Shareswatch Australia

One of the world’s largest countries, sparsely populated, with extensive minerals in its remote hinterland deserts. Sound like Australia? This is Mongolia. On the cusp of an investment boom, fuelled by Chinese demand for resources and driven by Mongolia’s position just to the north of China’s industrial heartlands. Mongolia’s economy, like Australia’s, has defied the global gloom.

So far this year the Australian stock market had managed to edge slowly upwards and the All Ordinaries Index appears poised to settle above 4400 during the next week or so. Although the risks of a major Eurozone economic implosion appear to be fading, the signs are that the economy in China continues to slow and it appears the U.S. economy is still struggling. The situation in China in particular is likely to have a major impact on where the Australian stock market heads next over the following few months.

At the start of last year I did not update my Australian stock market trends simply because I thought the market was basically going nowhere. This year however I feel it is worth looking at some interesting sectors again in an attempt to pick out some areas where investors might be able to find bargains and position themselves for the next bull market.

We are almost through a third of 2011 and the mood across global markets appears to be decidedly downbeat.  The bullish voices of late 2010 have now faded and even the Reserve Bank of Australia and Federal Treasurer are sounding cautious. But don’t be fooled by the talk that recent events have caused the global economy to face headwinds because the reality is that 2011 was always going to be a tough year.

Quite clearly the debate regarding the Resources Super Profits Tax (RSPT) in Australia and abroad has not died down. Despite what the Government would like people to believe, it is not just the foreign mining companies that are opposed to this new tax, but also small Australian mining companies, business owners and the public in general.

One of the best investments an Australian investor could have made over the last 10 years would have been to buy a large chunk of BHP Billiton (ASX: BHP) stocks.  This is simply because BHP shares have outperformed gold, listed or unlisted property and most ASX listed blue chip stocks I can think of. But have BHP shares now rallied too far and what does it’s share price tell us about the demand for commodities?

Another year, another decade and time once again to look at our shares portfolio and perhaps review our positions. Although the global financial crisis has been tough for investors the fact is that the Australian stock market did bounce back in 2009 and if history is any guide then we are likely to see it finish higher in 2010.

The current downturn in the world markets presents us with an opportunity to review or develop our investment strategy for the next few years. For some people it may mean a major overhaul such as moving from stocks to real estate, while for others it may mean just a realignment of stocks in a portfolio.

Trying to forecast where technology may lead us is relatively easy compared to determining where to invest in order take advantages of these technological trends. Some companies that may appear ideally suited to do well in the future may actually find technology works against them and some sectors that appear “hot”  might actually turn out to be quite unprofitable.

Well it is time to reflect once again on some of the stock positions I have taken over the last 6 months or so. Although this is often a painful experience, I would suggest to anyone who invests in shares to regularly reflect on how their portfolio is tracking and revisit the reasons why they purchased (or sold) a particular stock. Often we can learn a little about our own investing style if we have a brutal look at our past investments and this may help us make better investment decisions in the future.

The problem with picking which mining stock to invest in is that you really need to know something about mining or you need to be getting advice from someone that does. Unfortunately most of the analysts out there covering companies like BHP and RIO do not have any qualifications in disciplines such as mining engineering or geology, and for me that is like having a stock broker tick-off the pre-flight checklist on an aircraft I am just about to fly in. He might be a smart guy, but personally I would prefer someone who knows about aeroplanes up in the cockpit thanks.

Few precious metals stir the emotions of investors quite as much as gold. But just as it stirs emotions, it also causes many people to forget about the basics of investing and plunge into gold seeking their fortune, only to suffer losses and heartache. Currently there is a lot of focus on gold as it is seen as a good asset to hold in times of trouble, so now seems like a good time to have a look at what drives gold prices and other gold market fundamentals.

One thing all investors would like to know is if the Australian Stock Market has reached a bottom and when things will start to recover. Like everyone else, I cannot predict the future but I can at least outline what I think (hope) will happen and how I am positioning my own investments.