Stock Trading Views

How to Invest in Livestock

2008-05-14T19:36:00.001Z

A while ago I wrote an article looking at ways to capitalise on the high food prices How to make Money from Higher Food Prices. We haven't really experienced much in the way of upside and to be honest I don't expect to see much for maybe another 6 months or so.

As I pointed out in the above article one of the drivers that I saw for investing in livestock was the rising cost of corn and feedstuffs.What is currently happening is that some farmers are selling or in some cases even slaughtering some of their herd because that cost them less than having to buy the feed to keep them alive.

While this slaughtering is going on I don't expect to see much of an increase in prices of Hogs or Cattle, after about 6 months or so of this slaughtering I think we will start to see a shortage of supply driving the market prices of livestock higher.

Until we see a realisation that the slaughtering is starting to create a shortage I don't see there being much short term movement to the upside, if however you are looking for a good longer term play on rising food prices I would still be considering the CATL ETF for Cattle and the HOG ETF for Live Hogs. It is certainly my opinion that they are a strong buy on any further weakness.

Best Wishes

Alan

Technorati Tags: Corn,Live Cattle ETF,Live Hog ETF

The growing Food Crisis -what should I invest in

2008-05-09T16:34:00.001Z

Around the world, rising food prices have made basic staples like rice and corn unaffordable for many people, pushing the worlds poor in places such as Africa and Asia to breaking point. It is incredible listening to the news these days to hear the headlines about Global Food Shortages and riots in countries like Haiti and Mexico. We have become so used to the availability of food in our stores that it is sometimes easy to forget that for some people it is not just a case of heading to the nearest store to get food for their table.For some it is a matter of life and death to be able to get staple items such as wheat and rice.

It has become such a problem that some of the worlds governments have had to step in to try to protect the stock that they hold.Just yesterday India placed a ban on futures trading in several commodities, including soybean oil, chickpeas and potatoes.This was an attempt to preserve supplies and keep down the rampant inflation that is being caused by the increase in food prices.

In Asia the problem is just as acute with rice continuing to make new highs on world exchanges.The demand placed on the prices of rice due to the huge populations of China and India has seen it reach astronomical levels with the price more than doubling in the last year.

As well as the impact on populations desperate to feed themselves, we are seeing the impact on countries as farmers try to capitalise on the current high prices by seeking land wherever they can to grow the crops that are being demanded across the globe.

Until the end of the last century, soybeans were practically unknown in the Amazon basin. It was not until the grain terminal was built that soybean farmers came to the region from farther south. The land there was cheaper, the banks were offering low-interest loans and sales were guaranteed.

Villages, rubber plantations and grazing land for cattle were transformed into bean fields. The farmers cut enormous swathes into the rainforest, until environmentalists put a temporary stop to the unchecked rash of clearcutting. In Mato Grosso, the most important farming region, producers and environmental activists agreed on a two-year moratorium on the purchase of soybeans from the Amazon basin.

From the Río de la Plata to the Amazon, the Chinese are sucking the markets for soybeans dry. Large segments of the state of Mato Grosso are already covered with a green, pesticide-drenched monoculture. In the dry season between August and November, a cloud of smoke descends on Cuiabá, the capital of Mato Grosso. Despite a government ban, many farmers burn down sections of the rainforest to gain more farmland.

In Brazil we see huge swathes of land being used to grow Soybeans to satisfy the demand from China .Brazil is one of China's major trading partners. Long-term contracts between the two countries are intended to secure raw materials for China -- and, more recently, food products in particular.

This rising world power, with its population of 1.3 billion, must take steps to ensure that it too does not become a victim of the Food Crisis .However it has a competitor on the horizon.India home to 1.1 billion people, has caught up with China in terms of the power it wields as a massive market. Together, the two Asian nations must feed more than a third of the world's population. In times of exploding food prices, their sheer size alone makes the crisis even worse.

It isn't difficult to imagine what happens to prices when the world's two most populous countries buy up other food products in a similarly aggressive fashion. In more and more dangerously poor countries, wheat and meat have become an almost unaffordable luxury, while famine and hunger riots are only likely to get worse.

Over the next few years I can only see these challenges becoming worse and prices continuing to rise.

In order to invest in these commodities we need to look once again at our favoured ETFs, I have a position in DBA the Powershares Agriculture Fund.You could also look at the AIGG Grains ETF (AIGC) or the individual ETFS for Soybeans (SOYB) or Wheat (WEAT).

There is likely to be volatility in these markets so I would not bethinking short term and I will place stop losses of around 20% on any positions that I have or buy in to. Over a 3-5 year period I think these holdings will do very well.

Best Wishes

Alan

Technorati Tags: Agricultural Commodities,Brazil Fund,China,Commodity Investing,DBA,Commodity ETF,Grains,Soybean,Wheat

The Case for $200 Oil

2008-05-08T21:06:00.001Z

On Tuesday I wrote a post about the prediction from a Goldman Sachs Analyst that Crude Oil could hit $200 a barrel, $200 Crude Oil-surely not ? today I want to spend a bit more time looking at some of the reasons why that is not a crazy prediction and may even be on the low side.

The world’s known supply of crude oil has decreased by about 13% since 2001 It was estimated that the total world supply of Crude Oil was around 2 trillion barrels. We have already used around half that in about 150 years. As the planet’s supply of oil slips below one trillion barrels, and America’s pile of liabilities soars above 54 trillion dollars, crazy things might start to happen – crazy things like $200 oil.

