Riding a Resource Boom

Article Excerpt

Despite the bear market underway in the U.S., the resources boom continues here in Canada. Some investors think it will keep on rising indefinitely, due to slower but continuing growth in India and China. Resources prices may be headed much higher in years and decades to come, but they remain cyclical. That means you’ll see periodic collapses along the way. We see signs that high oil prices are having the predictable effect of cutting into demand. The gas-guzzler market has largely collapsed. Surveys show that drivers are putting fewer miles on their cars, in response to high gas prices. Businesses are making energy- saving investments that would have been uneconomical when oil was below, say, $80. Energy savings will continue long after the inevitable downturn in oil prices. My advice is to maintain 15% to 25% exposure to Resources. But resist the urge to invest much more, since the next slump could come at any time. Your best choices are the resource stocks we focus on…

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