FMG - Fortescue Ltd

[njc.corp]

FMG ship was turned back at a chinese port, from the sound of it... not good news I guess.

Here's a thought... for those interested in conspiracy theories...

1) china reduces demand
2) miners panic and get on the phone to find out more
3) china says okay, we could possibly take more, give us a better deal and we will think about it
4) in the interim, china buys up chunks of mining stock while prices are low
5) china sits back and waits, telling australia they can't possibly take any more iron ore
6) miners say okay, here is a better price
6) china eventually says okay, now we can take more
7) china gets better prices AND now owns a chunk of miners for peanuts
8) now that china is buying again, the shares go up, and china makes a killing

just an idea i had. are they devious enough to do this? absolutely. is it in their best interests? absolutely. is there anything we could have done to stop this from happening? absolutely not.

the chinese economy is very very healthy, and it would not be the first time that they have used such a tactic.

thoughts?

idea seems to be spot on- i mean why would u not do it-

the name of the game is to look and takecare of yourself first and caculate the risk-which the chinese people will 99.9% do-

still to many angles to cover on this stock so it looks like i am on the sidelines again for more months to come-

Thanks

Nick--

 

[nunthewiser]

AD08-65 ASIC lifts ban on covered short selling for non-financial securities

Thursday 13 November 2008


ASIC today said it would, as expected, lift the current ban on short selling of non-financial securities from opening of trading on 19 November 2008 but would continue the ban on covered short sales in financial securities.

ASIC put a 30-day ban on covered short selling of securities on 21 September and extended this ban on 21 October as market conditions remained difficult.

The ban on short selling of financial securities will remain in place until at least 27 January next year, consistent with many other jurisdictions, while ASX will maintain the ban on naked short selling indefinitely. ASIC confirmed that financial securities would be those comprising the S&P/ASX 200 Financials (including property funds) plus five other APRA regulated businesses.

Key details

ASIC announces the following effective from Wednesday 19 November:

Covered short sales of non-financial securities will be permitted;
The ban on covered short selling of financial securities will continue until 27 January 2009. Financial securities are those comprising the S&P/ASX 200 Financials and five additional securities (being those with APRA regulated businesses).
Existing exemptions for covered short selling, for example those relating to hedging and arbitrage transactions, will continue in relation to financials; and
The facilitation of the sale of securities being recalled from a stock-lending program (whether or not they are financials) will also continue.

 

[hollowpoint]

Is lifting the ban on short selling good or bad news for FMG? Am thinking that it might start getting more interest, but on the other hand, hasn't it already dropped, therefore short selling would be a bit pointless? If you were going to short something, you'd do it when it's trading high but falling, wouldn't you? I mean, you'd make a killing if something fell like 30%, but would it really be worth shorting if it only falls 5%?

 

[njc.corp]

Is lifting the ban on short selling good or bad news for FMG? Am thinking that it might start getting more interest, but on the other hand, hasn't it already dropped, therefore short selling would be a bit pointless? If you were going to short something, you'd do it when it's trading high but falling, wouldn't you? I mean, you'd make a killing if something fell like 30%, but would it really be worth shorting if it only falls 5%?

yes and no-also depends on the volume of shorting on the stock

so 5% with like 10-20,000 units worth is not bad at all in my books-

example only

 

[hollowpoint]

Competition time - Pick the Bottom...

I think we have hit it. Obviously a guess but I think $1.83 or whatever it was was the lowest it will go. Anyone else care to guess?

 

[nunthewiser]

Is lifting the ban on short selling good or bad news for FMG? Am thinking that it might start getting more interest, but on the other hand, hasn't it already dropped, therefore short selling would be a bit pointless? If you were going to short something, you'd do it when it's trading high but falling, wouldn't you? I mean, you'd make a killing if something fell like 30%, but would it really be worth shorting if it only falls 5%?

who is to say it wont fall another 30% or more ? dunno personally ..

im only happy about the ban being lifted as previous to the ban FMG was one of my main dollar earners trading short and on occasion long , was an easy stock to get the probabilitys right on , i did short others too but FMG was my main stock that i was most successful on in the way of win to lose ratios

 

[skc]

the chinese economy is very very healthy, and it would not be the first time that they have used such a tactic.

thoughts?

