Goodbye FY2007/2008 and thanks for nothing. Let’s hope FY2008/2009 will be better and we can all plug some nasty little leaks in our portfolio’s. Being an optimist I believe at some point in the next 12 months we will see equities post some modest gains, although after a horrid June I must admit my cheerful disposition was tested. Thankfully I was able to find my Spinal Tap DVD and this put all my problems in perspective, I was after all only dealing with investment portfolio problems, not a poorly sized Stonehenge stage prop or disputes about an album cover.
I am getting less optimistic however about the commodities super-cycle. I appreciate the theory about demand growing for iron ore, copper, coal etc but we may be getting to a stage now when the price increases will have reached a short-medium term peak. There is a point when price increases will dampen demand or make alternative sources more commercially viable and I feel we are near that point. We also need to remember that many of the large miners are making huge profits and thus they are “milking” the current situation for every cent they can get. This might be good for them in the short-medium term, but it might come back to bite them one day if they need to really compete for business in the future.
I know I need my head examined, but I am on the verge of easing back on investments in mining related companies and moving these funds into some areas that have been savaged by market downturn such as infrastructure funds, property trusts and banks. Sadly I know my timing is generally not good so I will probably either move too early of too late but at this stage, but I figure the next few months could be the time to start making the shift. If commodities prices do suffer a price correction then stocks that are able to keep paying healthy yields will start to look very attractive again.
It will be an very interesting to see how things develop over the next few months!