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Housing Stocks and Mining Stocks

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Joined: 17 Jul 2006
Posts: 115

PostPosted: Sat Sep 30, 2006 7:12 am    Post subject: Housing Stocks and Mining Stocks Reply with quote

Fuller: Of the two great bull markets mentioned in the opening, I would say that the US housing boom owed everything to the Bush administration's economic policies and Greenspan's Fed. And the former Fed Chairman commenced the partial deflating of that bubble before retiring last March.

The industrial commodity bull run owes far less to Bush and the Fed, although the latter supplied its share of liquidity. Instead, the seedbed for a recovery by resources was the 21-year prior bear market, which took prices to record lows in real terms for many of these industrial resources. And some of the fertilizer for the flowering of this seedbed appeared in the form of a synchronized global economic recover for the first time in many years. However the growth in demand turned Jurassic as one large-population underdeveloped nation after another, led by China and India, abandoned primitive economic experiments for capitalism. I maintain that this conversion on the road to Damascus, repeated to a greater or lesser degree on other continents, will produce by far the biggest and longest boom in industrial commodities and precious metals that the world has ever seen.

And what of house building and mining stocks?

The time to sell US house building shares was in mid-2005. Today they are mostly selling at single figure PERs and price charts show evidence of support building. They are probably a buy on a 2.5-year view, at least until the inauguration of the next US President in January 2009.

Mining, however is a much bigger story, not least because it is global. Valuations are incredibly cheap; the sector has been out of favour recently but this will not last when investors realise that it is now more of a growth than cyclical story. I would much rather hold quality mining shares for the long term than house building stocks, although both should appreciate from current levels.

My View: Many of the excellent mining and natural resource stocks are listed overseas... we will research more on those.
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