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.
Thursday, January 17, 2008
Strong AUD arguments
1. There are alot of investments in commodities already in the pipeline that will feed through to higher commodity sales - albeit at higher prices. Bulk commodity prices (iron ore, coal) are locked in until Apr'08. Higher mineral and agricultural export capacity (from new new mining investments and farm restocking) will take time to feed through to export sales.
2. Australia is experiencing growing inflation. Alot of people think inflation is simply a demand phenomena, so as global growth stalls, so will Australian inflation
3. Australian inflation will require higher interest rates to offset the loss in real buying power of the AUD
4. The possibility of an improvement in agricultural exports as a result of the cessation of the drought
5. A fall in domestic spending will reduce imports, and in the short term strong export receipts should result in a much improved terms of trade, but the flight of dollars into JPY (carry trade) will weaken the current account deficit, and the AUD.
Weak AUD arguments
1. Higher interest rates and the deleveraging of the global economy are likely to unwind the carry trade that sees institutions selling JPY and buying riskier, higher yielding growth economies (currencies) like AUD, NZD, CAN. I think these funds will end up in the home economies.
2. The prospect of a slowdown in global growth is already affecting the perceived long term attraction of AUD. Commodity prices have actually been surprisingly resilient. I see 2 reasons for this: (i) China has yet to respond to the slowdown in the USD. As usual they tend to be the last to pick up on global outlook. They will slow purchasing only when they see softer orders. (ii) Weaker USD is actually helping support the USD price of these commodities. (iii) Post-Xmas, pre-Chinese New Year buying.
3. Higher inflation in Australia will undermine the real value of the AUD
4. Economic uncertainty, high household debt levels, rising interest rates, falling equity and property values will undermine Australian household consumption, which will slow economic growth.
5. Australia is more vulnerable than the USD because it is a smaller currency market - so there will be a flight to avoid volatility.
6. Interest rate differentials will not help the AUD because they are being achieved on the backdrop of economic softness, so the prospect of higher interest rates in Australia, and forecast Fed easing does not move me for now. Its also true that I think the Fed easing will do little to support the US economy, though will likely be justification for a short term rally in the Dow Jones.
As a result of this analysis I see the AUd-USD falling back to the strong $US0.80 support that was established between Jan-04 and Jan-07. Having reached that 'over-sold' level, I think you will see a retracement to $US0.87, and thereafter alot of consolidation for a number of years until debt levels are cleared to some extent, existing global industrial capacity re-absorbed and asset prices rising again. No doubt traders will have some fun in the currency market. But the lesson is - go easy on the leverage - this is a time for economic shocks. eg. Companies disguising weaker earnings, accounting scandals, failed banks and hedge funds. It has already started. This week the $US16 billion writedown by Citibank, then $US11billion by Merril Lynch.
- Andrew Sheldon www.sheldonthinks.com
You can view foreclosed properties listed for as little as $US10,000 in Japan thanks to depopulation and a culture that is geared towards working for the state. I bought foreclosed properties in Japan and now I reveal all in our expanded 350+page report. The information you need to know, strategies to apply, where to get help, and the tools to use. We even help you avoid the tsunami and nuclear risks since I was a geologist/mining finance analyst in a past life. Check out the "feedback" in our blog for stories of success by customers of our previous reports.
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