Which Emerging Markets should I invest in ? and Market Close for 27th March

I am going to look at some of the emerging markets over the next few post specifically to understand the opportunities , the mid term outlook and some of the ways that you could invest in these markets should you feel that they are worth doing so.

 

I plan to look at three markets in the next few posts: Russia, Brazil and Africa, I will take a look at Russia either tomorrow or over the weekend .

 

Meantime the markets today sold off sharply in the last hour, this may be as a result of how much was borrowed at the FED Discount Window or a  some rumours that may have been circulating this afternoon.It could also have been triggered by those in the know “front running” the releases in the morning.

Interestingly enough there was another big drop on the back of major puts purchases in Lehman brothers, this may be just pure speculation or there may be someone in the know regarding some issues or problems at Lehman.

 

Currently the S&P index is tracking for the worst opening quarter since 2001, even with the usual window dressing that occurs at the end of a quarter, this could see the early days in April showing more declines as the quarter closes.

Tomorrow there is potential for more bad news with a number of economic reports coming out including Personal Income and Personal Spending data.

 

Look out for the Russia report in the next couple of days.

 

Best Wishes

 

Alan

Technorati Tags: Investing in Russia,Invest in Africa,Invest in Brazil,Emerging Markets

Should I buy Coffee ?

In the last part of this series I will look at the final piece of the puzzle of whether to buy Coffee or Starbucks by talking about the Coffee ETF (COFF).

We can see from the chart below that coffee has dropped off fairly sharply from the recent highs but seems to be forming a base around the 320 mark :

 

The stock to use ratio of coffee has been pretty low compared to where it has been in the last two decades this would indicate that we should be seeing prices being supported at least and probably moving higher.Coffee is being increasingly drunk throughout the world and the rising affluence of the emerging markets middle classes is likely to see an increase in their coffee consumption as the big chains start to open franchises and people look to emulate what they see in coffee drinking as a sign of western affluence.

 

In one of the biggest emerging markets I.e. China, the consumption of coffee is on the rise .It’s been estimated that China’s coffee consumption was approximately 45,000 tons in 2006. But that number could jump five-fold or even six-fold to reach 300,000 tons annually in the next 10 years. China's coffee consumption is growing at rate of 10% to 15% each year. And with a population of 1.3 billion, it won’t be long before China becomes the No. 2 coffee consumer in the world.

 

I believe that the medium term outlook for coffee is very positive, it is however very volatile and reacts violently to changes in weather, for that reason I would steer away from the Futures market, however the ETF is not leveraged so will allow you to stay in for the long term and not worry too much about volatility.

I would like to see it building a bit of a base here then moving higher and I would be buying with a longer term view for my Pension. I would likely leg in to the position a third at a time and place a 25% stop loss.

So to answer the question, would I buy coffee or Starbucks ? For me personally where there is an option to buy into the commodity I would always favour the commodity as it is less susceptible to other forces beyond supply and demand Stocks can still suffer due to poor management or with the market in general, this is less likely with the commodity so I will be buying Coffee and not Starbucks.

I like coffee for the longer term and will buy the ETF when I see the price moving back up again from here.

 

I would be interested in your views: Coffee or Starbucks ?

 

Best Wishes

 

Alan

Technorati Tags: Coffee,Starbucks,Coff,Coffee ETF,SBUX

Palladium is it the next Platinum ?

The precious metals are taking a breather at the moment pulling back off their highs, Palladium is no exception, having reached a 6 year high recently of $580 an ounce, it has now pulled back by over $100 an ounce.

The long term outlook for the metal however still looks promising and since it is not as high profile as Gold and Platinum may also offer some real potential in the mid to long term.One of the major countries that mines Palladium is South Africa.The recent problems regarding power cuts in the country have had an impact in the mining of Palladium, South Africa accounts for about 30% of the worlds production of Palladium so any disruptions to the supply here have a major impact on the price.

The power situation in South Africa is still fragile and any further disruptions would certainly cause another spike in the price, power issues aside, there are other fundamental issues which also give support to the view that Palladium is likely to go higher in the medium term.The recent run up in Platinum is a key factor here with the record prices seen recently making Palladium an attractive option for the autocatalyst market as well as the jewellery market.With the increasing purchase of cars in the emerging markets such as China and India then the demand for Palladium to be used in catalytic converters is only likely to increase .

