FMG Financial Intelligence Topic, page-22

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scrabble1

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08/01/20

00:36

Post #: 42273460
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Originally posted by big e ↑

Most are expecting the RBA to lower interest rates next month and that would include me.

They would take into account the impact of fires as well and what they will do to the price of food. I would anticipated that the
cost of meat fruit and vegetables will rise at the same time they will be mindful of the re build costs post fires.

High prices of less available food may not see empty shelves because quite a few essentials of life had an increase on
1 January and Melbourne's summer is slow to start and many minds are not turning to shopping other than return to
school costs and I for one pay rates about this time of year.

A lower interest rate surely would drive people to yield assets. At least that's what todays after market buyer may have
been thinking. As have other large recent buyers thought in recent after market trades.
We would have to be one of the best yield share on the ASX and fully franked.

A pull back on the daily price doesn't worry me when the weekly chart looks so good. We remain in a perfect uptrend and
I'm prepared to let the trend be my friend.

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Good point you raise about food prices. China are currently going through a similar thing with pork prices. This has led to an increase in inflation. The difference is economic growth is still 6% notwithstanding its the lowest growth rate for a generation.

https://www.google.com.au/amp/s/www...aking-no-chances-with-stagflation-11577628000

The last thing the economy here needs is supply side inflation, whether it be through Middle East tensions causing oil prices to be elevated for a long time, which then filters through supply chains or higher produce prices.

We’ve already exhausted monetary policy stimulus. Wage growth is poor due to excessive slack in the labour market. Retail sector is struggling. Productivity is going negative. Cap ex/infrastructure spending; both private and public are poor.

Having said that, irrespective of whether I agree or not, rates will decline again soon as you said. The dollar will continue to be under pressure too.

Yield is going to become a much more important focus. FMG and other miners have always had higher risk premiums attached to them. However, we are seeing the ride turn somewhat.

Sectors whose profits/dividends are declining, whose margins are being squeezed and growth prospects subdued are moving away from the old school finance mantra of safe haven to a riskier basket.

I’m really comfortable with FMG now as a yield play. I’ve done my sums a million times over. Looked at IO supply coming on market over the coming years macro and micro (fmg), change to discounts for FMG, Australian dollar, more focus on fiscal/infrastructure investment as opposed to monetary policy in near future, continued Chinese infrastructure growth, Indian growth, margin over volume strategy by the 4 majors, high barriers to entry, monetary policy settings in Oz etc etc etc Also dividends are fully franked.

Yep fmg remaining where it is for a bit longer won’t bug me. Having said that, the Dalian is currently 675 and the AUD down 1%... At one point, the market is going to realise, we’ve been gifted a wooden horse from Brazil (I think that’s the saying), that IO comeback is still as elusive as ever. I can’t believe this hasn’t really been mentioned by analysts etc

FMG Price at posting: $10.69 Sentiment: Buy Disclosure: Held
11 Upvote

1 Great analysis

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