basic economics and foresight

Lots of analysts who frankly know very little, keep harping on about falling iron ore prices and think the likes of Fmg, Bhp and Rio are likes lamb to the slaughter, esp Fmg as they are not diversified to other commodities like the others. Well sorry analysts, you people are a joke and very short sighted. Don't get influenced by this short sighted doom and gloom.

Fmg are a lot more nimble, possess a lot more foresight than they are given credit for and understand the economy and industry a lot more than those call analysts or punters.

Let's examine. Fmg predicted that ore prices might taper off, let's examine what they had the foresight to do.

1) cut debt aggressively
2) cut costs aggressively
3) increase production
4) switch much of their operations to gas.

It's the smaller explorers and producers who will struggle, not a multi billion world class operation who has so many levers to pull.

They can continue to cut 1 and 2. Can increase or decrease 3. Moving to gas, sheer brilliance.

So as the smaller explorers and producers fall off, this will increase consolidation and therefore demand which will increase price. Once price increases, Fmg have the capacity to increase production to meet demand.

Once steel producers consolidate in China, this will result in a increase in demand for ore and push up prices. Fmg will be there to meet demand.

If prices decrease, many steel producers will take advantage of this by stockpiling, Fmg have the capacity to supply this. The price of ore will naturally drop, however what Fmg losers on the price leg, gain on the supply side.

Every commodity resource prices goes up and down, this is well known. Many industries including Fmg are not bust and boom. Fmg might have to endure a bit of pricing pressure, however they are strong enough to endure any price correlation. In the Lt, the weak will fail and the strong like Fmg will prosper!!!!

Long term, fmg has huge value and the sp is undervalued. When a stock is undervalued do you buy or sell? I know what I do and have done.