BHP 0.00% $35.50 bhp group limited

bhp horrific fundamentals worsening

  1. 95 Posts.
    I've managed to cool my heels from hot copper for a few weeks and let this play-out, but I thought I'd check back in and was heartened to see many fellow bears now on this thread, or as I like to call them, realists.

    I could go on all day about why BHP is headed to 10 dollars a share with a bullet with the plethora of research I've done over the last several weeks, but rather than bore you with it all, I'll just say for the most part: DYOR, and there will be no case left to argue.

    However here's a few quick reasons:

    Reason 1:
    _____________________________________________
    The Baltic Dry Index, an indicator of economic trends which tracks the cost of moving goods such as coal, iron ore and grain across the oceans, has slumped over the past five months.

    The index hit a record high of 11,793 points in May but has since fallen back to earth, hitting just 815 points last week -- the lowest level since the end of 1999.
    _______________________________________________________

    http://www.google.com/hostednews/afp/article/ALeqM5gs1656SztpXSBXJ0NBcpTbBBBlwQ

    Reason 2:

    Copper currently $1.485 a pound down (and still falling) from $4 a pound.

    www.kitcometals.com

    Here's a chart for better proof:

    http://futures.tradingcharts.com/chart/CP/M

    Notice its heading back to pre-resources boom levels. That is measurably significant, due to fundamentals and resulting sentiment.

    Reason 3: Fundamentals for base metals exemplified by copper (arguably the most important base metal hence my focus on it) warrants the fall in prices:

    www.basemetals.com

    ...then click on LME stocks and copper chart (the blue line).

    Basically copper stocks in LME warehouses have risen from just over 100,000 thousand tonnes to just under 300,000 AND STILL EVER RISING!

    Reason 4:

    Most other base metals are similar and iron ore has even plummeted on the spot market which was the resource sector's last bastion of hope until recently:
    _________________________________________________________
    The price of Indian iron ore sold on the spot market in China -- a key indicator -- is around $95-$100 a tonne, CFR (cost and freight), which is below the benchmark contract price for similar quality Brazilian and Australian ore. Spot ore sold for up to $200 a tonne in some Chinese ports in March.

    Chinese steel makers have already agreed to cut production by up to 20 percent, perhaps until year-end, in hopes of arresting falling steel prices.
    __________________________________

    http://rusmet.com/news.php?id=14707

    So basically spot iron ore prices have halved in a few months. Now I see why they say resources sector is invariably the most risky!

    Well that about covers it in a nutshell from a fundamental perspective which is still worsening, and might I add many analysts are now predicting copper to fall from it's current $1.48ish price to below $1 a pound!

    So now you can see why I say BHP is heading to $16 within days or weeks, and ten dollars a share in the near term.

    I don't want to see BHP or any other Aus company go out of business. I just want to see value put back into their share-prices. Heck, when they do fall below ten dollars soon I may even look at going long again. I'm not anti-resources and was formerly the biggest bull alive. I'm now just rolling with the punches and trading accordingly, and so continue to hold my puts on BHP.

    Oh and did I mention USA data now pointing to a depression at least as bad as 1929 if not worse?

    I probably should have. That's not priced in over there yet either. So stock-market rout has a long way to go but resources will remain at the pointy (risky) end. Oh and BHP fell 13 percent last night in USA for those who missed it.

    Finally of all those reasons I just posted, what do you think that will mean for BHP earnings per share going forward from here?

    Enough said.

 
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