Vale S.A. (VALE)

It's a multi-year move--a long-term investment--though he prefers Cleveland Cliffs. He recommends VALE.

This is a Brazilian company, very big in iron ore. They own Inco in Canada. He got out when the Brazilian government said that it wanted to get involved in Vale’s operations. As long as the Brazilian government has a major say in Vale, they will be looking out more for Brazil and less for the shareholders. He will not invest under such circumstances.

He is not involved in this company because of its holdings in iron ore and nickel. The iron ore cycle from the 2000’s has played out the same way that it did in the cycle in the 70’s. A lot of capacity has been added. It’s a capital-intensive business. Once the capacity was added, that was the end of the cycle, and these cycles don’t come back for 20 years. He should be more positive about nickel but he feels that the Chinese have ruined the business. There are no labor or environmental laws to increase the cost of mining for nickel in China and this has put a lid on the price of nickel. When mining goes on hold, it does so for a very long time. On average, down cycles last about 20 years.