Hollowpoint: Great tactic. Can you share some examples where the Chinese has done the same thing?

Also, is China's economy really that healthy from the perspective of FMG? Iron ore is used to make steel for either capital or consumer products. I can see consumer products take a hit from the reduction in export demand, offset perhaps somewhat by gains in domestic consumption. I can also see a demand reduction in capital products, as less businesses contemplate capacity expansion, less private construction etc. For example, the planned construction of another mega casino (by Sands) has just been postponed in Macau today with ~10,000 workers affected. Capital product will increase somewhat by the recent stimulus package, however. These are just my understanding of the market landscape, but I have not researched into the relative volume / value of each drivers.

If anyone seen relevant articles or stats it would be great to share them

 

[hollowpoint]

Hollowpoint: Great tactic. Can you share some examples where the Chinese has done the same thing?

Also, is China's economy really that healthy from the perspective of FMG? Iron ore is used to make steel for either capital or consumer products. I can see consumer products take a hit from the reduction in export demand, offset perhaps somewhat by gains in domestic consumption. I can also see a demand reduction in capital products, as less businesses contemplate capacity expansion, less private construction etc. For example, the planned construction of another mega casino (by Sands) has just been postponed in Macau today with ~10,000 workers affected. Capital product will increase somewhat by the recent stimulus package, however. These are just my understanding of the market landscape, but I have not researched into the relative volume / value of each drivers.

If anyone seen relevant articles or stats it would be great to share them

Don't quote me on it, but I believe that they did this with Wool and going a lot further back (80's I think) I vaguely remember it happening with Aussie beef.

It's foxing....

Remember when RAM was $15 per MB? Back in the early 90's (91 or 92)... then an earthquake in japan took out a factory (I think it was mitsubishi) but then China raised their asking price to up to $140 per MB (even though they were neither impacted by the earthquake, nor did they buy from Japan). After a few weeks of higher prices, major Australian buyers said they 'no longer needed as much' memory, which was a blatant lie. China then reduced their prices to around $25-40 per MB on 'falling demand'... the consortium then invested in various chinese (and malaysian) shares (I was not in the loop, so I don't know precisely what they were) and made a motza when demand 'increased' again and the memory market stabilised. We were buying from the consortium that led that push for lower prices. They made money on both the cheaper RAM (relatively cheaper, anyway) and also the lower share prices. Of course, in Australia, the consortium was still selling RAM at the higher prices of around $110-140.

So, that is Australia doing it to China....

 

[gav]

Also, is China's economy really that healthy from the perspective of FMG? Iron ore is used to make steel for either capital or consumer products. I can see consumer products take a hit from the reduction in export demand, offset perhaps somewhat by gains in domestic consumption. I can also see a demand reduction in capital products, as less businesses contemplate capacity expansion, less private construction etc. For example, the planned construction of another mega casino (by Sands) has just been postponed in Macau today with ~10,000 workers affected. Capital product will increase somewhat by the recent stimulus package, however. These are just my understanding of the market landscape, but I have not researched into the relative volume / value of each drivers.

Hello Skc,

Do you have a link or article to Sands postponing that work? They would be the 2nd major casino company recently to stop work over there. The reason I ask is because I know someone that works on Casinos over there...

Thank-you

 

[hollowpoint]

Don't quote me on it, but I believe that they did this with Wool and going a lot further back (80's I think) I vaguely remember it happening with Aussie beef.

It's foxing....

