How to identify new stock market leadership

I’d like to add some context to my previous commentary.  I’ve stated before that I believe we are in a revitalized global boom, the progress of which was seriously damaged by the financial crisis we barely survived.  I first made this prediction, and its future impact on resources (or commodities) many years ago in my first bookBelow is a quote from the book:

2004 Insomniac Press

“The global demand for resources is beginning to improve, the Far East is growing again, and over the past year, commodity prices are heading in the right direction – as is to be expected at the start of a global economic boom.” This quote is from Resources Rock How to Invest in and Profit from the Next Global Boom in Natural Resources, by Malvin Spooner (me) with Pamela Clarke (Insomniac Press, 2004).

Okay, I’m boasting – but I figure since hardly anyone at all read the book, I’m entitled. 

2007 Random House

The point however, is that the ‘play’ if you want to call it that in the sector is hardly a new phenomenon.  In fact, it wasn’t even a new phenomenon when this fellow published his book and sold millions of copies.  True ‘maverick’ investors look for the ‘next’ great thing, as they divest themselves of the ‘last’ great thing.  Seven years later, trading in commodity stocks (and commodities) continues to be rampant…..but for pennies.  The big bucks are to be made elsewhere.  It’s not easy to figure out where that will be, but my new book is devoted to helping folks understand (not because I’m smarter, but because I’ve been burned over many years of experience) where it won’t be.  What to avoid at a point in time is easier to identify than what to buy.

The best chart I ever drew is scanned (from my first Resources Rock book) below.  I apologize that it’s tough to read but to reproduce it would be painstaking.  I suppose if enough of you asked me to I’d do it.  It shows how investors (clients of you investment advisors) behave – opposite of course to what they should be doing.

The BEST Graph I ever made!

You can see points identified by #12, 13, & 14 (click on image to make it bigger) which are when an investment (any investment pretty much, a stock, stock market, bonds, real estate) has gotten so bad that the ‘herd’ is fed up then it’s likely a good place to start looking for opportunities.  Whole sectors looking like this are a beacon to light up new market leadership in the making.

Invest to Live, Live to Ride

About Mal Spooner

Malvin Spooner is a veteran money manager, former CEO of award-winning investment fund management boutique he founded. He recently authored A Maverick Investor's Guidebook which blends his experience touring across the heartland in the United States with valuable investing tips and stories. He has been quoted and published for many years in business journals, newspapers and has been featured on many television programs over his career. An avid motorcycle enthusiast, and known across Canada as a part-time musician performing rock ‘n’ roll for charity, Mal is known for his candour and non-traditional (‘maverick’) thinking when discussing financial markets. His previous book published by Insomniac Press — Resources Rock: How to Invest in the Next Global Boom in Natural Resources which he authored with Pamela Clark — predicted the resources boom back in early 2004.
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4 Responses to How to identify new stock market leadership

  1. Stephen Bishop says:

    And…???
    So where r we on your chart (above)?
    And???
    What do you suggest one should do as we quickly approach the “Sell in May and Go Away…” Seasonal Calendar Moment?
    Thanks
    Stephen

    • Mal Spooner says:

      Cash looks good, and those sectors with characteristics outlined in my previous post “Stocks moving up as others lose favour…..” Does anyone really think the $C is going to twice parity? Or is it more likely the C$ will return to parity and maybe down some “if” foreign investors in Canada decide to ‘redeem?’ Cheers.

  2. Crash Davis says:

    In my opinion, knowing that chart and how to read where a client is on it (and they will all be on it!!) is as important as trying to read the market trends. The right advisor can help a client understand that the psychology of investing is as important as the investment choice. Can’t control market but we can control emotion and pereception of the market conditions. Like guitar…it is not the notes..it’s how they are played.

  3. Kevin says:

    Great chart! soooo true

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