Readers will know i feel FMG is overpriced. Since, my last post...

Readers will know i feel FMG is overpriced. Since, my last post several pieces of new info lead me to confirm my thoughts.

1) The 2nd largest shareholder in FMG a US investment group (name escapes me Hamm....) who supported FMG from the outset have stated they intend to sell half their 16.5% stake. 3 chinese steelmakers have indicated they will buy this stock. Why would key stakeholder sell now if they felt the SP has strong upside??? Have read also (at least 2 articles) opining Forrest will also wind down some of his stake.

2)I continue to have strong reservations re Chinese economy. Recently read (and google will find you the story) that apartment prices of new projects are selling for 25% discount to listed prices. In one city the discount was said to have reached 40%. This price fall was comparing current sales with apartments sold only 4 months ago!!

3)Well documented that Chinese govt is deliberatly trying to curb boom and subsquent inflation by yet again increasing minimal reserves of commercial banks to over 16%. (In Oz i think reserve requ. is 6%).

4)Korea and Japan signed with VALE for a 85% IO increase about 2 months ago. I have not read confirmation that Chinese have signed off at same price will VALE. No doubt some readers may know more than me.

5) Talks with China and RIO/BHP continue with no confirmation of any deal being struck.

6) FMG have announced that the first 'cape' vessell with contain IO cargo worth $11.6M. Divide by 170,000 tons = $68/ton gross. Nowhere near the current spot price of $170 or even BHP's price for last year of $110/ton!!!

7)The chinese think in decades. Why wouldn't they encourage a demand situation that will promote safe suppliers such as Brazil and Oz to ramp up production massively. They do need plenty IO. Hence, they will pay a short term premium but cannot see how the EXTRA 240 million tons/annum due with 18 months from around the world cannot be anything but bearish for IO prices.

So how does current FMG SP stack up against sales of $68/ton?? Why would FMG sell at this price if they could get more than double according to all the financial commentators??? Does the current($7.40)FMG SP PE stack up even at last year's price of $110/ton?

One key FMG stakeholder is selling. Another apears to be about to. Many on this site bought FMG at well below $1.00. GOOD on ya!! I didn't think Forrest would pull it off in the timeframe. But more importantly i don't beleive the China boom will continue at anything like the pace of the past 6 years. China is already a net steel exporter since about mid last year. Apartment prices in some city blocks HAVE fallen 25% in 4 months!!

Yes... i do have 4,500 FMG shorted. Hardly likely to affect the SP.

I suggest you take your profits soon.
Oversupply is not far away.