BHP-where to next?

[feihong]

Just before it goes back up maybe?

Sorry, I hate stops. If something is good value at one price, I fail to see why it is worse value at a lower price. But then I'm not short term trading (though even then I don't like 'hard' stops).

because fundamental can change over time, and "bad value" is often discovered too late. Charts do tend to pick up bad things, just look at ABS and AFG chart prior to their downfall. Or even BNB and MQG for that matter. Have a look at QBE chart prior to 9/11.

Obviously most people will argue that BHP is one of the best stocks ever, and will not fail. Still, it's better to be safe than sorry. I don't think a lot of people were happy who held BHP back in 98/99 AT THAT TIME.. Now, who could say that BHP would not end up the way HIA and Enron did, given the management at the time is very poor?

 

[Ray Brown]

HIA and Enron basically shuffled debt and assets around stripping off obscene profit as they went. BHP digs stuff up and sells it to the world. To compare a company like BHP (with cash pouring out of it) to the other two is a bit unrealistic IMHO.

 

[topcropper]

A couple of brilliant articles about BHP in yesterdays AFR.

BHP could be net debt free as early as next year because of it's massive cash flows. Eanings per share could jump from $US 3.50 this year to as much as $US 5.20 next year as the new coal and iron ore prices take effect.

Then another article about how China is shutting down a swath of manufacturing industries for the olympic games so that athletes can breath clean air. This will lead to a massive temporary drop in commodity prices.

Add to that the panic in equity markets and the asset devaluation currently happening, and I think BHP could head much much lower. Can only dream of the opportunities that lie ahead. Woo hoo. Getting things in place to take advantage of what may never happen again.

See ya's.

 

[Ausprop]

Then another article about how China is shutting down a swath of manufacturing industries for the olympic games so that athletes can breath clean air. This will lead to a massive temporary drop in commodity prices.

interesting. hard to see any downside for their petroleum division and uranium and the ore is contracted for the year anyway isn't it?

it could only be a sentiment driven devaluation then?

 

[BV]

interesting. hard to see any downside for their petroleum division and uranium and the ore is contracted for the year anyway isn't it?

it could only be a sentiment driven devaluation then?

Chinas appetite for oil will not be as big as it has been after the Olympics.
Also, contracts to supply goods only guarantee exclusivity and not the amount of tones they will be ordering.

 

[s_t]

Chinas appetite for oil will not be as big as it has been after the Olympics.

Why not? .

 

[willair]

Why not? .

Commodity prices in biggest monthly drop since 1980

</EM>
By Sean O'Grady, Economics Editor
Monday, 4 August 2008



Commodity prices fell by 10 per cent last month, indicating that the five-year-long commodities price boom is coming to an end and easing pressures on the Bank of England to raise interest rates this week.

The Jefferies-Reuters CRB Index, a composite, shed 10 per cent of its value during July, the biggest monthly drop since 1980. In volatile trading on Friday platinum prices fell almost 7 per cent, while gold and silver declined by about 1 per cent. Rice and other "soft" commodities are also down.
However, it is oil that has seen the biggest switchback – down 13 per cent or more since June's record levels. Having comfortably crested the $100/barrel mark and threatened $150/barrel earlier this year, the price is now closer to $120/barrel. Analysts see it at or below $100/barrel within months: Deutsche Bank suggests a "reversal" of the move from $60/barrel since 2007; Lehman Brothers put oil at $90/barrel early in 2009. The consensus is around $100.
With a fall of around a third from the peak, oil price declines should feed through to a rapid fall in consumer inflation, vindicating claims by the Bank that the present jump in prices is more of a "spike" than a long-term trend.
Evidence that wages growth is muted is another "doveish" factor.
On Tuesday the United States Federal Reserve and on Thursday the Bank of England and the European Central Bank will meet to set rates. With extremely weak data on economic growth coming through and the most recent news on commodity prices, many believe that rate rises can be avoided.
Sharply lower demand, especially from the US, is the principal factor pushing down the price of crude, as the slowdown continues. Lehman Brothers says that "over the first half of the year, US oil demand surpassed all negative expectations".
The rate of increase in demand from China and India is also expected to moderate, both as the rapid growth in their economies slows and as energy efficiency measures and substitution of expensive commodities for cheaper ones gathers pace.
The reform of fuel subsidies in India, China, Taiwan, Malaysia and other emerging markets is also helping matters.
The International Energy Agency has halved its forecast for the growth in global oil demand in 2008.
On the supply side, analysts point to new Opec and non-Opec projects coming on stream, and more effort by Saudi Arabia to increase supply, as agreed at recent international summits. At least an additional 1.9 million barrels of oil per day is expected soon.
The inflationary effects of speculation may also go into reverse. In a recent research paper, the Treasury predicted that "several factors point to a possible falling back in prices towards the end of 2008".
Some economists are now suggesting that the very worst predictions of recession may be avoided. Ruth Lea, economic adviser to Arbuthnot Banking Group, commented: "Providing commodity prices continue to ease, inflation is kept under control, and the credit markets improve over the next year, growth should resume next year, albeit modestly