 

The other major supplier of Palladium is Russia, in recent years they have been keeping the market well supplied but lately these supplies have been slowing ,adding further constraints into the supply chain, there are some who believe that the Russian supplies are starting to run out if that is the case then this will be another reason for Palladium to start to move higher. The increasing interest in Precious Metals is also likely to create demand as people look to other metals beyond Gold as the fear of inflation and a sinking dollar add to the safe haven status of Precious Metals.

 

The best way to take advantage of buying Palladium is via the London traded ETF  (PHPD), it is also possible to gain exposure to Palladium via the ETF (PHPP) which gives exposure to all 4 metals, Gold, Silver, Platinum and Palladium.I added some PHPD to my portfolio today at $48.77 as well as some more of the Silver ETF (SLV) .A chart of the recent prices showing the latest pullback is below.I think this pullback may be a good buying opportunity for anyone who believes in the metals longer term.

 

 

 

 

 

Best Wishes

 

Alan

 

Technorati Tags: Gold,Silver ETF,Precious Metals ETF,Platinum,Palladium

Should I buy Starbucks

In my last post I asked the question re buying Starbucks or the Coffee ETF, I will look today at the Bear and Bull scenarios for Starbucks (SBUX) and my next post will look at Coffee (COFF).At the beginning of this year The chairman of Starbucks -Howard Schultz took back the reins as CEO. The idea being that he help the chain out of its recent slump.The stock has fallen over 45% in the last 12  months and recently was trading down near 4 year lows .The main concerns were that the chain has overexpanded and was suffering from major competition.The economic slowdown may also make people think twice about the cost of that Double tall Skinny Mocha on their way to work every day.

 

Bear Case

The vast amount of the growth in Starbucks was from adding new stores, but there comes a point when this is not going to be the best way of generating future revenues and profits, particularly as margins have declined in line with increased labour and rent costs.There is also increasing competition from the fast food chains such as McDonalds. In the short term Starbucks has to do something about its profitability and investing in new stores may not be the best way of doing this , sure Howard Schultz built the brand from the early days but a major slowdown in the economy is going to really hurt in this sort of industry.It may be a real challenge for them recovering particularly  in the teeth of a recession

 

 

Bull Case

Currently Starbucks shares are trading at a historic low for Forward Earnings. Howard Schultz is probably the best placed person to engineer a turnaround, he has the experience to know what the organisation needs to do to be able to turn the current position round. They currently have around 11,000 stores in the US and have cut back dramatically on planned store openings  with less than 1000 planned for 2009.They re looking to expand internationally where the growth potential is much higher than in the US.Longer term they may actually be able to get back on track.

 

 

In my next post I will look at the situation for Coffee and then give you my verdict .

 

 

Best Wishes

 

 

Alan

 

Technorati Tags: Coffee,Commodities,Starbucks,SBUX

Should I buy Coffee or Starbucks ?

Having just got back from a work trip I was sitting in the airports(as seems to be happening more and more often) with my Cafe Latte and Double chocolate chip muffin-which had cost about £5 ($10) and reflected on how busy it was with not a spare seat to be found. being a regular coffee drinker, I started to wonder on the best way to invest in my favourite beverage.I have traded futures before and coffee can be one of the most volatile with violent weather related swings-it is definitely not for the faint hearted. So over the next couple of days I am going to look at the outlook for Starbucks and also at ways that you can invest in coffee without having to get involved in the highly leveraged and often manipulated futures markets.

We will see that Starbucks is not necessarily correlated with the price of Coffee, as with all commodities versus shares that are related to or have an interest in commodities there are many things that come in to play that can impact a share like management costs etc that do not affect the prices of a commodity which are driven mainly by the fundamentals of supply and demand, this makes them easier to predict over the medium term.

In my next post I will look at Starbucks and in the post after that the Coffee ETF.

