What I Learned From Rio Tinto
News of Rio Tinto's (RIO) unexpected $14 billion write-down tells two stories, and both are important to traders of commodity stocks.
Let's start with the bad -- no, awful -- decisions by outgoing CEO Tom Albanese for the Anglo-Australian mining giant, specifically, the horrible overpayment for Alcan in 2007 -- a $38 billion acquisition left unrewarded by declining aluminum prices and an awful return on capital. I can see getting stuck in a very bad aluminum trade. I have often wondered over the past five years about prices of tin and aluminum -- the one metal that refused to give a spike in prices to trade off of. I asked myself if it could continue to fall, and I once got stuck in a buy of Alcoa (AA) in the hopes that I had found a bottom, only to see that, yes, aluminum could in fact go lower still. In thinking that aluminum would have its day, Albanese wasn't alone -- one could almost forgive him for that....371 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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