fdl and gda stratedgy

For what its worth....

I sold all my Bluechips in late November and bought up FDL and GDA. The reason for this move to me made sense for the following reasons.

The ASX has maintained good growth and Australia has prospered well as a result of mining and selling resources overseas. Iron ore mined from the pilbra contributed to the wealth of Australia in the 1970's by selling to Japan and currently selling to China. As a result of both Iron ore booms, Australia enjoys world class mining capabilites that give us an advantage over developing countries persuing mineral processing activities in their own backyard. China has access to huge untapped resources in their own backyard and will in the fullness of time (mayby 50 years) mine their own resource.

Currently it is rumoured that Brazil has stated a 70% increase in their new contract price for Iron Ore with China. I don't expect the negotiated contract price for Iron ore will increase by 70% but somewhere between 1% and 70% will become the final price. The point I am making is Iron Ore is and will be for some time in demand from Australia, and the price will rise inline with demand from developing nations.

The Chinese are starting to look to Australia for investment in Mining Companies in the interest of reducing the current global escalation of Iron ore prices. Either way, the SP for Companies with Iron ore resources that have econonmical access to shipping ports will increase proportional to the Iron Ore contract price.

As the finacial markets around the world cool their heals after the cheap money fiasco, I expect the Bluchips SP to reduce and remain depressed for six to twelve months. But I do not see the demand for or the price of Iron ore reducing for some time to come.

FDL and GDA are in close proximity to FMG. FMG are smart enough to work with the Chinese and invite investment into their region. They are also prepared to take on RIO and BHP in the Pilbra. This can only be seen as positive by the Chinese to aid the current demand for Iron ore.

I am quite happy to sit tight with FDL and GDA and expect exceptional growth to the SP as the hottest boom in the Pilbra for 35 years unfolds before our eyes.

Oh and then I'll cash in and buy back my Bluechips and enjoy the next cycle.

Gotta love the Stock Market.....