http://www.investmentcontrarians.com/gold-investments/this-mining-sectors-ready-for-a-big-move/1353/ When it comes to developing and creating a long-terminvestment strategy for your portfolio, one of the more difficult aspects is maintaining a focus on the horizon. What this means is that sometimes one needs to look past the short-term aberrations and focus on where the economy and stocks will be in the future.

1. http://www.investmentcontrarians.com/gold-investments/this-
mining-sectors-ready-for-a-big-move/1353/
This Mining Sector’s Ready for a Big
Move
By Sasha Cekerevac for Investment Contrarians | Feb 4, 2013
When it comes to developing and creating a long-terminvestment strategy for your portfolio,
one of the more difficult aspects is maintaining a focus on the horizon. What this means is that
sometimes one needs to look past the short-term aberrations and focus on where the
economy and stocks will be in the future.
The topic of mining stocks has come up quite often lately. Initially, when one talks about
mining stocks, many people automatically gravitate toward gold and silver companies.
I would suggest that there are data showing that other commodity mining stocks might offer
strong long-term potential capital appreciation.
Professionals know that the market price of a stock offers far more information than any one
data point. If the price of a stock or commodity is moving, this is certainly an indication of
where people are placing their funds through their own investment strategy.
While some might have an investment strategy primarily in mining stocks, I would urge
diversifying away from any one commodity in this sector, creating a more diversified portfolio
in general.
Getting ahead of the curve over the retail public is a difficult but attainable investment
strategy. I would suggest that, in addition to looking at economic data in forming one’s own
analysis, one should look to the price charts and see what’s happening on the ground.
Recently, we’ve seen a recent breakout in one commodity that might surprise a lot of people:
copper.
“Doctor Copper,” as the commodity is often called due to its ability to predict economic
growth, has just broken out of its downtrend. While many are focusing on the recent negative
gross domestic product (GDP) data point, those whose investment strategy is accumulating
copper believe economic growth might be stronger over the next 12–16 months—even more
than the mass public believes.

2. http://www.investmentcontrarians.com/gold-investments/this-
mining-sectors-ready-for-a-big-move/1353/
Chart courtesy of www.StockCharts.com
Considering this strong breakout in copper, looking for mining stocks in this sector certainly
seems prudent.
Does this investment strategy in copper and related mining stocks make sense given the latest
economic data? To answer this question, one needs to dig into the data and form an educated
hypothesis.
The headline report by the Bureau of Economic Analysis on GDP growth showed that for the
fourth quarter 2012, the U.S. economy declined 0.1% compared to third-quarter data. That is
certainly negative; however, for full-year 2012, the U.S. economy increased GDP growth by
2.2%, compared to an increase of 1.8% in 2011. (Source: “GDP Declines Slightly in Fourth
Quarter: Advance Estimate of GDP,” Bureau of Economic Analysis web site, January 30, 2013.)
What had the biggest impact on the decline of U.S. GDP for the fourth quarter was not a
decline in consumer spending, but a massive decline in defense spending. National defense
spending dropped 22.2% for the fourth quarter, the largest decline since 1972.

3. http://www.investmentcontrarians.com/gold-investments/this-
mining-sectors-ready-for-a-big-move/1353/
When it comes to data related to the American public, real personal consumption spending
increased by 2.2% in the fourth quarter, compared to a 1.6% increase in the third quarter.
Durable goods purchased increased by 13.9% in the fourth quarter, compared with an
increase of 8.9% in the third quarter. Personal income in current dollars increased a whopping
7.9% in the fourth quarter, up from 2.2% in the third quarter.
What do all of these numbers indicate? While the headline GDP number looks bad, it appears
that there is some strength in consumers, who had an increase in both income and spending.
Clearly, those who are making an investment strategy in copper are expecting a stronger
economy in the second half of 2013 through to 2014.
Mining stocks involved in copper should also benefit if the commodity’s spot price continues to
increase. Once the first half of 2013 is over and the impact of these defense cuts stabilizes, if
personal income and spending continue to grow at their current rates, it is highly likely that
we will see a stronger second half in 2013.
It is quite obvious from the price of copper that many are calculating this thesis into their
investment strategy. Looking at copper-related mining stocks, many copper mining stocks
have outperformed many other mining stocks in sectors that are not economically sensitive.
I would always look to the market price in conjunction with economic data to confirm any
investment strategy. If one believes there will be a strong or weak economy in the future, yet
commodity prices are not acting appropriately, I would certainly close these positions and
reevaluate my strategy.
Regardless of what one believes the future holds for economic growth, this breakout in copper
appears to be significant.
An extremely accurate and simple trading belief, going back decades (perhaps longer), says
that if a market goes up on bad news, it is a sign of significant underlying strength.
Conversely, if a market goes down on strong news, it is a sign of underlying weakness.
On this release of a headline GDP data point that initially indicated a weak economy, the
natural reaction for copper should have been to sell off, but it didn’t; in fact, copper broke out
of a key downtrend.
As an investment strategy, I always look to buy companies—in this case, copper-related
mining stocks—on strength, not weakness. The real test will be whether copper and the
related mining stocks can hold this upward move. If copper falls below support, then this
would be a sign that the economy is slowing once again.