basic economics and foresight, page-17

Analysts are quite knowledgeable about long and short term value difference - but their institutional clients dont have patience to buy stocks that have falling short term indicators.

Thats the opportunity for us as private investors.

The big funds are measured on 3 monthly performance - they cant accept being down 10% for 3 months in order to be up 20% 6 month later. Have too much of that and their money starts evaporating.

Thats why the big sell-off of FMG on Friday - UBS downgraded their FY2014 Iron Ore forecast to reflect the recent spot price weakness - and thats led to strong selling.

But from what I hear, UBS themselves say FMG is worth considerably more than $5.50 and they still like iron ore price at above $US110 long term.

But just now concensus is in disarray - JP Morgan forecast a few months ago that they think spot price is going to US$80/t, and Citi said $US 90/t - and the funds, when a strong consensus like this breaks - scurry away like rats when the light comes on.

I think there is no doubt of this being a good opportunity to buy FMG. I'm a strong believer in a consolidating wave of growth in global steel demand from 2015.

But there is nothing to say the FMG stock price wont go to $4.20 before it goes back to $5. So buyer beware.

Keep a beady eye on the Fe spot price - if it stays above $US100 then $4.50 is excellent buying in FMG imo. But right now the pros just arent sure.

The one thing you do know about FMG - even with a massive debt - above $US80/t it should be ok long term. Whereas AGO will cease to have a business.