bhp headed for 17 with conservative pe ratio, page-18

Its quite simple how the market can find substitution, simply by taking control of other undeveloped resources in australia and using them as reserves to control the iron ore price or better still, taking over resources.

Bhp has a longer vision than 5 yrs and if the share price has already factored in growth over then next 2 to 3 yrs as has been suggested. I beleive that as the chinese gain more market control of iron ore prices will drop. Then the chinese will use bhp ore for production and their reserves for price control. Steel mills are already taking over coal assets in australia for their own supply.

In 2006 everyone said the boom would last 5yrs, we are talking about the minning boom. I spoke to someone in the industry who said that you will need to get out before then, and he said why not get out now, that was about end 2006. I was swimming in cash lol. Then the credit crisis due to over valuation, followed by a commodities crash.

I actally beleive that a lot of the commodities support in the market is institutional hedging, a bit like what happened to oil. All the instutions pushed up the oil price. Demand for oil doesnt drop that quickly.

Most of the industry still believes that there the commodity cylce stil exists and yet there is such bold predicitions of future earnings. Even in a recession you cant have demand dissappear and effect commodies prices like they were, thats why I think most of the commodities are valued at unrealistic prices.