Saturday, 10 November 2007

BHP Billiton vs Rio Tinto - it could all backfire.

Careful what you wish for.... BHP Billiton's bid for Rio Tinto might just backfire.
The general public in Australia have been deluded into thinking that the "Big Australian" has bought up Billiton. Wrong. The smaller company did a deal, with the larger company - to pretend that BHP was buying the other company, and would remain "Australian". It is a sham. Now Billiton is calling the tune.
BHP Billiton's new CEO Marius Kloppers (from Billiton) has just announced a breath-takingly bold bid for Rio Tinto.
Have a look at this analysis, as published in the SMH website
"MF Global senior trader Anthony Anderson said BHP Billiton's tilt at Rio Tinto throws the spotlight on the strength of the global commodities boom.
"It reinforces BHP's well documented view that resources are going to be stronger for longer and that India and China are still very much going to create the worldwide demand for it," Mr Anderson told AAP.
"They're ignoring any chance of a recession in the US and just focussing on those two countries really."
That is a scary analysis - BHP Billiton is "ignoring any chance of a recession in the US....." Can that be true?
If so, it is the most stupid move imaginable.
Consider this.
China is moving out of holding US currency, and "bank bills", and US "Subprime" mortgages. It is looking for investments which will not evaporate in front of their eyes. Why not buy up resources which they need - iron ore and coal? China has a resource investment program which is so large, it could simply inhale BHP Billiton.
If BHP Billiton's gamble comes unstuck, because it has ignored the potential recession in the US, then the whole house of cards could collapse, and BHP Billiton, the "so-called" Big Australian, could end up a mid-sized Chinese company.
Don't say I didn't warn you!
If that comes about, then it will not be just the Body Politic which is ill, it will turn out to have been the Body Corporate which is also ill. Sick with greed, hubris and ignorance.

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