 

Best Wishes

 

 

Alan

Technorati Tags: Coffee,Commodities,ETF,Starbucks,Investing

Visa in Record IPO, Goldman and Lehman Results calm Markets

The Credit card company Visa (V)  set a record yesterday for the biggest-ever initial public offering (IPO) in U.S. history, bringing in an estimated $17.3 billion. The company offered 406 million shares at $44 per share, . The company will begin trading on the New York Stock Exchange under the ticker symbol V. Goldman Sachs and Lehman reported results yesterday that beat Market expectations but were substantially down on previous quarters reflecting the challenges in the market currently but since expectations were for a lot worse this had the impact of assisting the markets to another 400 point upside yesterday.The Fed helped hugely  cutting rates by a huge 0.75% ,this was still below some market expectations of a 1 % cut, the market however rallied on the news.Today we are seeing numerous statements from the likes of Morgan Stanley (MMS) and Goldman Sachs (GS) stating that they took advantage of the Fed discount window, bearing in mind the secret nature of these institutions this can only be seen as blatant PR to try to remove the stigma that would be associated with people finding out that Banks are in need of capital.The thought no doubt being that if the likes of Goldman and Morgan Stanley are using it then it doesn't mean there is a problem. On the contrary my view is that if they did indeed use the window it just goes to show the depth of the problem.

 

After earlier appearing to probably open to the downside the markets  opened slightly to the upside although at the time of writing they are back in negative territory.Rumours in the UK that HBOS(HBOS-LSE) are having liquidity problems-(which they have denied )are keeping the fear in the markets. The dollar is stronger and this is having a negative impact on Gold and Silver, with April Gold futures off 45 points currently . If we see Gold down around the $900 mark then I may consider adding  ore to my portfolio. Those of you who read my article on Silver yesterday (Should I buy Silver or Gold ? ) will note that Silver is holding up much better only off 0.13 at $19.71 for the June Futures.

I own both Gold and Silver but as I said yesterday if I was only looking to buy one I believe that Silver has the most catching up to do and that would be the one that I would favour I would use the Silver ETF (SLV) and look to leg in on pullbacks.

 

 

Best Wishes

 

 

Alan

 

Technorati Tags: Fed,Silver ETF,Goldman Sachs,Morgan Stanley,Lehman,Gold,Visa

Should I buy Silver or Gold ?

Should I buy Silver or Gold if I want to invest in precious Metals or hedge against inflation ? It is an excellent question and one that is often asked.Gold usually always seem to  hog the limelight when it comes to investing in precious metals but does it deserve the accolade. Over the last few years both metals have performed very well with Silver being down near the $5 mark not many years ago and Gold was down to around $250 when famously Gordon Brown the UK prime minister sold a large portion of the UK's Gold reserves in one of his early acts as Chancellor. Between 1999 and 2002 he sold around 400 tons of the UK reserves and lost the UK around  £2 billion pounds in the process-"Way to go Gordy!!!  Anyone living in the UK or following his progress  since will I am sure be well aware that it has been all downhill from that master stroke of financial genius-however this is not a political blog so back to the matter in hand.

Since these lows Gold has outperformed Silver  and the ratio of the price of Gold to Silver has historically always tended to revert back to an average of around 16:1. Sure there have been historical extremes with the ratio being as low as 6:1 back in 1551 and as high as 100:1 in the 1940's and  in 1991. Historically though it has hovered for a lot of the time between 14 and 16:1. Currently the ratio is around 50:1 which is still at the high end and would indicate that Silver is undervalued in comparison to Gold. At the current price of approx. $1000 per ounce for Gold at a 16:1 ratio silver would be priced at $62.5 per ounce over 300% higher than its current price of $20.

 

My own personal perspective is that Silver is likely to catch up Gold, maybe not to the 16:1 ration but I think it may have further to run than gold will in the short term. MY favourite way to invest in Silver is the Silver ETF (SLV). In the short term I think we could see resistance at the $25-$26 mark but if we break through that level we may see it taking off.

 

 

Best Wishes

 

 

Alan

 

Technorati Tags: Silver,Gold,Silver ETF

Things You Can Buy For $2

The markets got hammered at the opening on the news that JP Morgan had bought Bear Stearns, they are off their lows for the moment but  the DJI hit a low of 11756 and the futures hit 11671 before rebounding, Gold hit a record of $1030 an ounce but is currently trading at $1006. People are running for the Hills. it will be interesting to see what comes out this week with the FOMC statement on the 18th.Already the Fed has cut the lending rate for institutions from 3.5% to 3.25%. This increases the likelihood of another large cut  at the next Fed  meeting there is some talk of a full 1%-that to me really smacks of panic .It is also reported in the UK Sunday Telegraph that Goldman Sachs  will report a $3 billion write down when they report on Tuesday, so it seems even the previously untouchable Goldman have got their fingers burnt as well. Unfortunately I think there is a way to go with this before we see the bottom, but only time will tell.

