You might have heard something about a carbon tax in the recent weeks, but if you missed the furious debate it might have been a boon for your mental and financial health.
While each side was laboriously attempting to win the hearts and minds, with tales of environmental or financial doom, some spooked investors may have lived to regret making quick decisions on the issue.
Ignoring the politics, everyone had an opinion on what a carbon price would do to the share market and the economy.
Those against the carbon tax have predicted the end of coal mining in Australia, while those for the tax suggested those fears are unfounded.
An interesting development came a day after the carbon pricing scheme was announced – a $5 billion takeover for Australian coal miner, Macarthur Coal.
The dual suitors were US coal giant, Peabody Energy and European steelmaker, ArcelorMittal.
Peabody made a previous bid for Macarthur in 2010 which failed, so the carbon tax had not dampened its enthusiasm for Australian coal.
The move fuelled speculation of further takeover activity because don’t forget, global coal prices have expanded at an annual rate of eight per cent for the past five years.
According to Bloomberg, there were $9.4 billion worth of coal takeovers of Australian companies and assets in 2010, more than double the level of the year before.
All this has taken place against the background of a proposed carbon price and don’t forget, alongside plans for a resource rent tax on miners.
Overseas buyers clearly believe that global demand for coal will support continuing high prices.
So investors who moved away from coal stocks because of the debate over the carbon price might have done themselves a disservice.
As always, basing investment decisions on the predictions of others, or predicting how markets will respond to a particular piece of news can be financially hazardous.
Peter Mancell is a director of Mancell Financial Group and FYG Planners AFSL / ACL 224543. This information is general in nature and readers should seek professional advice specific to their circumstances. If you want help with your financial future, we think we’re Australia’s best financial planner.
