I must say it has been a pleasure contacting some of my clients recently to tell that their portfolios had increase by between 10-15% year to date. “REALLY?” has been the common response…

Continuing on from Glenn Fairbairn’s article blog post last week, where he discussed the recent overselling of resource stocks, namely RIO & BHP, I was very interested to hear during the week that Rio Tinto maintains a cost to produce iron ore at $50 per tonne. They are the cheapest producer in the world, closely followed by BHP. As Glenn stated, with a softening iron ore price, higher cost producers will fall away leaving RIO & BHP to pick up the slack. So why did everyone sell them?

Buying behavior based on emotion is what controls investment markets. The ability of an investor to ignore the noise around them and invest based on fundamentals will determine their long term success. Either that or just listen to their Adviser!

The sharemarket is an efficient beast. It has the ability to price in influential factors, such as a “faltering economy” around 12-18 months before it actually happens. This may in fact be a reason why, although it seems we have a stagnant economy, the sharemarket has already looked past this and is factoring in the sunny skies ahead. 

In closing, don’t stay indoors just because the same people are telling you it’s raining outside. Summer is on the way, in fact, it’s been summer for a while now…