im sorry but i laughed.crazypunter is wrong - but not as much as...

im sorry but i laughed.

crazypunter is wrong - but not as much as you are,

if what you said was correct for investing, bhp and rio would now be double what they were pre-gfc

do you realise chinese steel output at 770Mtpa is now 50% higher than pre gfc?

yet bhp and rio are half the price they were

increasing production tonnages never beats increasing profitability per unit in supporting a share price.

1) because the extra product weakens the price received.

2) because stocks get priced on potential for future earnings growth or decline.

if the view is iron ore long term is steady or falling then share price will fall even if npat increases.

Craxypunter is wrong in the short term - fmg will almost certainly have a short spike up.

Whatever the trend is in iron ore price long term - its just dropped 25% plus - have a look at any commodity or currency - that cant go on indefinitely.

and when spot iron ore rises a few days fmg will rise as shorts get covered and iron ore price bulls get set.

BUT - as ive been trying to explain to non economists for the past few years - rising demand does not mean rising profitability.

people who dont get that will get eaten alive by resource stocks if they havent been already.

rising demand does inrease profitability - if nothing else changes.

but if you have increased numbers of suppliers - increased costs or some other factor - then you have to reassess

however - crazy is more right than wrong about current long term prognosis for iron ore. the chinese iron ore is high cost but thats coming down as they improve their mining efficiency

the $64 question though is if US and or Europe get enough economic gdp to start buying more chinese steel goods again.

if they do then fmg will be $5.50 again.

if not then the trend is likely to be volatile, sideways and ultimately down, even if their npat rises as they pay down more debt.