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You are here: Home / Archives for mining boom

Who can you trust?

August 27, 2013 by Jon

Australia - Election 2013

I will tell it to you, straight… No sugar-coating.

In an election campaign battle that has all the drama and power of tough kiddy tae kwon do (have a look, very funny video), Rudd and Abbott have finally found something to agree upon.

And they’re both wrong.

Amazingly, both Rudd and Abbot are singing from the same hymn sheet when it comes to the mining boom. And they’re both way off key.

For Rudd, the mining boom is about to end, plunging Australia into economic calamity, because China is powering down. Our best customer is taking a breather.

For Abbott, the mining boom is about to end, plunging Australia into economic calamity, because Labor’s carbon tax killed the mining boom.

Both arguments are simplistic, stupid…

… and wrong.

What’s the deal, why are both the PM and the PM-in-waiting talking down the Aussie economy and the mining boom?

For Rudd’s part, he’s trying to draw out Abbott’s small target strategy. Abbott’s main line of offence so far seems to be leveraging of the public conception that any pack of monkeys could do better than Labor, and hey, we’re those monkeys.

So Rudd’s trying to scare people. China is powering down, the mining boom is over, and you need a government with actual plans.

For Abbott’s part, he trying to focus attention of Labor’s most unpopular policy, and make it guilty of a sin it could never be capable of. The carbon tax and the MRRT were pretty ineffective. Everyone agrees on that. But they can’t be both ineffective and devastating at the same time. You can’t have it both ways.

And so Abbott is simply trying to scare people – Look at the mess they’ve made already. Imagine what other havoc they might wreak if we gave them another term. Nobody’s safe.

It’s all the politics of fear.

The psychology of fear is interesting. We’re hardwired to pay more attention to threats than to opportunities. A monkey who loses sight of the tigers for the berries, isn’t a monkey for long.

So the parties pay lip service to actual policies and the things they will do for you, but they know the messages that will sell are the messages of fear.

Labor’s campaign slogan is classic. “If he wins, you lose.” Be afraid. Very afraid.

And so the election boils down to both parties trying to present themselves as the least scary option.

Pretty uninspiring.

As investors, it’s important to be aware of this human “threat attention” bias, and the structures that are built upon it. The entire media and newstertainment industry is an example. Good news never made a paper sell.

And so the media will sell us the bad news stories we want to buy. Drive-by shootings in suburbs you’ve never heard of. Disease pandemics in small countries you can’t pronounce. A rout in shares you don’t own. On and on it goes.

The economy is collapsing. The property bubble is bursting. Aliens have infiltrated the White House. The mining boom is over.

As investors, we need to see through this bias in the media and get a read of what is actually going on.

Trouble is though, there are feedback loops. If a story gets repeated enough times in the media, people start to accept it as fact. It becomes a self-fulfilling prophesy.

And that’s what worries me about all this fear-mongering from both sides of politics right now. Repeat a lie enough times it becomes the truth.

Call me foolish, but I’m worried that people might actually start listening to our politicians. And what will they hear?

“The mining boom is over, China is slowing.”

“The mining boom is over, it was Labor’s fault.”

Suddenly there’s a consensus that the mining boom is over. The public accepts it as fact. But it’s just plain wrong.

Oh woe is us! Isn’t there someone we can rely on to tell it to us straight? Who will save us in this darkest of hours?

Enter Glenn ‘Gunslinger’ Stevens, a junior economist on each arm.

Glenn’s been going out of his way to keep us on the straight and narrow, and protect the name and honour of fair Miss Truth.

According to Glenn, the mining boom’s not over, it’s just “changing gear.” It’s just going through a “phase shift”.

The prices boom has passed, and commodity prices are down from their peak in 2011. Our terms of trade are down around 18 percent, but Stevens (and most economists) reckon that even when the slide is over, it will still be higher than it was when the mining boom started – leaving us all better off.

The investment phase also now looks like it has passed its peak, but investment is still expanding. It’s not going backwards. BHP is not pulling down mines. It’s still growing, just at a slower pace than before. And it was a mind-blowing pace before.

But the key here, as Stevens points out, is that the next phase, the production and export phase, has barely started. He reckons volumes of iron ore are rising by about 15 per cent a year. Shipments of natural gas won't start increasing strongly until 2015, and will probably have several years of very strong growth, and then remain high for years and years.

The boom is far from over. No economic calamity. Just an orderly phase shift. No tigers. Just marginally smaller berries.

But that won’t stop the pollies from trying to tell you that the world is ending.

Whatever. Shift happens.

Filed Under: Blog, General Tagged With: abbott, election, mining boom, rudd

Exploit This Trend… ASAP!

June 26, 2012 by Jon

You really need to get going on this…

Let me tell you a quick story.

Several years ago I decided to invest in a capital city that was not on the radar in a big way.

In comparison to what the prices were in the other 2 capital cities I was investing in, it was at a 30-40% discount.

I bought an inner-city property, 3kms from the CBD for around $375,000… and after 3 years, I needed to get a valuation on it.

I remember the day so clearly. I was at the airport, waiting to catch a flight, answered my phone and it was my bank manager who told me that that property came in at $550,000. I nearly fell off my chair… that's a 47% increase!

Other than purchasing it, I did nothing. I have to tell you that when you make $175,000 without working for it, it's a special feeling.

Now, no more suspense… The city I invested in was Brisbane.

So why am I telling you all this?

Well, I think you can have the exact same experience if you listen up.

I've just read a report that predicts the following and confirms my thoughts on the current real estate market:

  • Brisbane to grow by 20% in the next 3 years.
  • Perth to grow by 22% in the next 3 years
  • Sydney to grow by 17% in the next 3 years
  • Darwin to grow by 15% in the next 3 years

– The rest of the capital cities with flat to minimal growth.

Here's what I also think about the percentage increases…

You can do a lot better than that if you buy well, know what type of property is likely to increase faster, research a few areas  and get some education on how to accelerate those returns even further.

You've got the remember, the above percentages are median prices. Smart, savvy real estate investors will always out perform them.

But nothing will happen if you just sit there and do nothing.

I think you could really exploit this information and look back in 3 years time and thank your lucky stars that you did.

You know, in 2009 we predicted the Melbourne market would take off… and it did.

Today, the Melbourne market is going to go sideways for a while. Unless you know what you're doing in that market and are buying value, then you best stay out of it.

Me, personally, I like going to into real estate markets where you can buy well and get an uplift from demand as well.

For me, those two markets are Brisbane and Perth right now.

…It's not coincidence that both of those markets are growing faster due to the resource boom that's going on. I don't care what your opinion is about China and the global marketplace, this trend is here to stay and I predict that those two markets will outperform the expert opinion.

Please don't sit there and do nothing. At least start researching these areas and make up your own mind as to whether you should be investing there.

Signed with Success,

Jon Giaan
Knowledge Source

Filed Under: Property Investing Tagged With: brisbane, darwin, growth, mining boom, perth, projections, property, real estate, sydney

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