BHP - BHP Group

[ducati916]

ducati
Your pe data supported my case nicely.
Nonsense

My personal investments in BHP can be called whatever, and I guess I'm the only one that really cares about the outcomes. I believe that it's useful for anyone investing to compare what they have achieved with those others who suggest a more profitable path was possible.
Hindsight trades suffer from a credibility issue

I'm not sure why you would criticise some earlier statements in this thread that regarded getting into BHP near $30 was relatively safe, when clearly it has proved profitable to boot.
Simply because I do not consider an overvalued entry "safe"

Given you regard BHP as doomed, and you fancy yourself as a dab hand with Elliott waves, perhaps a chart with timeframes could educate us to your estimations of "when" and "how low".
Never mentioned Elliott waves

I guess asking you to keep it short and to the point is a tall order.
But you could always try.

Strange, in a previous post you complained that my "opinions" were unsubstantiated and that you required some argument or factual basis. Looks like your opinion fluctuates to suit

 

[reece55]

Double top anyone????

I think there is a high chance that this is going to be a top price for BHP for some time to come. It has put up a valiant effort to shrug off the US, but I think it is inevitable that a down turn in the US will depress BHP's share price (and indeed all share prices).

Complete EW to a wave 5 at about 39.80 or so. It's been a fantastic ride, but I think it's time to hit the eject button on this baby. The PE may be cheap, but earnings at this point in the economic cycle for BHP are likely to be at a peak.

Unbelievably, the target if the 32.00 fails is $24!!!!! I'm not saying it will go that far, but if someone said in Jan that it was going to go from 24 to 39 in 9 months, you probably would have laughed!

All the best trading.

Cheers

 

[rederob]

As you know I am an Elliot Wave afficinado, with a Doctorate based on the research presented in relation to the applicability of EW. to econometric models of bank NPL's & interest rates.
By my count, BHP is doomed.
jog on
d998

Given you regard BHP as doomed, and you fancy yourself as a dab hand with Elliott waves, perhaps a chart with timeframes could educate us to your estimations of "when" and "how low".
Never mentioned Elliott waves
ducati

Adding lies to your repertoire advances your credibility.

To debunk yet another of your "nonsense" replies, your data on pes shows that in near subsequent years, as the pe declines, the subsequent year's profit for "holding" BHP increases.
When the commodity cycle turns down, it's time to quit BHP.
But only if its energy assets are unable to compensate for declines in its metals assets.

Your point about an overvalued entry not being "safe" is not valid if the assumptions supporting it are unsound. In this case we are enjoying a bull market for most commodities, with cyclical record prices for metals being regularly achieved. People who are unable to see this, or just wish to present a counter view because they can, will clearly not be benefiting from trading this equity.

There is a saying, "the proof of the pudding is in the eating". This is hindsight proof.
I know the ingredients are still in place, and the cooking conditions are right.
So I think the BHP pudding will taste OK next year, but there are no guarantees.
With the benefit of hindsight, and a little foresight, investors and traders may have another 12 months on BHP.
However, as BHP's pe is outside my target range - way too high at present - I'm prepared to give reece's double top thesis some credibility in the near term.

 

[gregcourageous]

With the dow dropping substantially and BHP hitting that 100% Fibonacci line, i think we could see a nice drop over the next week... back to around the 61.8% mark, seems to be a little support there. That last "hanging man" candle seems to indicate a reversal as well... Could be worth a short first thing Monday.

Thoughts anyone?

 

[kerosam]

i used the bollinger bands & it appears that the closing is on the high end of band without extra ordinary high volumes. might retrace downwards next week.

have a look at WPL, quite similar.

short both on friday.

 

[Captain_Chaza]

With the dow dropping substantially and BHP hitting that 100% Fibonacci line, i think we could see a nice drop over the next week... back to around the 61.8% mark, seems to be a little support there. That last "hanging man" candle seems to indicate a reversal as well... Could be worth a short first thing Monday.

Thoughts anyone?

One does not need to be a Rhodes Scholar to Know what will happen on Monday's open

Where to from there ?

 

[BSD]

If you don't think that BHP is cheap at these levels then how do you reconcile your later statement that BHP is very attractive purchase when the Chinaphobes and Americans get all worried and sell their 'risky resources shares' to buy USD backed treasuries at 3.5%.


The two statements seem to be in contradiction to one another.

No, they don't.

At A$38 per share they are not cheap.