 

Precious Metals and Commodities, it is becoming a mantra but there is nowhere else(apart from Cash) that looks likely to be reasonable in the next 12-18mths until the stock market has dealt with all the issues and found a bottom.

 

On a slightly lighter note I found this article   on another blog, and found it amusing but also very telling about the state of the Financial Institutions, it is  worth noting that not that long ago Bebo the social networking site was sold for $850 million -more than 3 times what Bear Stearns was deemed to be worth. Interestingly the Fed has also underwritten the purchase of Bear Stearns, so similarly to the debacle in the UK of Northern Rock it is the American Taxpayers that are in hock for the approx. $30billion of "Toxic Waste "  that has caused the decline of Bear Stearns, when you consider back in September Bear Stearns was trading for around $100 that is one hell of a discount .

 

 

 

 Things You Can Buy For $2

Things you can buy for $2:

• 2 limes
• 1 organic avocado
• 15% of a drink at a bar
• A pound (sterling)
• A day’s worth of labour from a farmer in the Indian countryside
• Nothing at a strip club
• A payoff of that persistent newspaper boy who wants his $2
• 2.3 cheeseburgers from McDonald’s
• Medicine for an African child for a whole month
• Oh yeah and these guys….

Amazing Bear Stearns (NYSE: BSC) Fact: Their building is worth 3x more than what their equity was sold for.

Best Wishes

 

Alan

 

Technorati Tags: Bear Stearnsearns,FED,JP Morgan,Rate Cut,Northern Rock,FOMC,DJI,Goldman Sachs

JPMorgan buys Bear Stearns for $2 a share

If anyone doubted just how big a problem the banks are in then this should really put the lid on it, JP Morgan has agreed to buy Bear Stearns for a cut price rate of $2 a share valuing the Bank at about $230m.This means that after 85 years of independence Bear Stearns is no more. For more info see this story in the FT.

 

 

JPMorgan buys Bear Stearns for $2 a share
Sun, 16 Mar 2008 23:29:00 GMT

 

 

Technorati Tags: JP Morgan,Bear Stearns,Banking Stocks

Will the Dollar Decline Further ?

The Financial Times had a short paragraph in their currencies section last week which caused a stir among currency traders. It told of a report which indicated that the central bank of the United Arab Emirates had set up a taskforce to help implement a possible depegging of the country's currency from the US dollar. This is something that had been written about months ago, but the talk of depegging jumped back up onto the trader's radar yesterday.

There is a meeting scheduled this  week by the six Gulf Cooperation Council states, including Saudi Arabia and the United Emirates. The committee meets four times a year and will be discussing the formation of a Gulf Central bank and other technical matters related to a proposed single currency. The meeting won't be attended by any central bank governors, so I don't expect an announcement of an agreement to drop the dollar peg at this time; but just the discussion is putting additional downward pressure on the US$.

 

On top of this the Euro continues to make new highs and the Swiss Franc is now at parity with the US dollar if we look at charts of the Euro and Swiss Franc over the last few years we can see the dramatic decline of the dollar in these two currencies.

 

 

The dollar has also reached below the psychological  100 yen mark as well, the slide in the dollar has been enough to start the rumour mill about  Central bank intervention, I personally don't think it will happen , but if the dollar keeps dropping as quickly as it has done in the last few weeks then it may spark some sort of response. The ECB must be starting to get concerned with the strength of the Euro and even Sterling is back  well over $2 even although the UK will suffer a lot of the same problems as the US since they too are having problems in the housing markets.

 

Every bit of bad news for the dollar is a boost for Gold, I still believe that the precious metals will do us proud in the medium term,sure there will be pullbacks some of them could be quite severe.I will be using any pullbacks as good buying opportunities. I also favour Silver a bit more than Gold for reasons I will go into in my next post.