 

[Ausprop]

doesn't help to explain the link between a bunch of people running around in their speedos and aggregate oil demand?

 

[s_t]

doesn't help to explain the link between a bunch of people running around in their speedos and aggregate oil demand?

Yep, and since when does a 10% drop (small in comparison to the run up) indicate that the commoditities price boom is coming to an end?

 

[Sunfish]

A 10% drop in house prices would have you guys screaming about the buying opportunity. So many have said "Bring it on!" in the past.

Why does it mean the end of the resource super-cycle? There is legitimate reason to question how good some of the miners' shares are because they are victims of resource costs as well as benefactors. But the product in the market will continue higher for fundamental reasons: The stuff is getting hard to find and expensive to recover. (Coal and iron, less so, but transport is going higher too and we are closer to Asian markets than S. America).

 

[willair]

A 10% drop in house prices would have you guys screaming about the buying opportunity. So many have said "Bring it on!" in the past.

Why does it mean the end of the resource super-cycle? There is legitimate reason to question how good some of the miners' shares are because they are victims of resource costs as well as benefactors. But the product in the market will continue higher for fundamental reasons: The stuff is getting hard to find and expensive to recover. (Coal and iron, less so, but transport is going higher too and we are closer to Asian markets than S. America).

Sunfish,you would not think that with the price of BHP about 20 minutes ago,the numbers say it all,it was so easy up till about 8 months in a full blown bull market,but as they tell me experience is what you pay the price for, i can never understand why the Directors / Senior Management don't reply to my letters after all the shareholders own the company,or do they

36.190-5.63%36.18036.19036.40036.64036.1307,334,411

 

[BV]

and since when does a 10% drop (small in comparison to the run up) indicate that the commoditities price boom is coming to an end?

Some people will tell us that prices at the shops may be rising because billions of Indians and Chinese are eating more, and using cars instead of bicycles, but the truth is that some well funded gamers (the likes of huge super funds) are playing the commodities market like a casino in cyberspace.

How long is this going to last?
Who knows but as with any speculation one day it will come to an end.

I suggest you Listen to this podcast

http://odeo.com/episodes/23141156-2008-08-03-Food-futures

 

[s_t]

Listened to the whole thing. Bit of a waste of time.

I'm sure speculation is going on, but that doesn't mean it's a bubble and current prices are unwarranted.....

 

[BV]

Listened to the whole thing. Bit of a waste of time.

I'm sure speculation is going on, but that doesn't mean it's a bubble and current prices are unwarranted.....

Really??? I thought that it was obvious that we have a commodities bubble but anyway you are entitled to your opinion.

At least IMO it's a very educational talk and it's important to listen to because the trend is now changing.

There will be many who will be selling commodity stocks soon
and they will be looking to put their money somewhere safe.

The problem is, there are no safe stocks right now so they will probably switch it to cash and leave it there for a while till markets turn around.

Commodity price corrections have started and there is more to come me thinks,
and what if Chinas appetite for raw materials changes after the Olympics?...

 

[chilliaa]

Sunfish,you would not think that with the price of BHP about 20 minutes ago,the numbers say it all,it was so easy up till about 8 months in a full blown bull market,but as they tell me experience is what you pay the price for, i can never understand why the Directors / Senior Management don't reply to my letters after all the shareholders own the company,or do they

36.190-5.63%36.18036.19036.40036.64036.1307,334,411

Maybe you should try calling the CEO/Senior management directly.
I have done this twice this year and spoke to the CEO directly. Of course you must prepare your questions before hand, they dont have time to chit chat. And try to avoid questions like 'why is the share undervalued or what price do you think the shareprice will be next year'.