Remember when RAM was $15 per MB? Back in the early 90's (91 or 92)... then an earthquake in japan took out a factory (I think it was mitsubishi) but then China raised their asking price to up to $140 per MB (even though they were neither impacted by the earthquake, nor did they buy from Japan). After a few weeks of higher prices, major Australian buyers said they 'no longer needed as much' memory, which was a blatant lie. China then reduced their prices to around $25-40 per MB on 'falling demand'... the consortium then invested in various chinese (and malaysian) shares (I was not in the loop, so I don't know precisely what they were) and made a motza when demand 'increased' again and the memory market stabilised. We were buying from the consortium that led that push for lower prices. They made money on both the cheaper RAM (relatively cheaper, anyway) and also the lower share prices. Of course, in Australia, the consortium was still selling RAM at the higher prices of around $110-140.

So, that is Australia doing it to China....

Actually, thinking about it, it may have been Taiwan.... so long ago I can't remember too much about it.... only that it was all rubbish... the factory was down for only a few days, but in that time, it sent prices skyrocketing.

 

[jamcdoug]

Just wanted to offer my two bobs worth on FMG and China.

First of all, You'd be cray not to believe in China's long term growth story. For the next 10 years, on average, 20 million people a year will be moving from rural to urban centres. That means an entire Australia's worth of property, infrastructure and power needs to be generated each year. This places huge demand on our resources in the long run..particularly iron ore and coal.

Sure, China is slowing at the moment. No one country is immune from the fragile global economy. But I think the global slowdown has come at an ideal time for China. It was growing at a frenetic pace and there was a very real threat of the economy over-heating.

The credit crunch and subsequent decline in demand for Chinas exports has completely removed the inflation threat and this has enabled the Chinese government to pursue growth policies (in the form of cutting interest rates and their recently announced multi-billion dollar stimulus package). In addition to this, Chinese banks have been extremely prudent in their lending policies, have limited exposure to toxic sub-prime securities and Chinese household debt is at extrememly low levels compared to Western peers. Add to this their ENORMOUS foreign currency reserves and you have an economy exceptionally well placed to handle the worst economic crisis in 100 years.

I'm hoping that since China's announcement that the stimulus package is to be spent on infrastructure, transport, propertry etc. we have found a floor in commodity prices and hopefully FMG's share price. Further i'm hopeful that with the shelving of many expansion projects, supply cuts, infrastructure problems, the inability of small explorers/producers to remain as a "going concern" and the fact that many of the worlds biggest resource deposits are maturing...we shall see another BOOM in commodity prices in the next few years as Demand once again hugely outweighs supply. Bare in mind that a mine usually takes around 6 years to reach full production...so suipply is likely to seriously lag demand and this will keep prices high for many years yet.

All this bodes well for FMG in the long term but i've NEVER liked FMG. Its meteoric rise was reminiscent of the tech boom. It was completely based on overly optimistic projections regarding capacity and expansion plans. Everyone seems to forget how difficult it is to run a mining company and all the associated teething problems.

Twiggy wouldn't have forgotten that though.... He was the former head of Anaonda Nickel (now Minara Resources) - a spectacular failure.
Twiggy is just a bloke who was in the right sector at the right time and (given his former career as stockbroker) is able to sell a GREAT stock story.

The only numbers we have is $600 million cash in the bank...and $5.9 BILLION in DEBT. There is NO DOUBT they are going to need to raise cash. They seem to have missed the boat on that one given that so many available funds are being sucked up by the likes of NAB, Incitec Pivot, Proprty trusts etc... so a cornerstone investor is definitely needed.

Apart from that they are just another commodity business. One of several trying to secure Chinese customers. The only thing that differentiates them is a larger deposit base. It is highly unlikely that they will reach $13 any time again in the near future.

 

[oldblue]

Actually, thinking about it, it may have been Taiwan.... so long ago I can't remember too much about it.... only that it was all rubbish... the factory was down for only a few days, but in that time, it sent prices skyrocketing.

