Morning Mumble: Some waffle, but maybe useful, Iron Ore Comedy or Tragedy the big dipper + Gold risk aversion retail therapy!

Good Morning,

Significant learning curves over lunch yesterday, many thanks DC (now armed with a reading list)! 

Time this morning has been spent working through trading costs and taxation! Over the next week or so things are changing, with a more balance level of CFDs and spread bets (not fully decided). Having spent time looking at the difference between DMA CFD and spread bet, there's no obvious conclusion. They both have their benefits. 

Using CFD for a small 22 ish trades a month its got its pros including arbitrage between two separate providers based on differing prices (E.g. IB/IG/City Index). Hugo has kindly been working on the difference in returns between CFD and Spreadbet. Having initially thought there was a loss of profits/greater losses as a result of the spread compared to the benefits of CFD DMA, it's actually contrary including return on capital invested! 

The returns from spread bet were near 8% higher than CFD for longer term positions, and 11% lower when trading on tighter/small (immediate) margins or moves on a stock/market. Some CFD positions would have cost more even allowing for 5-6bps on the spread. Limiting speculation / investing for decent gains rather than tighter/marginal fluctuations is the benefit of spread betting. In essence, whatever your trading platform, get on the blower and demand a better deal, or move (sometimes the latter is even better than the pros of staying)! Alternatively, if you have never made money at it, give up. It needs to be explored in-depth.

For the likes of the Leggie there's limited alternative but those with a short-term view rather than hell-freezing over, it might just be wise to consider other options. Then again, if you're a fund manager, perhaps there's just a need to get the position right? Well that would be a start for most, especially on AIM or in commodities.

The bigger dipper of iron ore is now smacking of a sense of desperation (Cheers AG & a sensible analyst TB). We are not saving whales, but our iron ore (Aussie perspective). With blame being thrown towards those appearing to be winning the war on production costs. Of course this has nothing to do with Andrew 'Twiggy' Forrest's belief that Australia's AAA rating is under threat, nor the reliance on revenues from commodity exports/mining. 

If the Australian nation haven't noticed the lopsided nature of their economy. There's the formation of a property bubble, stimulus (via interest rate cuts) and the raft of tax measures to stimulate the economy. It all might not be enough for Australia (as represented by depreciation of the Aussie Dollar). With the AUD range bound circa GBP1: AUD1.90-2.00 there's the possibility for a break out above £1:AU$2, pending Chinese risks of QE (see below). 

With near a full month since an adjustment in the tick size on the DCE (Dalian Commodity Exchange) for iron ore, coal and coking coal. The main beneficiaries appear to be the hedgies rather than the intended liquidity increase. Sector confidence has been misguided as a result of all commodities bouncing since recent lows (albeit for the wrong/right reasons (pending your view). 

With the markets acknowledging that China has 'yet again' fired the gun via the China Iron & Steel Association (CISA) comments about over capacity (Bloomberg: Iron ore over capacity) and steel production tailing off! Ironically the having an echo of March 2014's warnings (EMC: Chinese Iron Ore & the Glut of over capacity...price sunk to $114 (circa). 

Supply is limited for immediate delivery (justifying the modest premium) its certainly supported the price in Rio, BLT and Vale's favour + the higher cost producers ticking over with lower fuel costs and 'just surviving.' With peak demand for steel over, the market is grasping a reality, where speculation has warped the realities (in the short-term). See: Monthly crude steel production in the 65 countries included in the report, in thousands of tonnes & World Steel

With March figures of steel production down, the commodity price rises are looking unjustified and any bull would be well justified to consider the risks. With capital outflows, reduced mortgage and second home deposit requirements, lower steel production, deflationary pressure on factory gate prices, do China have any choice but outright QE? China are likely to have to considering outright bond purchases (or similar (remember its an amateur here).With China LG (Local Government) debt simply untenable and swelling as loans are recognised on paper via bond issuance, there is a need to deal with the issues especially light of their main revenues not recovering as expected. . 

Limited time to cover the abysmal Vedanta preliminary results. Some analysts might need to revisit "accountancy" for dummies, with impairments of a modest $6,744.2 billion. Somewhat different to the full year results 2015 all those days ago (15). Its wise to have a look at debt and equity levels, after the write-downs, net debt on the up and credit downgrades. VED might just need a knight in shining armour! (Chinese development bank?). Costs are dire and increased...the market reaction is pathetic! 

No time for the Sirius Minerals (SXX) planning officers tactics in what appears to avoid their duty/responsibility...Anglo Pacific (APF) interim management statement is 'half' decent but needs some more work. Amara Mining might be wise to consider the term robust in their PFS for Yaoure, the market reaction, AMA simply need to prove up the indicated resources and rework their models. The current returns on today's news/model are not as enticing, sensible, but not outstanding (need to listen to the conference call when its available, having missed it this morning. Gold supply contracted a fraction, investment purchases increased and risk aversion after US Data gave it a decent jump for some small profits.

Atb Fraser