeowners who could afford to make the payments, but walked away because they believed it was the most prudent financial decision to make.

Now there are vast numbers of strategic squatters. People who could pay but aren’t. Instead of walking away, they remain in the home knowing that it may be not months, but years, before the lender will evict them. The average foreclosure now takes 728 days. In a few states, it’s over a 1,000 days. And this is after the lender has filed a notice of default. Some loans have gone 500 days delinquent before Bank of America has filed a notice to start the process. [Read more →]

January 9, 2013   Comments Off

Beware the Bear in the US Market.

If you want to send a roomful of 100 wealth managers into an icy chill, have Russell Napier address them. This is exactly what happened at Citywire’s Smart Beta retreat at the Four Seasons Hotel in Hampshire recently.
Napier’s presentation, ‘Deflation in an Age of Fiat Currency’, is thought-provoking, and the precise polar opposite of investing as usual. A wry and picaresque speaker, he starts with some conclusions. Among them:

- To reach record lows [akin to those on offer in 1921, 1932, 1949 and 1982], US equities will have to fall by more than 60%.

- Central banks are straining to produce inflation, and developments in emerging markets (i.e. China) suggest a deflation shock is now likely.

- The capital exodus from China is disrupting the creation of inflation.

- In the search for yield, cash is trash ‘so now is the time to own cash’. (This is an example of his dry contrarianism.)

- US Treasuries could repeat their 83% price decline of 1946-1981. [Read more →]

December 9, 2012   Comments Off

Two Reasons to Steer Clear of the Chinese Stock Market.

Here are some things that we know. We know that long-term stock market returns are utterly unrelated to economic growth; instead, they are related to the price at which you buy your stake.

Buy a market when it is cheap, and history tells us you will make good long term returns; buy a market when it is expensive, and history tells us you will not.

We also know that when a market is cheap, sentiment will be such that everyone will have a reason why it will stay cheap forever, and must be avoided at all cost. The clever investor is the one who ignores the noise and looks at the price.

Beware the Bear Market Trap
This brings me to the Chinese stock market – people keep telling me how cheap it is. Brian Dennehy of fundexpert.co.uk sent me a chart this week showing how the major markets have performed since October 2007. The S&P 500 is down 10% and the FTSE 100 is down about 11%. [Read more →]

November 22, 2012   Comments Off

No Exchange Benefits More from QE3 than the TSX Venture.

This article is contributed by Pinnacledigest.com. One of the TOP sites for up to date information on the Canadian and US Stock Markets. For more information subscribe to their free newsletter.

Aaron Hoddinott's picture
Written by Aaron Hoddinott

“The Fed confirmed Thursday what many had expected - that it would buy US $40 billion worth of mortgage backed securities every month, launching its third round of quantitative easing on Friday. And it acknowledged it will continue to print money to make those purchases even after there are signs of stronger growth in the economy and employment”

The Financial Post

Bernanke has made it clear that his only solution for the US economy is to throw more money at it- and quite frankly, what else can he do?

In Bernanke‘s defense, the Fed‘s dual mandate, which is overbearing in my view, is to ensure full employment and combat inflation. He can certainly combat inflation, just look at what Volcker did in the 80′s. However, for the Fed to ensure full-employment, it would require a conducive government which provides an economic and fiscal environment which promotes growth. [Read more →]

September 17, 2012   Comments Off

Is Zimbabwe the Next Emerging Market Dynamo?

This week we learnt that China is about to overtake Japan and become the world’s second biggest economy.

Who’d have expected that 20 years ago? Not many people, from my memory.

China is a classic case of what can happen when an emerging economy really takes off. And it has spurred investors everywhere to try and unearth the next big thing amid the ranks of ‘frontier’ markets.

And you can’t get much more frontier than Zimbabwe. It’s had the most horrific economic problems. Yet one of the UK’s top fund managers is starting to invest in the country.

So is this the real deal? Or will Zimbabwe still be a basket case come 2030? Let’s take a look… [Read more →]

September 3, 2012   Comments Off

TSX Venture Summer Doldrums.

This article is contributed by Pinnacledigest.com. One of the TOP sites for up to date information on the Canadian and US Stock Markets. For more information subscribe to their free newsletter.

Dear member,

The summer doldrums have officially arrived. It’s late July and there is no better time to spend with family and relax. The summer is also a great time to evaluate your portfolio and look for opportunity while many professional investors are vacationing.

Thanks to the lack of participation (seen every year at this time) and the general uncertainty in the world economy, it’s easy to forget about the market. If you are vested in fundamentally sound deals, well positioned, with cash in the bank, forgetting about the market is somewhat relaxing in itself.

Although many investors will opt to wait until September, October or even November to re-enter the market, our team believes this ‘laissez faire’ approach may prove costly.

While valuations and volume continue to hit extreme lows on the TSX Venture, our team believes a positive rebound, following Labor Day weekend when participants re-enter the market, will occur. [Read more →]

July 25, 2012   Comments Off