Back in the 1980's I had first hand experience of China's tactics as a buyer of crossbred wools. It was usual for them to wax hot and cold in their approach to wool auctions, making it difficult to assess the extent of demand at any time and exerting a downward pressure on prices. Mind you, this was nothing more than you would expect a dominant buyer to do when competition for the product was otherwise quite modest.
China has had to wear the dictates of dominant sellers of iron ore such as BHP and RIO in recent years. We can hardly expect them not to play hardball now that the advantage has passed to buyers.

 

[hollowpoint]

Back in the 1980's I had first hand experience of China's tactics as a buyer of crossbred wools. It was usual for them to wax hot and cold in their approach to wool auctions, making it difficult to assess the extent of demand at any time and exerting a downward pressure on prices. Mind you, this was nothing more than you would expect a dominant buyer to do when competition for the product was otherwise quite modest.
China has had to wear the dictates of dominant sellers of iron ore such as BHP and RIO in recent years. We can hardly expect them not to play hardball now that the advantage has passed to buyers.

I agree... it's nothing personal after all.... just business, and in business you have to get the best deal possible. If I didn't get the biggest bang for my client's bucks, they'd abandon me for someone who is a harder negotiator.

 

[skc]

Hello Skc,

Do you have a link or article to Sands postponing that work? They would be the 2nd major casino company recently to stop work over there. The reason I ask is because I know someone that works on Casinos over there...

Thank-you

News here: http://www.iht.com/articles/ap/2008/11/14/business/AS-Macau-Las-Vegas-Sands.php

Another article on Bloomberg http://www.bloomberg.com/apps/news?pid=20601103&sid=arlSBrVgumXM&refer=us

 

[skc]

Actually, thinking about it, it may have been Taiwan.... so long ago I can't remember too much about it.... only that it was all rubbish... the factory was down for only a few days, but in that time, it sent prices skyrocketing.

Thanks for responding . It was Taiwan indeed. RAM price rocketed when it was Taiwan's turn to have a massive earthquake in 1999. Anyway, back to FMG.

 

[Ruincity]

In my experience when there is more than one supplier of a particular product and the product is basically the same the power is ALWAYS with the buyer....
Having worked both sides of the industry being the buyer is the best IMO.

Plenty of companies worldwide selling IO last time I checked.....

 

[Warren Buffet II]

First Vale, then RIO now BHP, who is next?

http://www.theaustralian.news.com.au/business/story/0,28124,24652943-643,00.html

You can see in the article that BHP is using the same excuse than FMG about their good relationship with buyers and that crap but they concide that revenue will be hit big time.

WBII

 

[UraniumLover]

who is to say it wont fall another 30% or more ? dunno personally ..

im only happy about the ban being lifted as previous to the ban FMG was one of my main dollar earners trading short and on occasion long , was an easy stock to get the probabilitys right on , i did short others too but FMG was my main stock that i was most successful on in the way of win to lose ratios

I was very upset when they banned short selling too.
Was a good exercise on FMG considering the percentages it has declined by.
Certain shares in the financial sector also showed strong downward trends.. linked to large debt..
Not sure how much lower it will go.
Let's hope Hedge funds don't jump back on it and short large volumes...
The bottom.. who know's.. someone mentioned 1 cent but i'd say closer to current prices if the recession doesn't deapen thanks to Chinese consumption of iron ore.

 

[cbacamden]

FMG has killed me (and others)

Down 70K as of friday - Why am I so stupid ?

7 Years + of good results has gone in 6 mths

Just when you think it carnt get any worse - it crashes down hard.

Unless things come good next week, IM OUT

For those people just starting out learn from my mistakes and protect your capital. What ever strategy you decide to go with it needs to be able to withstand 10 bad trades in a row - otherwise you end up like me.

A try hard

 

[SenTineL]

why do people assume it's all over?

has the company gone bust? are the administrators walking in?
BHP and RIO are also down by over 50% and they are huge companies. yes FMG do only have IO to pin their hopes on but still....

i am waiting to see how it pans out, mind you if I had 70k to play with i would be more carefull than riding this stock all the way down