Below is my most recent post on the short term trading thread which may also be of interest to some Daytraders. Post: As investors/traders we need to manage our risk factors. One spot Australian investors/traders need to keep a close eye on is China. Clearly Australia is doing better than most of the world because it is hooked to the “China Story”. In early 2008 I thought my portfolio was exempt from the Global Credit Crisis as my profits & portfolio values continued to soar. From the start of May to the End of June 2008 my portfolios were up by over $1.6m & I was convinced my strategy of strong concentrations in resources in particular iron ore was clearly a winning formula cf the poor suckers who held the banks & financials. Well by about October 2008 I started to realize my “resources based portfolio” was linked to the overall economy & I shouldn’t have expected my resources stocks to have stayed up if the whole world was seeing an economic collapse. Low commodity prices have seen the Chinese become aggressive buyers, they are certainly buying more than their current needs so they are stockpiling at these bargain prices. This buying has also been driven by a grossly overvalued US dollar forcing the Chinese to spent their US dollars on any hard asset except holding US dollars. But we must remember if commodity prices rise too high the Chinese can easily stop buying & let the prices fall back again. The Chinese have had thousands of years learning the art of trading unlike Australians. It would not be the first time Chinese have stopped buying for a few months & we have seen the consequences on Australian Resource shares. Whilst I am not saying this will happen in the immediate future, we do need to be aware of the importance of what China is doing & its consequences on our sharemarket. Dubai in recent weeks has highlighted that all bubbles do burst & remember the Chinese bubble would have multiple shockwaves of the Dubai affair on World Sharemarkets & in particular the Australian economy. China is part of any investors/traders risk management strategies & should never be forgotten. Regards Buffett
