Consider Australian Energy and Resources

December 10th, 2014
in contributors

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"Buy low and sell high" is the oft quoted mantra. "Buy when there is blood in the street" is another. Now is your chance. Australian energy and resource stocks have fallen significantly over the past 3 to 6 months as commodity prices have come off and the China story has begun to fade as people digest the huge demographic headwinds that turn China into Japan and Italy (or worse) within 5 to 10 years.

Follow up:

The fall in the share prices in these sectors has been compounded by the fall in the AUD which is now down to less than 0.83 USD from a high around 1.08 USD, close to a 25% discount in the currency as the once in a generation, or even in a hundred years, terms of trade boom closes.

The realisation that the resources mining, transport and processing investment boom will now fade as commodity prices have fallen as new production comes on stream has dawned.

The realisation that projects not under way will now likely stall and high cost producers may mothball and the significant impact on employment and wages that will have is also flowing through the general economy as the capex phase, which employs about 8 times as many people as the production phase, grinds down over the next 3 years.

It might not be the bottom yet, but some dollar cost averaging into Australian energy and resources could be the investment opportunity of today for those who want to establish a portfolio for the next 10 to 15 years and sell high in the next boom. There might be low returns for 5 years or there could be a bounce back from an oversold situation, but I'm focussed on the longer term opportunity.

The other story of potential opportunity is Russia, but that has to wait for another day.










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