But, when the Americans and others who cannot see/believe that we are in the midst of a sustained bull market in commodities and energy created by massive increases in real demand from developing economies and a limited supply response - BHP gets sold-off aggressively.

Last year the fear mongers knocked the price down to $24, this year low $30 region.

Great opportunities that have provided excellent profits.


I remain very confident in my forecast for iron ore prices. Seeing you believe I am being excessively bullish - what are you expecting, a fall?

Copper is forecast to be in deficit for another 18 months.

Oil is holding $70 very easy at the moment.

How many large copper mines (150,000tnpa) are coming into production next year? How many jumbo oil fields?

Global demand for steel, copper and energy is not going down.

So where is the end of this 'cycle' we keep hearing we are at the top-of?

 

[gfresh]

.. don't forget uranium and olympic dam

there are 34 reactors under construction now, with an expected 60 reactors to come on worldwide over the next 15 years. source: http://www.uic.com.au/nip19.htm

BHP is cheap IMO.. with what looks like going to be an outright fight to secure resources over the next 50 years, a company that pretty much has fingers in every resource you can think of, will do very well.

 

[reece55]

.. don't forget uranium and olympic dam

there are 34 reactors under construction now, with an expected 60 reactors to come on worldwide over the next 15 years. source: http://www.uic.com.au/nip19.htm

BHP is cheap IMO.. with what looks like going to be an outright fight to secure resources over the next 50 years, a company that pretty much has fingers in every resource you can think of, will do very well.

Point taken gfresh re olympic dam, it is a word class mine and the long term U story is a good one, but I guess it depends on what investment timeline is - 50 years is a long to wait for a return on a share....

But cheap relative to it's earnings? I think fundamentally at the stage of the business cycle we are in, it is looking exceedingly expensive..... Just my opinion though, there are plenty of others to go with on this thread!

Cheers

 

[ducati916]

Adding lies to your repertoire advances your credibility.
It would seem that you have trouble distinguishing a facetious statement.

To debunk yet another of your "nonsense" replies, your data on pes shows that in near subsequent years, as the pe declines, the subsequent year's profit for "holding" BHP increases.
When the commodity cycle turns down, it's time to quit BHP.
But only if its energy assets are unable to compensate for declines in its metals assets.
Which shows that the *higher* the P/E purchased at, the greater your profit would have been. So the data provides the evidence that your theory of buying low P/E's is nonsense.

Your point about an overvalued entry not being "safe" is not valid if the assumptions supporting it are unsound. In this case we are enjoying a bull market for most commodities, with cyclical record prices for metals being regularly achieved. People who are unable to see this, or just wish to present a counter view because they can, will clearly not be benefiting from trading this equity.
The point in regards to *trading* has already been differentiated. Investment value at current prices I have deemed unsound, for all of the reasons posted.

There is a saying, "the proof of the pudding is in the eating". This is hindsight proof.
I know the ingredients are still in place, and the cooking conditions are right.
So I think the BHP pudding will taste OK next year, but there are no guarantees.
With the benefit of hindsight, and a little foresight, investors and traders may have another 12 months on BHP.
However, as BHP's pe is outside my target range - way too high at present - I'm prepared to give reece's double top thesis some credibility in the near term.

"Ingredients" a rather imprecise term when making a case for an investment, the rest of your statements are simply *speculative*. In speculation, you may be correct, or you may be incorrect, that is the nature of speculation. BHP however has been touted as a solid Blue Chip investment stock @ these prices. You are not providing any analysis for this viewpoint, simply speculation

 

[rederob]

"Ingredients" a rather imprecise term when making a case for an investment, the rest of your statements are simply *speculative*. In speculation, you may be correct, or you may be incorrect, that is the nature of speculation. BHP however has been touted as a solid Blue Chip investment stock @ these prices. You are not providing any analysis for this viewpoint, simply speculation

ducati
I forgave your inability to spell aficionado, and your incorrect claim over how numskull may be spelt.
But on BHP there is nothing in your analysis to date that will have enabled anyone to profit from following your posts.

In relation to BSD's post on iron ore pricing, your reply ignores the present reality of spot iron ore prices - and dry bulk shipping rates - rising markedly.

You need to come to grips with your inability to undertake "fundamental analysis" and perhaps pursue a more suitable path. Might I suggest comedy. I have certainly enjoyed a good many laughs here.

