How to make Money in the Stock Market.This blog looks at how you can make money trading and investing in Forex, Stocks Options and Futures.


Thursday, 27 March 2008

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



Wednesday, 26 March 2008

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



Tuesday, 25 March 2008

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




Monday, 24 March 2008

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





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