economic headwinds starting to disappear!

Hey Fellas

Its important that we understand what is happen to the markets at the minute.

QEII ends at the end of this month, and all the economic indicators show a sluggish growth path for the US, giving credence to additional loose monetary policy like QEIII!

We'll see the markets remain volatile while this plays out, together with the EU sorting out the Greek Debt issue and the US lingering debt ceiling issue making negative headlines!

Dont let the US Markets political stoush to force the Federal Reserve to actually continue their QEIII pump priming efforts, scare you guys!

This is a temporary bit of pain or opportunity for those still accumulating shares, which will be very beneficial to lifting the stock markets around the world from July onwards.

As we mentioned a couple of weeks ago, the Germans have come to the party with a "bridging" finance for the Greeks, while the Greeks are now selling off Nationally Owned Property on the Greek islands and infrastructure assets to pay down some of their debt, which was a pre requisite for this additional funding. The EU is now dotting the "i"s and crossing their "t"s to ensure this debt issue is resolved before mid to late June.

The US economy was always going to show signs of sluggish growth, but it is still growing. What the Federal Reserve is keen to continue is for Wall St to continue to rise in the medium term, 9-18months, to ensure there is enough capital appreciation from the share market for companies, traders, private investors like us, to make capital gains, so that they will pay down debt/accumulate other asset classes like houses, helping support that market and increase consumer spending. Thereby lifting GDP through aggregate demand, since the Federal and State Govts have extinguished their Fiscal Stimulus positions!

The Fed and US Govts are trying to stimulate the US economy directly through share profits made on Wall St, they are doing this through the QEII! It also has the effect of depreciating the US dollar, which helps US companies increase exports and reflect higher profits in US dollars, when those profits are sourced from over seas!

I would expect Mr Bernanke's next speech to be very supportive of additional quantitative easing or some other continued effort to pump prime the economy to facilitate the target to grow the US economy. And this is exactly what the players on Wall St want. Hence last night's message, and it will continue, until Mr Bernanke does respond in a positive way.

Then watch Wall St lift in a big way! :)

What does this mean for the ASX and our investments locally? Well our miners are making hundreds/billions of millions of dollars annually, thanks to China and India!

Once Wall St gets what they want, in July/August then its going to be a very positive shift in the ASX!

Then we will have multiple positive fundamental shifts in the world economy lift the ASX, especially the Materials and Energy Sectors:

1. China's inflation will show signs of heading towards their target of 4% thereby allowing banks to begin lending, albeit in controlled manner to acquire minerals for their infrastructure development.

2. The Indian monsoon season starts in 3 weeks and continues until mid to late September, which reduces their monthly exports of iron ore by 20-30% during this period.

3. QEIII, or something very accommodating will be announced by Mr Bernanke in the next 30-60 days, providing additional lift to Wall St and world markets overall.

4. Japan begins their massive reconstruction efforts. Engineers/purchasing managers/govt depts have been working on assessing the damage and what needs to be done to rebuild northern Japan. From July, we will see them begin to enter world markets to buy iron ore, coal, copper, nickel, zinc etc using the $300Billion freed by up the insurance industry and Federal Govt!

5. Once the EU proves they can soften the blow of Greek Debt restructuring, the markets will then feel safer, knowing that the same can be applied to the other PIIGS!

Stay calm, dont panic if you are in the position to continue to accumulate shares then the next month will give you the best time to do this, for a sustained and strong lift in the markets in the second half of the year! And this goes for most stocks in the Materials and Energy Sectors!

FUndamentally Copper is in critically short supply, Avanco already has enough copper to commence DSO shipments at very low costs, between $1000-2000 per tonne, when the market price of copper is around $9000-10000 per tonne!

People will find that this week will be the lull in stock markets around the world, we will see a significantly lift in markets once these headwinds disappear in coming weeks.

If you sitting on the sidelines, time to jump in and enjoy the ride! If you have a look at the AVB chart it has consistently bounced off 11c. We are at the low point. I know I have been accumulating by bottom feeding over the last month!

Cheers Nectar