I’ve blown up the balloons, put on my paper hat and poured a celebratory glass of champagne.
The reason? More a little further below.
My celebrations have nothing to do with Kevin13.
They have nothing to do with the resurgent stock market, up another 88 points or 1.86% in early afternoon trading today.
Source: The Age
And it’s nothing to do with the still plunging gold price. Although it’s nice to be proven correct in consistently calling gold a bubble, we’re not ones to dance on other’s graves.
Today I’m celebrating slower-than-forecast economic growth in the U.S., with Fed Bank of Richmond President Jeffrey Lacker saying on Bloomberg…
“We’re going to continue to get growth at a fairly disappointing rate going forward.”
Global markets have been in a funk since Ben Bernanke announced a tapering of the U.S. Federal Reserve’s stimulus “money printing” measures.
But slower economic growth means the Fed may slow the tapering process, or even not taper at all.
Cue the celebrations.
The Dow rose 150 points overnight, back in sight of the 15,000 mark.
The S&P/ASX 200 has got 5,000 back in its sights, having slumped as low as 4,632 on Tuesday.
It’s high time we had something to cheer about.
We investors have such short memories. The ASX has risen around 17% in this financial year. Whichever way you look at it, it has been a wonderful financial year for shares.
Mining stocks taken to the cleaners
Yet if I’m guessing correctly, many investors are focusing on the last month or so, a time when our market has fallen into ‘correction’ territory, with the share prices of many mining-related stocks having been taken to the absolute cleaners.
My own portfolio hasn’t been immune either, despite it benefiting enormously because of the crashing Aussie dollar, courtesy of its exposure to U.S. stocks like Berkshire Hathaway (NYSE: BRK-B) and the Motley Fool Share Advisor recommended 3D printing stock that’s revolutionising the world. I’m already up 300% on my purchase price, and with Motley Fool co-founder David Gardner including the company as one of his favourite stocks, the future could be even brighter.
On the flip side, my poor old Lynas (ASX: LYC) holding continues to flounder, now down 60% from my purchase price.
Luckily it was a relatively small position to start with, one that’s obviously a lot smaller now. When mining stocks go wrong — which happens often, given they have no control over price or demand — the consequences are wealth-destroying.
Oh so close, BHP Billiton
Speaking of mining stocks, this week was a case of “oh so close” in my quest to buy some more BHP Billiton (ASX: BHP) shares below $30.
BHP shares hit a low of $30.43 on Tuesday, before rallying to close yesterday at $31.62. One more utterance of the word “taper” from Ben Bernanke and we’ll be there. Watch this space.
Motley Fool Share Advisor analyst Scott Phillips probably thinks I’m off my rocker even contemplating buying more BHP.
Scott’s no fan of mining companies, something that’s probably saved him a fortune over the years.
For the odd rags to riches success stories like Fortescue Metals (ASX: FMG), there are many, many more fallen heroes like Newcrest (ASX: NCM), Atlas Iron (ASX: AGO), Paladin Energy (ASX: PDN) and even Lynas itself, its shares down a massive 85% from the 2011 peak.
Miners — “one massive bucket of enormous risk”
In the latest Motley Fool Share Advisor weekly update, Scott pulls no punches when it comes to his dislike of mining companies…
“Miners have no sustainable competitive advantage (the only advantage is being low-cost, but that only lasts for the life of the mine). They can’t control their prices, and can’t meaningfully reinvest their funds to create long-term business value.”
He’s far too polite to say it, so we’ll leave it to a mining insider, a fellow Fool, and Motley Fool Share Advisor subscriber who emailed Scott to say…
“A fantastic article and wanted to back up your feeling on miners. To the outside world miners are money making machines. To those on the ‘inside’ they are all too often one massive bucket of enormous risk. It is an industry of extremes. When things are going well they’re incredible. But when they’re not, they’re an almost miserable place to be.”
In these pages I’ve reminded readers before about Warren Buffett’s 2 rules of investing. I make no apologies for reiterating them again and again… if nothing else to remind me not to do something stupid
Rule #1: Don’t lose money.
Rule #2: Don’t forget rule #1.
Think about that before you invest your hard-earned money into some speculative mining stock, or even some large-cap like BHP.
Scott also has a couple of words to say about KRudd’s (Kevin13) return to the Prime Minister’s office and what it all means for investors.
For me, the sooner the election the better — not because of my political preferences, but because I can’t bear the thought of months of nasty debate and “attack dog” ad campaigns polluting my screens. Life is too short.
From an investing perspective, “After the election” are the three words that bring music to my ears.
Confidence will return. In a note to clients today, Bell Potter’s Charlie Aitken suggested today’s market rally is because the uncertainty of the Labor party’s leadership has now, finally, been resolved.
“After the election” just got a whole lot closer
Seasoned investors will know the market looks forward, and it’s already looking forward to the election, and the injection of confidence coming your way on September 14th 2013, if not before.
All of which means… now could be the perfect time to be piling back into the share market, buying good quality companies while they are trading on the cheap.
And funnily enough, we have Kevin13 to thank.
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