Is the ASX 200 overvalued?

Probably. If you believe in "Regression to the mean" based on real price levels, it would seem to indicate that a correction will occur in 2013 (especially if CPI remains low)

Yes...Well done Penny!!!

Canary down the coal (and iron ore) mine - Chinese Hot Rolled Steel

Was looking at Bloomberg today and I chanced upon the Chinese Domestic Hot Rolled Steel price. On SSeptember 2011, the price was $4837. Today, it is $3362. That is a drop of 30% in a year (and shows no signs of improvement at this stage)

Such a large drop in price can only mean one thing. External and Internal demand for Chinese Domestic Hot rolled steel is dropping. I can't see historical production levels of steel continuing at that price. Chinese Steel producers will go out of business.

As two of the main factors of production for steel is cooking coke and iron ore, the two largest exports of minerals for Australia, this reduction in price will have a huge effect on the Australian economy and the major coal and iron ore producer's share prices. Share prices are all based on future earnings and China is a big customer of these miners. A slowdown in Chinese steel production will hurt these future cash flows

I would not be buying into coal or iron ore miners until that Steel price shows some signs of improvement.