Predications of a downturn lasting 18 months have been made. Persons with Margin Loans should be cautious.

If investing in Australian Resource companies, watch the Australian Dollar. If the dollar rises, it may indicate investment flowing back into the resources sector but be cautious of the strength of the American Dollar that may offset this indicator.

A rising Australian Dollar will also effect companies that are paid in the USD which will influence the company's profit.

Companies with no or low debt level and good management in place should benifit during the looming tighter credit market.

If the flow of credit between the banks eases, the finance sector is worth looking at closely, especially the bank stocks that have little exposure to the sub prime crisis.

On resources, BHP is the company of choice. BHP has a stong balance sheet, little debt and excellent management.

The proposed takeover of RIO is still a strong possiblility. With all the banks in Europe and USA merging and being taken over, it is hard to see how the European Regulator will not allow the BHP RIO takeover to go ahead, especially with the Australian Regulator, ASIC, having already given it's approval for the takeover.

RIO's shares are trading at a discount to the proposed terms offered by BHP.

Other Australian shares to watch are Wesfarmers, Woolworths and Incetec Pivot. Leighton and United have the chance to take advantage of the proposed investment by the government in Australian infrastructure.