Ann: March 2011 Quarterly Report , page-20

EL

I understand how you are feeling and I have also been negatively impacted in the last couple of weeks as my goldies keep getting thrashed despite the all time high price of gold in USD (but stationary in AUD terms).

My gut tells me that people are reducing risk, and the small end of town gets hurts the hardest. I am not sure when the turnaround will happen, perhaps in the second half of 2011 (many say sell in May and go away so that they can back your portfolio a bit cheaper)

Think how holders of "premier" mid cap oiler AWE feel. My broker Ord Minnett got me into them back in early 2006 for $2.60/share from which they rose to around $4 but in 2007 they were back to my entry price so I sold. Where are they now? $1.575. Who benefitted? Certainly not shareholders.

BPT, PSA, KEY were other duds for me. OEL has done nothing, but I hold in hope of something one day (the virtual oil thesis still draws me in at times).

My small holding in KEY was sold at 1/3 rd of my entry price (its price is now much lower).

On the other hand if one can time these companies there is some money to be made by realists, not buy and hold dreamers like me (I think BPT has made some sort of recovery). Oilers are far too dangerous for my limited portfolio.

I suspect the market has made most of the gains it is going to make for some time (unless the AUD falls a lot to make our shares cheaper to overseas investors). So one needs to learn some new tricks (a bid hard for an old codger like me) to make cash, such as trading within defined limits of certain companies that one would be willing to hold if the price fell below entry point. And perhaps to do this on some sort of seasonal basis (eg get out of small plays by February/March and sit and wait for the next major market fallback for a re-entry).

This market has me questioning why I bother trying. While I have recovered my 2008 losses, the extra gains keep getting lost so my overall gain since 2008 is not enough to keep me as a committed investor.

Will I learn from my mistakes? I dunno.

Sticking to miners seems safer, but perhaps a lot (if not most) of the upside has already been factored in given elevated commodity prices (at least for this stage of the commodity cycle). This means constant vigilance on AUD, USD, input costs (eg oil), price, demand, country risk, supply etc. When I was into Ni in what was the late stage of the Ni boom in 2006/2007 it was a bit mind numbing for me. The chances of a poor investment decision simply goes up the further up in the boom we have ridden.

Well so much for my rambling thoughts. I hope you are keeping well and not getting brought down by the market turbulance.

Since you are a bit of expert on the Cu plays, what do you think of AVI? I have a very small holding in this. Could be one to accumulate when the price drops in mid year. I would be interested in your views since I need a bit of winner to add to my currently depleted portfolio. Let me know if you buy some of them.

Good luck.

loki