If you are looking at ways to benefit from any further declines in teh dollar then look to the Currency ETF , I will be looking at the Yen  FXY and the Swiss Franc FXF.

 

Best Wishes

 

Alan

 

Technorati Tags: Currencies,Currency ETF,Gold Futures,Silver,Yen,Swiss France,Dollar Decline

,

Bear Stearns- Bailed out by JP Morgan and NY Fed-Is there more to come ??

 

After looking like opening to the upside the markets took a nosedive this morning on the news that Bear Stearns is being given 28 days financing from JP Morgan and the NY Fed, there has been rumours for a while in the market about Bear Stearns having liquidity problems and this confirms them to be true.They are looking to put in place some permanent financing to help them with liquidity. If companies the size of Bear Stearns can get in to trouble then we should really start to be concerned about the impact of the Credit Crunch. I have said before that I am steering clear of Financial's and this further keeps me away from them for the time being.The only way to play theses is the same as Jim Rogers, short them or buy puts on any rallies.

 

This news and the drop in the Dow has pushed April Gold Futures up over $1000 currently they are trading at $1003, having hit a high of $1007.There are also rumours(unsubstantiated ) of a possible emergency Rate cut by the Fed-when will they learn !!

 

 

Today 09:13am

Bear Stearns Companies Inc JPMorgan Chase and NY Federal Reserve Bank providing financing for 28 days, working on permanent financing

- JP Morgan in conjunction with the Federal Reserve Bank of New York, has agreed to provide secured funding to the Company for an initial period of up to 28 days. Through its Discount Window, the Fed will provide non-recourse, back-to-back financing to JPMorgan Chase. JPMorgan Chase is working closely with the Company on securing permanent financing or other alternatives for the company.

Trade The News - Live Audio Breaking News Analysis and Futures Calls

 

 

Best Wishes

 

 

Alan

 

Technorati Tags: Fed,Gold,Gold Futures,Bear Stearns,JP Morgan,Credit Crunch

Gold hits $1000, Retail Sales Decline-Paulson says a Strong Dollar is very much in the US interest-yea right !!

 

Well it happened even quicker than I thought but Gold hit the $1000 mark earlier today although it has since backed off slightly, Retail sales numbers disappointed again ,dropping 0.6% versus expectations of a rise of 0.2-0.3%.This has had an impact on the major Indices with the DJI down 185 points at the moment just off the days lows.

 

Hank Paulson is currently speaking and saying the same old mantra of how a Strong Dollar is in the US interests, only a couple of days after "helicopter Ben" scatted another $200 Billion dollars in to the markets like confetti, not quite sure how that will help a strong dollar.but hey how would I know. It looks like the engine of US growth the consumer may be finally drawing in its horns amongst the pressures form the Credit Crunch and Housing.If they continue to spend less and less this will really start to create big problems. With oil hovering around $110 and gas prices going through the roof, who can blame folks for not getting in their car and driving to the mall to send more ?

 

I am staying long and strong Precious Metals and Commodities, my position in PHPM (Precious Metals ETF) is up 51% on an annualised basis, DBA (Agriculture ETF) is up 186.9% annualised and the cotton ETF is up 235% annualised. Now is not the time to be buying stocks especially in Retail, or Financial's.

 

Best Wishes

 

 

Alan

Technorati Tags: Dollar,Gold,Commodities,ETF,Cotton,Agricultural Commodities,Precious Metals ETF

Stocks decline after record Rise yesterday-Gold moving towards $1000

As I mentioned in my earlier post, I really don't feel that yesterdays rise was anything other than a massage upwards based on the Fed's announcement of a $200 Billion injection to improve liquidity.Today after rising at the open we worked our way back to end up with declines across the board.

The Dow Jones industrial average (INDU) lost 0.4%, the broader Standard & Poor's 500 (SPX) index lost 0.9% and the Nasdaq composite (COMP) lost 0.5%.

 

The announcement of the injection of capital from the Fed sparked a short covering rally but today we returned to concerns about what the economy is doing .The Retail Sales numbers are due out on Thursday and they will be closely watched to see what consumers are doing, if we see further declines in retails sales then it will likely spark another moving lower of the indices.