 

[ducati916]

ducati
I forgave your inability to spell aficionado, and your incorrect claim over how numskull may be spelt.
But on BHP there is nothing in your analysis to date that will have enabled anyone to profit from following your posts.
In regards to aficionado and it's spelling, I concede the error. In regards to "numskull" we have a dual spelling...Main Entry: num·skull
Variant(s): or numb·skull /'n&m-"sk&l/
Function: noun
Etymology: numb + skull
1 : a thick or muddled head
2 : a dull or stupid person : DUNCE
In relation to profiting from my analysis, again you are confusing short-term trading with a longer term investment horizon.


In relation to BSD's post on iron ore pricing, your reply ignores the present reality of spot iron ore prices - and dry bulk shipping rates - rising markedly.
In relation to BSD's post, I shall address his points. It takes a little longer to answer his posts in that he will at least post an opinion that is supported by some form of analysis, thus, I have to take more time in refuting or debating his points.

You need to come to grips with your inability to undertake "fundamental analysis" and perhaps pursue a more suitable path. Might I suggest comedy. I have certainly enjoyed a good many laughs here.

Of course, your responses almost invariably focus on the personality issue, very rarely is any data or analysis provided. I notice in this post the evidence of analysis that you offer are; 2 spelling mistakes, one of which turns out not to be a spelling mistake at all.

 

[ducati916]

BSD

I would argue that there is indeed a contradiction.
If at $38 they are not cheap, then selling BHP would be rational?

With relation to industrial metals, yes, I am expecting a fall. I am expecting a fall on the following basis;
*If the US enters recession, which looks increasingly likely, then demand from the US will fall for industrial metals. If demand falls [significantly] or otherwise, I would expect lower prices.

*If the falling demand for a variety of products from China to the US falls as the US enters recession, what will happen to the growth curve in China?
*rise
*stable
*fall
In 2/3 scenario's the outcome for China is negative. Thus, I would again expect falling prices.

What evidence. Industrial metals are correlated to the economic cycle and correlate to rising [falling] interest rates. Interest rates are rising worldwide and will continue to rise. Thus, your industrial commodity bull market is threatened via the economic cycle.

 

[rederob]

Of course, your responses almost invariably focus on the personality issue, very rarely is any data or analysis provided. I notice in this post the evidence of analysis that you offer are; 2 spelling mistakes, one of which turns out not to be a spelling mistake at all.

ducati
Others can do the homework needed to convince themselves one way or another.
Others can look at the kitco 5 year charts of metal supply, and correlate that information with present metal prices.
Some things are patently obvious.
Others might also like to look at both the long term price contracts for iron ore and compare these to prevailing spot prices, and the spot price trend.
I raised this point in my post, but you chose to deal with whatever suits your inability to acknowledge market realities.
The baltic dry index is another source of information fundamental to appreciating global bulk commodity transport trends (again, I mentioned . I have included a snapshot below for those interested.
The data shows a rising trend of almost inconceivable proportions given the rate that new ships have hit the oceans in recent years.
And guess where most of the bulk commodities end up?
75% of the world's 20 busiest ports are in Asia, including 50% in China.
The US accounts for only 15% of the top 20 ports - possibly fewer given the data I used from Wiki was 2 years old.
Although US financial concerns have a global footprint, US industrial dominance has waned to the extent that China now surpasses it in many areas of consumption and production - most especially in commodity sectors.
Again, this is not a recent trend: It's well established and there is very little chance in the foreseeable future that it will change.

 

[ducati916]

rederob

Although US financial concerns have a global footprint, US industrial dominance has waned to the extent that China now surpasses it in many areas of consumption and production - most especially in commodity sectors.
Again, this is not a recent trend: It's well established and there is very little chance in the foreseeable future that it will change.

China
GDP, current prices
US dollars | Billions percent change
1980 301.51
1981 285.27 -5.4%
1982 279.77 -1.9%
1983 300.38 7.4%
1984 309.09 2.9%
1985 305.26 -1.2%
1986 295.48 -3.2%
1987 321.39 8.8%
1988 401.07 24.8%
1989 449.10 12.0%
1990 387.77 -13.7%
1991 406.09 4.7%
1992 483.05 19.0%
1993 601.08 24.4%
1994 542.53 -9.7%
1995 700.22 29.1%
1996 816.41 16.6%
1997 898.24 10.0%
1998 946.32 5.4%
1999 991.36 4.8%
2000 1080.74 9.0%
2001 1175.72 8.8%
2002 1270.67 8.1%
2003 1416.60 11.5%
2004 1649.39 16.4%
2005 1843.12 11.7%
2006 2040.33 10.7%

