The week has been an eye opener for market watchers, traders and investors alike. We’re at a crossroads. (Aren’t we always at a crossroad?) Australia is going to elections at the end of November on Saturday 24th. US elections are coming too but that’s next year. Billionaire investor George Soros is warning of an impending market correction. The US dollar is continuing to decline all the while oil and gold is seeing all time highs. There you have it, the five topics that have caught my eye in the past week: George Soros, elections, the US dollar, oil and gold.

Australian Elections

First we’ll tackle the Australian elections. The battle for Prime Minister is on between Kevin Rudd and John Howard. With the election coming up in a little over two weeks the campaigning clearly focusing on Australia’s economic management. For those not up to speed, John Howard’s Liberal Party has been in power for four consecutive terms since 1996. Since they’ve been in power the Australian economy has been growing and booming, Australian dollar at 23 year highs (US93.83c on Wednesday), unemployment at record lows and interest rates arguably low. Meanwhile, Kevin Rudd’s Labor Party has been opposition for all those years. The last run Labor had was between 1983 and 1996. And those years' were plagued by high interest rates of up to 17.5 percent. The major concerns for the election is the economic future of the country. The signs are here: Australia is fully employed, employment figures are at 32 and half year lows where the jobless rate was at 3.9 percent in September and the overall unemployment rate is at 4.2 percent. Growth is estimated to be 4.25 percent for 2007-2008. Concerns are: rising inflation, which touched the upper side of the RBA's target band of 2-3 percent and rising interest rates. Interest rates were pushed up again by 25 basis points last Wednesday to curb the inflationary pressures. And Howard apologised about the rate rise: "I would say to the borrowers of Australia who are affected by this change that I am sorry about that and I regret the additional burden that will be put upon them as a result. And I would say to those in the Australian community who think that the way to preserve that stability and strength and growth is to change the government ... where are the new and different policies? Where are the magic answers?'' Also to note was key phrases in the official RBA statement from Reserve Bank governor, Glenn Stevens, released with the announcement: "By the March quarter of next year, both headline and underlying measures of inflation are likely to be above 3 per cent." "The world economy is still expected to grow at an above-average pace, however, led by strong growth in China and other parts of Asia." "In Australia, the tightening in credit conditions resulting from the global turmoil has been less pronounced than elsewhere.

Australian interest rates see a possible election interest rate rise as a result of yesterday’s inflation economic data. The Consumer Price Index figures released showed headline inflation rose by 0.7 per cent in the September quarter - for an annual rate of 1.9 per cent inflation for the Australian economy. The interest rate decision is to come on Melbourne Cup day and many economists are predicting a 25 point increase (0.25%) which would be the sixth successive interest rate rise. The RBA officials meet on Tuesday 6th November and the decision is released at 9.30am the following day. An Australian election is coming up on the 24th November 2007. "I am not going to speculate, but I'm reminding you and I'm reminding everybody that it's the lowest [consumer price index] on an annual basis since December 1999," Prime Minister, John Howard said. "I nonetheless point out that the agreement that was made between the Government and the Reserve Bank... provided as a target that we would keep consumer prices between a band of 2 to 3 per cent.

John Ilhan has died of a suspected heart attack during his morning jog in Brighton, a beachside suburb of Melbourne around 5.30am this morning. Ilhan was 42. John Ilhan was born in Yozgat, Turkey, in 1965, before moving with his family to Melbourne when he was three. He started his own mobile phone shop in 1991. Ilhan grew up in Broadmeadows near the Ford plant in Melbourne's north-west and worked briefly as a salesman at the company — also studying at university and playing in the former National Soccer League — before taking a job with Strathfield Car Radios. He left to set up his own business in inner-city Brunswick and quickly expanded the business to become Telstra's largest independent mobile phone dealership with 600 staff. Crazy John's has more than 120 stores nationwide and turns over an estimated $400 million a year. John Ilhan was ranked 1st in Business Review Weekly's Australia's Young Rich List 2003, with a fortune of $200 million. In the 2007 Rich List, Ilhan came in as the 126th richest man in Australia with a fortune of $310 million.

There is a new share trading challenge starting next month and and the prize for the best stock portfolio performance is $50,000! It costs $49.95 to join but the cash goes to a good cause. The event is supporting Arthritis Australia which is seeking a cure to the ailment which plagues 1 in 5 Australians. When you join you start with $50,000 virtual money and allows you to trade any stock in the top 300 companies listed on the Australian Stock Exchange. The share trading challenge closes registrations on Friday close of business November 2nd and starts the following Monday 5th November and runs for the next four weeks or 20 trading days.

