Looks like an excellent opportunity to do it this week.
Three things have happened at the same time which have and will send stock markets down for the next fortnight or so before the next rise up to a new level.
1. We had 5 weeks of constant rises on the Dow Jones as well as most other major stock markets, when this happens, large institutions look for any excuse to realise their billions invested and they dump stocks. This is when we can get in cheaply for the next time.
2. CPI in CHina came in at 4.4% which has caused some fear around the world that the Kinesi will increase interest rates and their GDP will fall big time!
The Shanghai stock exchange fell 5% because of these fears on Friday. These fears, much like most of the fears of 2010 wont occur. We will not see a significant increase in interest rates, maybe an increase of between 0.25-0.5% over the next 3-4 months. The Chinese economy is growing at 9.5%+, even if growth slows to 8.5% this is an incredible achievement and will underpin our resources industry.
Bit of background about the Chinese inflation rate. 74% of the their CPI rise was caused by food price rises, partly because of droughts in Russia for wheat as well as rice production. But the main reason is because the $US dollar has been falling against all major currencies because of QEII. The Chinese Yuan is fixed against the $US, when the $US falls so does the Yuan against all other currencies.
These are all one off factors that wont play out long term, the Kinesi will raise rates but not by how far the markets are fearing.
One of the reasons the US is depreciating their currency is to increase exports out of the US as well as minimise imports, as well as create pain for China to appreciate their currency against the $US. And its working, based on the latest CPI increase in China. As the Yuan appreciates their purchasing power strengthens and prices of things they buy, mainly minerals and capital goods becomes cheaper to them, so 1. The International Price for the commodity rises and 2. They buy more of it. Both of which will continue to benefit our miners!
3. This European debt problem has risen its ugly head again, this time Ireland, and this will continue country by country for the next 3-5 years. The EU will step in like they did with Greece back in May and sort this out with the IMF's help.
These headwinds will pass in 3-4 weeks and the market will start to lift from mid December onwards. Until then its another excellent buying opportunity for those who hadnt got in yet or are looking at accumulating more shares cheaply!
DYOR - But I know that over the next 3 weeks we will see one of the last opportunities to jump into the Materials and Energy markets, with companies like GOA, before the next significant upswing in Q1 2011.