United States
GDP, current prices
US dollars | Billions percent change
1980 2789.5
1981 3128.4 12.1%
1982 3255.0 4.0%
1983 3536.7 8.7%
1984 3933.2 11.2%
1985 4220.2 7.3%
1986 4462.8 5.7%
1987 4739.5 6.2%
1988 5103.8 7.7%
1989 5484.4 7.5%
1990 5803.1 5.8%
1991 5995.9 3.3%
1992 6337.8 5.7%
1993 6657.4 5.0%
1994 7072.2 6.2%
1995 7397.6 4.6%
1996 7816.8 5.7%
1997 8304.3 6.2%
1998 8747.0 5.3%
1999 9268.4 6.0%
2000 9817.0 5.9%
2001 10128.0 3.2%
2002 10487.0 3.5%
2003 11004.0 4.9%
2004 11733.5 6.6%
2005 12438.9 6.0%
2006 13152.7 5.7%

The US still dwarfs China in GDP. Thus if the US enters a significant recession, the fall in demand for commodities [specifically] industrial metals, steel, etc will also be significant. Significant enough to suggest that prices could fall.

The first three charts are of US demand for industrial metals, iron & steel, and building materials

Additionaly, you can see the effect of interest rates on the shipping rates. The new shipping will in a falling price of commodities market exert the same competitive pricing within the shipping industry as they lower prices to compete for business.

 

[Knobby22]

The ideal scenario for BHP Billiton is that commodity prices do fall, possibly as per Ducat's scenario of a US recession - partially.
This will stimie the startups and make capital harder to get, reducing competition and slowing the mineral supply increase.

This will allow the boom to continue longer allowing the BHP huge profits to continue.

It would also make Rio susceptible to takeover from BHP as it would then be obvious that they paid too much for the aluminium assets.

Note: What is good for BHP may not be good for the other mining companies.

 

[rederob]

rederob
The US still dwarfs China in GDP. Thus if the US enters a significant recession, the fall in demand for commodities [specifically] industrial metals, steel, etc will also be significant. Significant enough to suggest that prices could fall.
Additionally, you can see the effect of interest rates on the shipping rates. The new shipping will in a falling price of commodities market exert the same competitive pricing within the shipping industry as they lower prices to compete for business.

ducati
GDP is a poor proxy for "consumption".
This link - deliberately a few years old - provides some data on China/US comparative consumption:
http://www.earth-policy.org/Updates/Update45.htm
Since then, China has now added most base metals to its portfolio of "greatest global consumer of...."

With respect to your chart comparing interest rates with the Baltic Dry Index, the correlation coefficient is barely supportive in your chosen time period. Not only is there no leading or lagged indicator effect, opposite trends can run for significant periods, suggesting no reliability can be attributed to the approach.

It would be foolish to ignore the potential impact of a US-led recession on the rest of the world. But BHP will not be Robinson Crusoe in this event.

 

[ducati916]

rederob

Deliberately out of date........
All the data from China is out of date. This is part of the problem with any analysis from China, getting accurate, reasonably up to date data.

These two paragraphs are interesting;

China’s eclipse of the United States as a consumer nation should be seen as another milestone along the path of its evolution as a world economic leader. Its record-high domestic savings and its huge trade surplus with the United States are but two of the more visible manifestations of its economic strength. It is now China, along with Japan, that is buying the U.S. treasury securities that enable the United States to run the largest fiscal deficit in history.

The United States, the world’s leading debtor nation, is now heavily dependent on Chinese capital to underwrite its fast-growing debt. If China ever decides to divert this capital surplus elsewhere, either to internal investment or to the development of oil, gas, and mineral resources elsewhere in the world, the U.S. economy will be in trouble.

The problem of course is that per capita annual income [as stated in this article] US is 7:1 in comparison.

China has been "funding" US consumption. The US has been consuming an enormous quantity of Chinese exports. Call the US portion *X1*

[If] and when the US goes into into recession you have the following;
*US consumption of commodities falls "X2*
*US consumption of Chinese commodities falls by *X1*

Thus world demand for commodities falls by X2 + X1

The next issue, employment
China already has an employment problem.
Should US demand create job losses of "Y1* what impact on the economy from a consumption, savings consideration?

