bhp headed for 17 with conservative pe ratio, page-10

Firstly you are saying that historical pe ratios are not relevant that is rubbish, why then do investment companies who have been around for 60 yrs; ARGO investments use pe ratios as a guide to measure when the market is over heated.

Let me expain, if you have a pe ratio of 14, that a 7% return on your money, a pe ratio of 18 is 5% return on your money and pe ratio of 23 is 4% return on your money. Therfore in order for a company to give you 8% return on your money in the next five years it has to double profits or 20% growth in profit per year.

What you are really saying is that you are prepared to hold BHP in a world recession with a pe ratio of 29 for god sake lol. That is a meglomaniac believe, that bhp will increase its profit over 210% within 5yrs and also infation of 4% therefore it need an increase profit by 230% to justify that bullish pe ratio.

Not to mention china taking market share, all the mines in care an maintance etc etc. Idealistic goals and faith do not translate into reality.

The world used the sub prime to blame the world crash and sure it was the tipping point to an already over valued market. If you know anything about commodity cycles you will know that when the market gets hot all sorts of things come into play, substition, high cost miners entering the market, massive investment that eventually floods the market and results in a crash. A good example is that if china had a tarrif system for its electricity and put up prices; that could reduce coal demand by 30 to 40%.

I thought I was safe with nickel but that was substitued with nickel pig iron. Also, as zinc prices peak, garbage recyling will increase. There are garbage companies that will make billions recycling rubbish. They are paid to collect and recycle the rubbish, make a profit and the cost of producing the meltals are free because its offset by collection profits. China will also have to adopt a strong recyling policy.

If you are bullish with China then why has BHP accepted a cut in iron ore prices, it would seem the dragon still has contol even though it probably has one of the biggest investment plans in history.

I have not looked closely at the bhp losses but only around 6 billion is abnormal, of that 3.5 is the ravensthorp operations written off and most of the cost of that project was over 5 YRS so probably the only significant proportion is 2.5 billion and they received 1.2 billion back for ravensthorp writeoffs which reduces the effect to 1.3 billion. The conclusion being that earnings per share this year are a very accurate representation of the companies position. Which means that a valuation using pe ratios are reasonable.