 

[topcropper]

Some people will tell us that prices at the shops may be rising because billions of Indians and Chinese are eating more, and using cars instead of bicycles, but the truth is that some well funded gamers (the likes of huge super funds) are playing the commodities market like a casino in cyberspace.

How long is this going to last?
Who knows but as with any speculation one day it will come to an end.

I suggest you Listen to this podcast

http://odeo.com/episodes/23141156-2008-08-03-Food-futures

So that podcast is your contribution to this forum. What a waste of time that was. And are you really suggesting that the current price of grain is mostly to do with speculators?

Grain prices have tripled up to the peak. They have now dropped back substantially, but they are not going back to where they started. Get used to higher food prices, and they are staying high and never going back down. The costs of growing food has changed forever, and the massive yield increases achieved from fossil fuel inputs, where farmers tripled production in 50 years can't happen again. It was a one off.

Metals, like nickel and zinc, and which are currently being hammered from the China shutdown because of the Olympics, are getting back to the cost of production, and mines are shutting down as they can't make a profit.

You have a strange definition of a bubble.

See ya's.

 

[BV]

So that podcast is your contribution to this forum. What a waste of time that was. And are you really suggesting that the current price of grain is mostly to do with speculators?

Grain prices have tripled up to the peak. They have now dropped back substantially, but they are not going back to where they started. Get used to higher food prices, and they are staying high and never going back down. The costs of growing food has changed forever, and the massive yield increases achieved from fossil fuel inputs, where farmers tripled production in 50 years can't happen again. It was a one off.

Metals, like nickel and zinc, and which are currently being hammered from the China shutdown because of the Olympics, are getting back to the cost of production, and mines are shutting down as they can't make a profit.

You have a strange definition of a bubble.

See ya's.

TC take whatever you want from it, I found it interesting.

My thought is that if big player activity is pushing prices up at some stage it will end because they will look for something else to invest in.

Will they do that and what could be a safer investment than commodities right now?

I don't know. I could be wrong and the China shutdown could be the only cause for the recent price drops and if it is so then get ready to pickup some cheap stocks at the end of it.

 

[willair]

Maybe you should try calling the CEO/Senior management directly.
I have done this twice this year and spoke to the CEO directly. Of course you must prepare your questions before hand, they dont have time to chit chat. And try to avoid questions like 'why is the share undervalued or what price do you think the shareprice will be next year'.

Chilliaa..
I like the old style,a simple letter with some idea's that i think will help the companies that we invest in,any 10 - 50 cent high risk start up miners will always talk to me straight away and upfront but who has the power to talk to the top level management in CBA-NAB-ANZ-BHP-good luck if you can they never want to talk to me..willair..

 

[Sunfish]

I watched the entire podcast. Thought it was an interesting primer on markets for those who didn't know. But I couldn't see where a convincing case was made that the speculators were pushing up prices.

I have a great deal of respect for Jim Rogers and he disagrees too.

Essentially, producers are sellers and end-users buyers, of futures. They are not always in the market at the same time so speculators provide the liquidity needed but speculators sell exactly as much as they buy. They do not hoard it! Towards the end of a contract's life they must sell and buy the next expiry date contract so, in an orderly market, they have little influence providing they do not act illegally and in collusion with the aim of distorting the price.

Now that manipulation does happen and often by government agencies. I don't see how putting the fox in charge of the hen-house is any solution. If you doubt governments deliberately affect markets read the GATA website. The current British PM, while Chancellor, sold off a big pile of B of England's gold below $300/oz in a desperate attempt to cap the price of gold. This gesture to the international banks cost the pommy treasury billions of pounds in reserves. They probably bought US$ assets which have halved in value since.

 

[chilliaa]

Chilliaa..
I like the old style,a simple letter with some idea's that i think will help the companies that we invest in,any 10 - 50 cent high risk start up miners will always talk to me straight away and upfront but who has the power to talk to the top level management in CBA-NAB-ANZ-BHP-good luck if you can they never want to talk to me..willair..

Agree with you on that point, i dont think retail investors will get access to senior management in any of the top 50 companies by market cap. However these larger companies often have very good shareholder support departments. So you just have to go through that department. I caused a bit a stink at BnB earlier this year when i asked for confirmation in writing concerning some issues regarding their convertable notes. They had to get their legal department involved, but they still replied back to me.