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Glencore down 20% in just 3 hours; Massive and still dropping.
Topic Started: 28 Sep 2015, 10:40 PM (5,107 Views)
deluded
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Sydneyite
30 Sep 2015, 12:18 PM

Don't heaps of bears here bemoan the fact that heaps of bank money goes into housing lending instead of to support businesses? Isn't what FMG did exactly what you all want to see happen? Capital borrowed and deployed to build a new business? Take a punt? Yet for some strange reason you all despite FMG and it's founder?
Excuse me, but a) where has FMG been borrowing it's money from? CBA or USA?, and b) what interest rates are they paying?

The answers to those questions will answer your question
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Loki
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Sydneyite
30 Sep 2015, 12:18 PM
But that's not a confidence trick - that's businesses doing what businesses do. You invest understanding the risk is in long term commodity prices - if they stay at or around current level, FMG will continue to make good profits. If they half from current levels then yea they are in trouble and won't be profitable due to their cost base.
That's what companies like BHP and Rio do. Companies like FMG pop up in every commodities boom. They lever up, purchase marginal mines and start producing. To assume that kind of company is a going concern is to assume that commodity prices will stay high, making marginal mines profitable.
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Don't heaps of bears here bemoan the fact that heaps of bank money goes into housing lending instead of to support businesses?
They might, but if they do, they have it the wrong way around. Investors and speculators put money into housing, not banks. Banks put their money in investors and speculators. Then the government protects the investors and speculators. Not healthy.
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Isn't what FMG did exactly what you all want to see happen?
Not me. Speculative commodity plays are a very poor use of capital. Mining uses a lot of expensive equipment, and will soon use technology like drones coupled with software to automate surveying and ground preparation. None of that technology was developed or built by Australian companies. There is not much value in the raw commodity. The value adding of mining comes from how efficiently and effectively you can get it out of the ground and on to a ship. That's where the capital goes.
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Capital borrowed and deployed to build a new business?
New businesses are not that valuable in themselves. Anyone can make one for about $1000. New technologies, methodologies, industries are what create value, and FMG did none of that. They borrowed some money, purchased some equipment and marginal mines and started digging. Anyone could do that as long as they convinced themselves that the price of commodities was going to stay high forever.
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Take a punt?
Yes, that's exactly what it was. A gamble. Something Australians excel at, losing to the house.
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Yet for some strange reason you all despite FMG and it's founder?
In the same way as I would despise a lottery winner if the newspapers starting quoting his random thoughts on anything.


“Talk sense to a fool and he calls you foolish.” - Euripides
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Ex BP Golly
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Sydneyite
30 Sep 2015, 12:18 PM
But that's not a confidence trick - that's businesses doing what businesses do. You invest understanding the risk is in long term commodity prices - if they stay at or around current level, FMG will continue to make good profits. If they half from current levels then yea they are in trouble and won't be profitable due to their cost base.

Don't heaps of bears here bemoan the fact that heaps of bank money goes into housing lending instead of to support businesses? Isn't what FMG did exactly what you all want to see happen? Capital borrowed and deployed to build a new business? Take a punt? Yet for some strange reason you all despite FMG and it's founder?
There is a difference between prudence and gaming.
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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Sydneyite
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deluded
30 Sep 2015, 12:37 PM
Excuse me, but a) where has FMG been borrowing it's money from? CBA or USA?, and b) what interest rates are they paying?

The answers to those questions will answer your question
Why does it matter where they get the capital from? Just factor in the terms in your risk assessment.
For Aussie property bears, "denial", is not just a long river in North Africa.....
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newjez
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Sydneyite
30 Sep 2015, 01:18 PM
Why does it matter where they get the capital from? Just factor in the terms in your risk assessment.
http://www.macrobusiness.com.au/2015/09/citi-roy-hill-whale-to-crush-iron-ore-price/

http://www.smh.com.au/business/markets/roy-hill-output-to-drive-iron-ore-below-us40-mark-says-citigroup-20150928-gjwusc.html

Risk? When does risk become certainty? I give then till Easter.
Edited by newjez, 30 Sep 2015, 02:34 PM.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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Sydneyite
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newjez
30 Sep 2015, 02:32 PM
That's interesting and may or may not turn out to be correct. But it doesn't answer the question I posed?
For Aussie property bears, "denial", is not just a long river in North Africa.....
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