forget charts. its fundamentals

Can't give too much of an opinion on BHP in the short term except to say nothing would surprise me in either direction.

But long term lets take a look at the fundamentals based on recent data:

1. US housing - bubble burst, but starting to show signs of recovery - the pain has mostly been experienced already. In my view probably the biggest risk to the global economy has now been removed, putting a floor under BHP price long term. Also, anyone notice that while everyone was scared sh1tless about US housing, long term bond yields were at record lows? And US mortgages are based on bond yields NOT central bank overnight rates. So at the same time as the Fed was raising rates, US mortgage rates were going to record lows providing a natural cushion for housing. This why I believe we are starting to see positive data on housing already, much sooner than people expected and why we saw record refinancing as people take advantage of lower rates (and consumers dont generally refiance a loan unless they are going to be better off....so this is putting even more money in consumers' pockets). POSITIVE

2. The consumer - still spending. Signs point to decent xmas sales at minumum. And trends towards retail discounting means inflation is not breaking out which lightens up the pressure in interest rates. POSITIVE

3. US deficit - larger again (what a surpise) - eventually this will be a problem, but at the same time it tells you that US consumers are still spending as most of the reason for the deficit is the trade gap with China. Anyway this deficit will naturally decline in importance as China's currency gradually increases in value and China starts to have success in promoting domestic consumption. NEUTRAL

3. Emerging markets - fixed asset investment in China is starting to moderate. NEGATIVE. But good in the long term as they will shift towards more sustainable and diversified sources of economic growth i.e. consumer consumption. Has anyone noticed there are alot more press articles around now talking about the emergence of the Chinese consumer? And now India is wanting to emulate China's strategy of developing infrastructure assets to promote economic growth. POSITIVE

4. Oil price - its lower. NEGATIVE short term, but POSITIVE long term as it happened just at the right time to sustain the US consumer through the housing weakness and into xmas. Also, oil has very little chance of going far under $60 as OPEC will cut prodcuction. OPEC also wants to improve their credibility in the market so they although they are talking the talk they are now more likely to walk the walk. POSITIVE

5. Commodities prices - they're off - NEGATIVE.....but how far are they going to fall? The investment community has been saying for ages that prices will fall. But the more they say this the more likely they are to stay high. Mining and exploration companies have really made no meaningful progress in discovering new world class deposits. The more people say prices will fall, the more cautious mining companies become in terms of approving exploration spend and new projects. So, demand ain't going away and there's no new supply coming on stream...and even if there is it will be in several years, when demand has increased further. In terms of investment flows affecting commodity prices, the recent sell off saw the short term momentum traders and hedge funds out of commodity prices....so that is a positive as the downside is mitigated and they may come back in again creating further upside. Anyway who gives a stuff as trade buyers (ie. nt investors) are still buying commodities meaning the price levels are realistiv. And...commodity prices are still way below their real peaks of previous commodity cycles. Amd my money is on this super cycle being bigger than past super cycles seeing as we're talking about more than a fifth of the population of the earth just in China alone (compare that to the last big commodity booms caused by Japan/US).

6. Costs are up. NEGATIVE. But so what? of course they are its a boom. Ravensthorpe will still be very profitable even if it costs a bit more. Also makes it much harder for new entrants to create supply.....I could go on about all this for ages. POSITIVE

7. Private equity and corporate activity - can't be bothered explaining this one. POSITIVE.

8. Inflation - still very well contained, even more so according to recent data. Consumers will spend like crazy but they will not tolerate higher prices. + oil is lower. + it ties in with a heap of the stuff I've already typed above. And lets face it central banks have got ALOT of credibility at the moment so people dont let their inflationary expectations get ahead because they believe in the Fed (or whatever other bank) depending on the country they're in). POSITIVE

9. Japan - still going OK. It takes time to turn around 15 years of deflationary environment and a savings culture. But the longer conditions stay benign the more Japanese consumers will start to relax and spend. POSITIVE

12. Brokers have lower calls and fund managers are underweight. Perfect....as soon as they rerate, they will come back in. I would be worried if every broker had BHP as a buy and it was still trading at these levels. Brokers get the best information in the market....you should use it....they just have no idea what to do with the information (and they like to fence sit). POSITIVE

11. there are about 20 more reasons to buy BHP but I cant be bothered typing any more. POSITIVE

So, play the market short or long but eventually shorts will get burned.

Who thinks I'm biased?