Vale S.A. (VALE)

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.

He likes some of these material names. This is in iron ore and metallurgical coal. Some of these names still have room to run. The shares are trading at around $13. Further back the stock was a lot higher. It has broken up above its 200 and 50 day moving averages.

A typical base metal stock and seasonality is normally around the beginning of February right through until around the middle of July. Watch your short-term momentum indicators very closely, such as stochastics, RSI and MACD. As soon as they start to roll over, that will be your opportunity to take your profits.

One of those commodity stocks that has rallied up because the US$ has taken off. It certainly has potential to go up from here. If the US$ does firm up a bit, it may take a little bit of wind out of their sails in the short term, but you can’t replace these mines at anything near where the stocks are trading at right now. It is just a matter of time until we get going again.

If you are a trader, you can position yourself for a trade here, because there should be a countercyclical rally at some point. You may want to give it a bit more time, or if you are going to Buy, just buy a small portion and then see what happens. This company has a great opportunity because it is such a big conglomerate with so many assets. They can clean the debt side of their balance sheet by selling some of those.

There are so many question marks with Iron Ore. China is so over supplied. They are not diversified.

One of the key challenges is that they are diversified and that it is iron ore that pays the bills. There is a risk that it could go a lot, lot lower.

(Market Call Minute) Iron ore prices are down and he is uncertain what is going on with the Brazilian government.

Biggest product is Iron Ore so they are dependent on Chinese steel production. He sold because of a change of government in Brazil and their interventionist tendency. He owns BHP-N happily.

As an operating company, they've done everything right. The problem was that Brazil slapped a tax on some of the largest corporations to cover some of their deficit. There is an election in October. If you own, and if the incumbent gets in, you might want to rethink your position. Otherwise things could really turn.

A prime player in iron ore as well as a great presence in the nickel market. High leverage in iron ore means it is highly levered to the steel business and therefore to China. If you look at other large entities, they have restructured their businesses, and this company has not. You would be better off in a Rio Tinto (RIO-N) or BHP Billiton (BHP-N).

If you buy commodities out of favour you have to hold them much longer. He doesn’t really like this one. There is a lot of government interference. Prefers BHP.

Brazilian company tied to Iron Ore. Big conglomerate companies like this don’t exist in Canada. They understand return on capital for their shareholders. He owns BHP because he thinks it is a better company with broader resource base and better run. BHP also shut down a bunch of projects that didn’t work for them.

This is your prototypical basic materials company and, if you are of the belief that China is going to continue on the same pace that it used to be in terms of building highways, building buildings, etc., it is probably a good name to own. However, he does not think China is going to continue on that pace. This and other countries are shifting more from an infrastructure play to more of a consumer oriented area.

(Top Pick Dec 13/12, Down 27.39%) Money left the region as well as stocks that service Asia. It could be a double bottom here and then it could perk up, otherwise he will exit the stock.