Value Investor: Is the bad news priced in for iron ore?

The possible upside to the recent slide in the iron ore price is that any unexpected good news would likely trigger a squeeze of short positions.

Last week iron ore broke through the psychological price barrier of US$100 a tonne for the first time since September 2012. So far this year, the price of iron ore has plunged 27 per cent, taking it well into bear market territory, reaching $US95.70 yesterday.

The recent federal budget included a forecast decline in iron ore prices to US$90 per tonne by June 2016. Iron ore prices are crucial to both budget revenue forecasts and shareholder returns of Australian equity investors.

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