chinalco and alcoa buy 14 billion rio stake

well the writing is on the wall now.

first it was the Chinese buying into MXG to control around 40% and now they have teamed up with Aloca to buy 7.2% of RIO. BHP will find it very difficult to bid for RIO now and if they do they will probably over pay. More likely for the Chinese to want to breakup RIO and get hold of the key commodity supplys they really want.

you can bet your bottom dollar that AXO will not stay this cheap for much longer. RIO will probably be trading on a PE of around 20x after all of this, AXO doesnt have a PE yet but could easily. AXO is trading on a production PE of less that 0.40%. no matter how you look at it this thing is so cheap its not funny.

as i said before, Chinese are notorious gamblers and like doing things on the cheap side. they probably see the global sell down in equities as a golden opportuntiy to start grabing key commodity companies such as RIO to secure long term supply.

compare AXO to something like a RIO, one of the big steel producers could stump up the cash and take AXO over (maybe it would cost them $300m) and then they could get finance for the remaining $500m and they would have a long life Fe mine for the next 25 yrs with no hassles from BHP etc nailing them with high Fe prices.

the first Chinese steel company that is sucessful at this will have a massive competitive advantage over its competitiors. it could sell the steel heaps cheaper because they would be vertically integrated. the cash flows they generate would enable them to buy up the commodity suppliers and hey presto, Chinese domination of the world!!!

Inflation, no chance, the Chinese will control the commodity markets and be the producers of steel etc. they would control the price and profitability. they would then also be able to keep the prices low and then you would see a massive build up of FX reserves in China to the extent never seen before.

the US economy is crap but the Chinese will try and use this lul in the markets to grab controling stakes in key companies. the next logical progresssion will be to buy up all the potential projects on the cheap, spend the cash to get them producing and then use the cash flows to try and take the big boys down (BHP, RIO, CDRV etc).

i will be back in the market on monday buying up AXO, it was a mistake not buying more at anything below $1. i can now see the mistake i made, i wont make it again.