Chinese Banks are notoriously bad [by world standards] Although saying that, several world Banks have been exposed as having been optimistic with regard to their Balance Sheets. [10 = good 0 = bankrupt]

On all Banking ratio's, Chinese Banks are very poor. So poor that to initially float them to the market the government had to repair their Balance Sheets.

The point being, that internal growth, excluding foreign capital inflows, must be generated via the banking system. This system is at danger of a severe credit contraction in the same way that the US is experiencing currently.

Chinese companies rely primarily on equity capital for expansion. Two main reasons; firstly, the equity markets are much better developed than the Bond market, which is practically non-existent and the Banks are currently over-leveraged.

Thus, the very active IPO market and sales of additional stock. This has actually reduced the debt component in the capital structure, which is good, however, it leaves businesses vulnerable to business cycle downturns as equity capital goes missing and the banks cannot seemingly pick up the short-fall.

Thus, the US could trigger a massive reaction within the Chinese economy should they move into recession. It's not only the US though, Europe is also watching closely the fallout of housing within their own economies, UK, Spain are two examples.

China is not a mature enough economy to bail out the world in the face of a global recession, which this one is starting to look like. China hsa based it's growth on exports, not consuming it's own production which has been very low, only some 40%+

 

[rederob]

ducati
Nobody will deny that a recession is always a possibility.
I have little faith in the US economy going anywhere but down.
However, the present subprime "crisis" is not yet proving the catalyst some thought it may.
It's also interesting to note the intervention of central banks across continents - something I haven't seen before.
Is this new intervention indicative of an ability to manufacture a "soft landing" should a liquidity crisis loom?
The jury is still out!

Many of the points you make have been made by the doom and gloom merchants for at least 4 years, and still no global bear market is in sight.
Nor is there any change in gear from China's flat out growth rates.

While it may be the case that "financially" China does not have the clout to nullify the impact of a possible US meltdown, I would argue that a new consumption paradigm has moved the well established goal posts of economic fundamentalism.
That is, to sate the hard and soft commodity needs of emerging BRIC nations will require levels of consumption that are not only unprecedented, they are barely able to be met from present global reserves.

BHP sits well in this environment.
And is better placed than most of its competitors to rally after any period of market malaise.

 

[ducati916]

ducati
Nobody will deny that a recession is always a possibility.
I have little faith in the US economy going anywhere but down.
However, the present subprime "crisis" is not yet proving the catalyst some thought it may.
I would disagree. The sub-prime crisis has spread world-wide, Asia, Europe and the US. True the problems are contained currently within the financial markets, however they are starting to leak into the Main St economy via increasing unemployment. Increasing unemplyment drags the economy down with it via reduced productivity, consumption and increased demands on social systems provided to the unemployed. Add to that further potential foreclosures due to default and it's not difficult to see the economy slowing significantly.


It's also interesting to note the intervention of central banks across continents - something I haven't seen before.
Agreed, just illustrates how serious a problem there is currently.



Is this new intervention indicative of an ability to manufacture a "soft landing" should a liquidity crisis loom?
The jury is still out!
I don't think you understand the feed forward loop of a liquidity crisis within the financial markets, increasing via reductions in interest rates and reserves, the liquidity can easily fail.

Many of the points you make have been made by the doom and gloom merchants for at least 4 years, and still no global bear market is in sight.
Nor is there any change in gear from China's flat out growth rates.

Certainly the bears were early to the party, that does not negate the validity of their argument. China is a manipulated economy, manipulated economies cannot stave off recessions, depressions, just look at Japan, which currently China resembles somewhat.



While it may be the case that "financially" China does not have the clout to nullify the impact of a possible US meltdown, I would argue that a new consumption paradigm has moved the well established goal posts of economic fundamentalism.

Disagree. The reason for that is China is not a consumption economy. They are currently an FDI & Investment economy. The output of this expansion is sold to the world market. If that market shrinks due to recession, Chinese growth will also slow.



That is, to sate the hard and soft commodity needs of emerging BRIC nations will require levels of consumption that are not only unprecedented, they are barely able to be met from present global reserves.

The BRICKS don't have the PPP to consume their own production, thus, as previously stated, a slowing world economy impacts China et al disproportionately

BHP sits well in this environment.
And is better placed than most of its competitors to rally after any period of market malaise.

BHP may well be superior to it's competitors, no argument. However, the current valuation of BHP is pricing in a continuation of the current commodity bull market, if that conclusion proves to be false, the share-price of BHP could revalue lower.