I've got bad news…
Iron ore and oil prices have fallen yet again. Pushing down the Dow Jones and the local S&P/ASX200 (ASX: XJO) (INDEX:^AXJO).
Source: Yahoo Finance
Whilst it's only early days yet, the mining and resources sector is proving to be the mother of all wealth destroyers in 2015.
BHP Billiton Limited (ASX: BHP), Woodside Petroleum Limited (ASX: WPL) and Santos Ltd (ASX: STO) are already down between 5.5% and 12.5%.
At this rate they'll be gone by Easter.
My shares in Cooper Basin oil and gas producer Senex Energy Ltd (ASX: SXY) are down 11% for the year.
The sad news is, I think it'll get worse before it gets better.
In fact I doubt we'll see an end to the oil, iron ore and coal price falls anytime soon. If I'm right, it doesn't bode well for the economy.
Unlike the U.S. market, which will be a beneficiary of lower oil prices, our economy isn't yet firing on all cylinders.
The Australian Financial Review today declared, "ASX stocks to lag world in 2015".
They quote a global portfolio manager as saying the Australian share market is in, "a mundane and corrective phase" that is, "out of sync with world markets".
That's too many flashy words for me, a humble retail investor without a team of analysts at my disposal.
Maybe I should contact my nearest global portfolio manager to see what can be done…
Then again, according to CNBC, in the U.S. around 80% of active fund managers failed to beat the market last year.
I guess we should stick with bank stocks after all. At least they'll do better than term deposits, right?
Apparently not, the AFR says, "Australian banks and mining companies…are likely to hold down returns this year because of low commodity prices, weak credit growth or tighter regulation".
I agree.
Bank valuations leave a lot to be desired…Commonwealth Bank of Australia (ASX: CBA) is most alarming.
Undoubtedly it's a great business but at today's price of $84.83 it's priced for exceptional future growth.
Source: Yahoo Finance
However a simple appraisal of the facts will tell you historical growth isn't likely to continue at the same pace into the future.
Mining investment is down, domestic GDP growth is down, unemployment is up, net interest margins (the difference between bank deposit rates and loan rates) are down, credit growth is slow and UBS analysts recently said the banks' bad debts finished 2014 at a "near-20-year low of just 0.15% of assets."
Falling bad debts artificially boost profits in the short term but make no mistake, they work both ways.
Whilst I'll agree the likelihood of increasing capital requirements is overdone, profitability is likely to slip in coming years.
However not all is lost for those seeking to escape low interest rates.
Earlier this week I locked in some great dividend stocks for both my personal and family's share portfolios.
All four of the stocks which I purchased came straight off the Motley Fool Share Advisor scorecard. Unlike some fund managers, the member-only service has handily outperformed the market.
So it's a no-brainer for me… taking time to pick some of the best ASX stocks from all the current Share Advisor buy recommendations is like shooting fish in a barrel.
One of the stocks, a global consumer services heavyweight with a near $7 billion market cap, I already owned but I was very happy to scoop up more at its current price.
The three others – an enterprising telco, childcare centre operator and technology company – will boost my portfolio's dividend income and provide great growth prospects. The way I see it, it's a win-win.
Sticking to the companies you know and understand is a great tip for all investors.
It's one which has served me well over the years and one which I think will continue to do so for many more.
Here's to a year of happy and profitable investing on the (lagging) Australian share market!
