Don’t be Tempted by Iron Ore

When we sparked up our Bloomberg machines this morning at MarketMatters, what caught our eyes was not the renewed calm in equity markets, amid all the Greek rhetoric, but the plunge in Iron Ore and related stocks. Overnight Vale, the largest Iron Ore producer in the world fell almost 4%, following Iron Ore -3%, to be a whopping 84% below its 2011 highs. As we have discussed at length, investors like to buy what is perceived to be cheap or has fallen a long way, but this generally leads to poor returns. We had some very disbelieving readers when last year MarketMatters predicted BHP, trading in the mid-$30 region at the time, would fall towards $20, this morning when the stock opens close to $26, we are gaining credibility rapidly. Our view on the main Iron Ore stocks remains negative, both fundamentally and technically, with some potential “long trades” later in 2015.(VIEW LINK)