 

Oil hit an all time high above $110 a barrel before closing just below that, I can well remember the raised eyebrows when Goldman Sachs forecast $100 by 2009 in July 2007. looks like they were dead wrong and we got there a lot sooner !!

 

For me Commodities are still the place to be at least in the medium term, sure we will see pullbacks, some of them vicious but I do not see them being a bad investment over a 2-3 yr horizon.Gold was up again at $985 and I don't think it will take much for us to see $1000 in the next couple of weeks.

 

Best Wishes

 

 

Alan

 

 

Technorati Tags: $100 Oil,$1000 Gold,Gold,Fed,INDU,SPX,COMP,Nasdaq,Trading

Is the worst over ?-Should we Start Buying Stocks again ?

Yesterday there was a huge rally in the stock markets, Look at the 5 minute Intraday chart below:

 

 

The markets continued higher at the outset today but with little conviction and already at the time of writing, the DJI is 100 points off its high. My own view is that we are seeing bounces inspired by well orchestrated news releases and manipulation by the Fed and others to stop the  markets plunging.I am sure a lot of you have heard or read about the PPT(Plunge Protection Team) Plunge Protection Team  who's role is to try to stop catastrophic drops in the market by intervening when appropriate.A lot of people feel that there role has now morphed and they are intervening far more often in the markets to maintain the perception of a strong economy and a bull market.  There has been a number of press articles lately indicating that they are back in the markets Bush convenes Plunge Protection Team. I think we will see them being increasingly less and less effective as time goes on and people realise that there is no real substance to these rallies only manipulation. For myself I am sticking to Precious metals and Commodities as I have been advocating of late. I do not think we are out of the woods yet and there are definitely still a few hungry bears roaming around in the Bushes.

 

What are your views, should we be buying stocks again, is the PPT a good thing or is it getting in the road of market forces.

 

 

Best Wishes

 

Alan

Technorati Tags: PPT,Plunge Protection team,Stocks,Dow Jones,Commodities,Gold

Eliot Spitzer-Ironic, Sad or Well deserved ?

 

Isn't it amazing how so often in life those that rise to prominence on a crusade of some sort or other end up falling by the wayside, I am sure there are many in Wall Street and beyond who can barely hide their glee at the predicament that Eliot Spitzer now finds himself in.It does though boggle the mind that people who set themselves up as champions of good or head off on morale crusades often come unglued.

Well what do you think, is it divine retribution or should it have nothing to do with his work or do you think he has been extremely two faced ? be intrigued by your thoughts and comments

 

 FT.com / World - Spitzer under intense pressure to resign

 

 

Best Wishes

 

 

Alan

 

Technorati Tags: Eliot Spitzer,Trading,Ironic

Will Gold reach $1000 ?

Gold nearly made the $1000 mark and I feel it is only a matter of time before we get there.However as we all know in the markets things never go up or down in a straight line.As ever I am always looking to bring you ways to trade that expand the options we have particularly in situations like just now where it may be prudent to step aside from the stock market and let it do its thing for a while. Gold is in the news as we have seen some spectacular moves -up and down.Now there is another ETN that allows you to be able to trade Gold long and short in your account and also with some leverage without having to resort to futures or futures options.

 

Deutsche Bank at the end of February listed the DB Gold Double Short ETN (DZZ), DB Gold Double Long ETN (DGP) and DB Gold Short ETN (DGZ) on the NYSE Arca.( DGP | ETNCenter.com ) For more information see the link  this allows us to  trade Gold in both directions and take advantage of the large movements that we will no doubt see on its way to $1000 any beyond. make no mistake I am a Gold bull but it would be nice to be able to make some money on the pullbacks as well.

 

Best Wishes

 

Alan

 

Technorati Tags: Gold,$1000 Gold,ETN,ETF,Trading,Short ETF

How to Short Commodities using ETF

In my last post we talked about how to make money from  increased food prices and looked at the  impact these prices would have on livestock such as Live cattle and Lean Hogs. I mentioned that for the more adventurous amongst you you might also wish to look at shorting the grains as they have risen very far very quickly.Shorting Commodities has traditionally been very difficult until the recent advent of Contra ETF's.

