Alloy Steel Inc. (fka AYSI)

[DaveinHackensack]

Companies can't sell their iron ore interests to China without the approval of the Aussie government. But I wouldn't worry too much about this tax. If it will be materially bad for business, it probably won't get adopted. Even Australia's left is fairly pragmatic.

For example, the same Rudd government proposed a strict cap & trade bill that was initially supposed to go into effect last year, if memory serves. It keeps getting put off, and may never be implemented.

The main reason for the AYSI's recent weakness is that not enough investors are convinced by the story yet. If current operational trends continue, and China's voracious demand for iron ore continues, AYSI could earn 35-40 cents or more this year. Too few investors believe that will happen though, otherwise the stock would be close to $4 today.

Part of that is because too few investors even know about this company -- look at how low the volumes are. And another part of that is because some of the investors who do are iHubbers, who are more likely to be skeptical that AYSI is a real company, because so many of the companies discussed here aren't. The recent FINRA investigation news doesn't help in that regard.

That said, my biggest concern here is that the Chinese economy will correct and its demand for iron ore will drop. Gary Shilling made a convincing short-term bear case for the Chinese economy, which I summarized elsewhere yesterday ( (http://shortscreen.com/message-board/77-1999-all-over-again-baidu-inc-bidu[/ ).