Australian Treasurer Warns Australian Stock Market Boom Won't Last

Submitted by Marco on 21 April, 2006 - 10:00

Peter Costello, the Australian treasurer put out another warning yesterday at a Committee for Economic and Development of Australia lunch in Sydney. Costello said that "Those investing in resources stocks could end up being burnt, like those who invested heavily during the global information technology boom in the late 1990s. When you get into the middle of these booms - the property boom, the tech boom, the resource boom - the tendency is always to think it will last forever, but none of them do. This boom, like all booms, will come to an end. If you put all your eggs into resource companies you will be in as bad a situation in a couple of years' time as people who put all their eggs in the tech basket." Maybe he was trying to protect mum and dad investors hyped about the booming resources market and the spectacular returns being achieved in the market at the moment. Of course this is sound advice for the general public. But for people conducting share trading like us - this advice should not concern you too much. If you have proper risk management strategies in your stock trading plan then you should not worry too much about this downturn. In fact you should be looking forward to shorting opportunities.

Sound advice for investors but perhaps a tip towards future market movements for share traders. Diversify is the key word for investors: Costello says, "As you all know a balanced portfolio, a balanced economy, is the best way to go." Costello also noted that Chinese economic growth would ensure demand for commodities remained strong for an extended period but the supply of raw materials from exporters across the world would grow quickly. This will eventually hit resources prices and the profitability of resources firms. "This boom has been going already for about two or three years … we think there is a couple of years left in it but it will not be permanent," Costello said. Anyway, check your stock trading charts!