These ETF's will move higher when the price of the commodity goes lower allowing you to benefit from declining prices by buying the ETF.One of the most forward thinking of the companies involved in these Contra ETF's is ETF Securities   http://www.etfsecurities.com/csl/short/index.asp   ETF Securities will allow you to go short a number of the major traded commodities and since you are buying and not selling they should be  tradable in most accounts.

A major shortcoming of many  brokerage accounts has been the inability to make money when markets are doing anything but going up, now with these new ETC/ETF that is no longer a problem.It also allows for some quite sophisticated trades to be placed-for example if you are bought in to the story of the last two posts of mine and you are an aggressive trader you might consider going long livestock and short grains by buying one of the livestock ETF's such as CATL (Live Cattle) and buying one of the Short ETF such as SWEA (Wheat).

 

The volatility in the stockmarket currently is very difficult to invest in and is being driven back and forward by news and by the manipulations of the big boys, the commodity markets however are more fundamentally driven by supply and demand and so are easier to predict in the medium term.

 

Best Wishes

 

 

Alan

Technorati Tags: Commodities,ETF,Short ETF,Grains,Live Cattle,Trading,ISA,IRA

How to make Money from Higher Food Prices

I am sure like me, that you have noticed the increased prices of many food stuffs when you make your trips to the local store or supermarket.Global food scarcity is even in this day and age still a major problem.Countries such as Egypt have actually widened its food rationing system for the first time in 20 years.Russia and China are putting controls in place and other countries such as Vietnam are imposing taxes on foreign sales to protect their own supplies.

The cause of all this is that our current Global food supplies cannot cope with the increasing demands of a world population which is growing by over 70 million per annum.Not only is that a huge increase but the emerging market countries with their expanding middle classes are starting to demand Westernised , meat heavy diets.We are also seeing misguided political pressure to increase the use of Biofuels-this has the effect of diverting already stretched supplies of foodstuffs such as grains to energy inefficient fuels.

This means that over the last year while the price of agricultural commodities have gone through the roof look at the price of wheat over the same period.

Last week the price of wheat rose 25% in one day as Kazakhstan (one of the largest exporters of grain) announced a plan to impose export tariffs.This caused buyers to panic sending the price soaring.So we all pile into grains then?...well not exactly I am always wary when something moves this much so quickly and I think we are experiencing a short term bubble in the price of grains.

For me a better way to take advantage of the grains boom and one which is not so obvious-and therefore less likely to be driven up by the hype is through buying meat such as Live Cattle and Hogs.Normally this would only

be possible on the CME futures but once again the advent of ETF's or in this case ETC(Exchange Traded Commodities) come to our rescue.

They can be traded in London via ETF Securities the symbols are( LSE:HOGS) and (LSE:CATL). This will give in my opinion good exposure to the grains boom-how I hear you ask, well Livestock are fed mainly on grains so if you are a livestock farmer faced with the choice of paying the increased costs of feeding your herd or selling them in the market-it seems to be a pretty easy choice.The farmers rather than feed their livestock grain will sell it into the market and obtain record prices, they will then also sell the livestock.

If you look at the prices of cattle for the last 12 months you will see that cattle has dropped in price as a result of too much stock hitting the markets

This will mean in the near term we have too much grains everyone is planting that to cash in on the high prices and not enough meat, within the next 6-12 mths people are going to start to realise that there is a shortage of meat and this will I believe cause prices to rise. Supply and demand, Supply and demand the mantra on which the commodity markets thrive.

I would be looking for opportunities to cash in on the grains and buy the meats.If you feel really aggressive then think of going short the grains and long the meats....how can I do that in a non margin account I hear you ask...........well that is for the next post. Until then good trading.

Alan

Reference List

href="http://traderbill.wordpress.com/2008/03/03/3308a-mess-and-a-half/" rel="nofollow">3/3/08…a mess and a half « Traderbill’s Financial Markets..

Bull Market in Agriculture | Teach Talk Trade Day Trading & Technical Analy..

The value of the U.S. dollar is sinking world-wide. « Bridges to Hope..

Wheat’s Major Price Reversal : Contrarian Profits

Data Feed « Trading for the Masses

Now That Warren Buffett is Crazy About the Loonie, Here are Seven Ways to P..

Tracey’s Market Update : Blog Archive : Wheat: “A rally of e..

Putting the pieces together...: Commodity/Inflation Funds: Update