Among the best performing stocks last week (week 42) on the Australian sharemarket were a mixture of energy and mining companies: Nexus Energy (NXS), Paladin (PDN), Pan Australian Resources (PNA), AWB, Mt Gibson Iron (MGX), Sino Gold (SGX), Roc Oil (ROC) and Flight Centre (FLT). All the above best performing stocks for week 42 stocks managed more than 10 percent gain on the trading week. Nexus Energy was the overall winning stock taking in a 16 percent increase after new company takeover speculation and the recent increase in the oil price. Paladin took the ribbon for the best performing stock on the ASX 100 index seeing an 11.5 percent rise or 78 cents and closing at $7.55. On the ASX 200 index, Pan Australian Resources took pole position increasing by 13 percent, adding 11 cents and closing at 95 cents. Other runners up on the ASX 200 index were AWB adding 12.7 percent (close $2.76, +0.31), Mt Gibson Iron adding 30 cents (close $2.75, +12.24%), Sino Gold increasing by 82 cents (close $8.11, +11.24%), Roc Oil adding 35 cents (close $3.62, +10.7%) and Flight Centre adding $2.30 or 10.4% and closing the trading week at $24.40.

Among the worst performing stocks last week (week 42) on the Australian sharemarket were Commander Communications (CDR), AGL Energy (AGK), Henderson CDI (HGI) and City Pacific (CIY). The overall worst performer was Commander Communications losing 29 percent upon their relisting on the sharemarket. AGL Energy was the worst performer on the ASX100 index and lost 16.5% or $2.58 closing at $13.05. Henederson CDI was the loser for the ASX 200 index and saw their stock value plummet by 20.2% or $1.02, closing at $4.01. Finally City Pacific lost 10.9% or 47 cents closing at $3.84. Previous repeat "losers" are Commander Communications (CDR) last month and also in May this year. Read a previous recommendation for AGL Energy (AGK).

The Australian sharemarket as well as international stockmarkets have been in bull mode for a while. The twentieth anniversary of the 1987 stockmarket crash is today: October 19th. The Australian economy has seen four years of continuous growth. So what's going to happen to our booming Australian economy? What are all these signals telling us?

Economic History 101

Did you know, today, Friday October 19th 2007 is the 20th anniversary of the history making, record breaking October 1987 market crash. Back in the 1980s global stocks and the Australian economy were booming after the early 80s recession, economic reform ad deregulation and re-rating of shares as a result of lower inflation. Australian shares nearly doubled in a year to the September 1987 high which was strongly supported by entrepreneurial stock gains. The American stockmarket peaked a month earlier in August. On October 19th the US stockmarket fell 20 percent and the Australian market followed the trend dropping 25 percent on the next day's trade (October 20). From pre-crash highs to their lows, the American stockmarket fell 35 percent and the Australian sharemarket fell by 50 percent. It took the USA stockmarket two years to recover and surpass previous highs while the Australian sharemarket took a little longer to recover: it only surpassed highs made in 1987 in February 1994.

Karoon Gas, Incitec Pivot and Macarthur Coal were the best performing stocks in their respective categories on the Australian sharemarket for week 41. Karoon Gas (KAR) was the overall winner of the week, shooting up 64 percent on the back of a broker's recommendation which said the company was worth between $20 to $40: the energy company closed the week at $3.70. The winner of the week for the ASX 100 index was Incitec Pivot (IPL) which managed to increase its value by 8.114 percent or $6.71 and closing the trading week at $89.41. On the other hand, ASX 200 winner Macarthur Coal (MCC) managed to put on 19.55 percent of value for its shareholders, or $1.21 closing at $7.40. Other notable gainers of the week were: Mt Gibson Iron ($2.45, increase of 11.36%); Cabcharge Australia ($11.05, increase of 11.17%), Aquarius Platinum ($41.32, increase of 9.6%) and Centro Retail ($1.71, increase of 8.9%). The Australian dollar at Friday close of business was US89.73 cents, gold was $747, All Ordinaries closed the week at 6760.1 and the ASX200 closed at 6748.9. Incitec Pivot was a previous winner of the week. Karoon Gas was also a previous winner. Read a previous recommendation for Macarthur Coal.

RAMS Home Loans and AGL Energy were among the worst performing stocks on the Australian Sharemarket for week 41 of 2007. RAMS Home Loans (RHG) lost 34 percent of share value closing at $0.315. ASX 100 and ASX 200 index loser was AGL Energy (AGK) losing 4.4% or 72 cents of stock value, closing at $15.63. Other losers of the week were: Sigma Pharmaceuticals ($1.43, losing 4.3%) and WA Newspapers ($14.28, losing 4.2%). The Australian dollar at Friday close of business was US89.73 cents, gold was $747, All Ordinaries closed the week at 6760.1 and the ASX200 closed at 6748.9. Read a previous AGL Energy (AGK) stock update.