Monday, July 13, 2009

RIO heating up, ASX gets crushed

The ASX drifted higher in the morning for apparently no reason, and it would've been a perfect trade given the weak US lead - I was waiting for the signal from the TICK - but it gave no early indication of a downtrend, so I stood pat, only to watch it fall 60 points for the whole day, taking no breathers to give me a chance to pick it up.

The RIO situation is heating up, and I am starting to think that the Chinese government 'baited' RIO executives into this situation to try and get better pricing for their continued stockpiling of commodities - attaining every edge for the global recovery. The Chinese have been talking down commodity prices all of last week - saying that the prices were 'too high'.

Current news reports that HU instigated the investigation into the RIO execs, and no charges have been actually declared; it obviously doesn't help that Chinese laws have every right to detain any suspects without giving them counsel.

Something doesn't smell right, and I predict the whole situation is probably some sort of diversion for some leverage that they want out of RIO - for obvious financial reasons. However, it's a huge political risk from the Chinese as the Australian government is now talking about how 'strained' business relationships could be - although the Chinese have nothing to be afraid of at the moment considering their considering clout given how they seem to be buying all the US treasury and are the only economy in public opinion capable of getting us out of this mess.

Ok, so what does this all mean for RIO's share price? Is it as bad as the market is pricing it or can it get worse? I think RIO has a lot of downside left, and whether or not any charges are laid out - RIO will probably go down a lot more, and FAST if the earnings and economic reports come out bad this week.