But crude oil is not the only natural resource that is depleting and/or in short supply. And the U.S. dollar is not the only currency on fertility drugs. So a forward-looking investor could expect to see the prices of most major commodities rise in terms of most major currencies. But this simple conclusion is easy to miss when most of the relevant data points contain nine to twelve zeros.

Most of us have some vague idea that one trillion is the number that lies somewhere north of one billion ,beyond that, we have no clue. So how much is one trillion anyway?

• 1 trillion seconds = 31,546 years.
• 1 trillion dollar bills placed end to end would reach 96.9 million miles, far enough to reach the Sun.
• The average new car costs $28,400. $1 trillion would buy more than 35 million cars.
• The entire Federal budget is $2.8 trillion. A stack of that many dollar bills would circle the Earth more than 7 times.
• Gross Federal debt is more than $8.7 trillion, which would make a stack of dollar bills that would reach from the Earth to the Moon and back with some to spare.
• $8.7 trillion in one-dollar bills would cover an area larger than each U.S. state except for Alaska and Texas.”

But there is something else at play that doesn't help the situation-the weakening of the US dollar which helps pay off the US debt but it also has some undesirable results in the form of $1000 gold and $120 crude oil.

In other words, the skyrocketing oil price is as much a monetary phenomenon as a geophysical one. Paper currencies and debts proliferate rapidly. Natural resources do not. That’s why the prices of natural resources like crude oil MUST increase over time. And that’s why you should listen to that little voice inside your head when it tells you: “$200 crude oil may be crazy, but not nearly as crazy as the size of the US Deficit.”

We are running out of Natural Resources there is no doubt, it is unlikely that we will see them completely depleted in most of my readers lifetimes,however if the Dollar continues lower (or is allowed to weaken to cover up for poor fiscal policies) then it will accelerate the incessant rise of these Natural Resources.Since the vast majority of Natural Resources are paid for in Dollars it stand to reason that as the resources become scarcer and the dollar becomes worth less that suppliers will be demanding more of them for whatever it is they have to sell.

Best Wishes

Alan

Technorati Tags: $200 Oil,Commodities,US Dollar,Strong Dollar Policy,Oil

Gold Stocks -Time to Buy ?

2008-05-07T22:45:00.001Z

I am sure we have all been following the rise of gold in the last 6 months or so peaking at just over $1000 per oz.Gold has now worked its way back down and is sitting today just shy of $870.There could be many reasons for this including the whispers about concerted Central Banks efforts to push the price down. One thing that stands out though is that even when Gold shot up to over $1000 the Gold Producers didn't follow along

America's largest gold producer, Newmont Mining (NEM), announced its first-quarter earnings towards the end of April. The company's revenue was 60% higher than the same quarter last year. Its average selling price for Gold was $933 per ounce during the quarter, up 40% from the same time in 2007. Unbelievably Newmont's share price fell !!

This seems to be common across the industry currently... and I think it just might be fantastic opportunity to get into these stocks.Gold prices have doubled since April 2005 to today. However the share prices of major gold producers have hardly moved. Newmont Mining's shares rose only 6% over the same period.

Usually Gold Producers shares perform even better than Gold... meaning that if gold doubles in price, gold stocks often quadruple in price. It all comes down to the "leverage effect"...

If a Gold Company can mine gold for $200 an ounce and sell that gold for $300 an ounce, it makes a profit of $100 an ounce. However, if the gold price jumps to $500 an ounce, the profit per ounce increases from $100 to $300... Now let's say the price of gold really gets rocking, increasing $800 an ounce profits increase dramatically. You would therefore expect that the share price would respond in expectation of these profits .However, it hasn't quite worked out that way in the past few years. Due to the soaring costs of fuel, equipment, and upgrading facilities, the costs to mine gold have risen nearly as much as the gold itself!

On May 1, 2006, the AMEX Gold Bugs index (HUI), which tracks the big gold mining companies, closed at 380. Today it closed at 407. The index has hardly moved during a period in which gold gained more than 30%. But I think the news from Newmont is the latest sign that gold miners are now really starting to rake in the cash. Newmont's quarterly profit rose 444% over the first quarter of 2007. The elevated gold price is finally kicking in. And the situation is the same with other big miners, including Barrick and Goldcorp... But like Newmont, these stocks are sitting dormant right now.

If you don't have exposure to gold stocks yet, now is the time to get some. I think we are still in a raging bull market for gold and that the current prices for the Gold stocks are way off where they should be if that is true.

Best Wishes

Alan

Technorati Tags: Barrick Gold,Gold Bugs Index,Goldcorp,Newmont Mining,Invest in Gold,Gold Stocks

$200 Crude Oil-surely not ?

2008-05-06T16:43:00.001Z

It wasn't that long ago that Goldman Sachs printed the "crazy prediction that Crude oil would reach over $100 a barrel .well they are at it again and who would dare doubt them this time. The story below from Bloomberg quotes the analyst behind that earlier prediction Arjun Murti as saying that within two years we could be seeing oil hitting between $150 and $200 a barrel. I wrote about Peak Oil and its impact in this article Has Oil Peaked ?

Based on this prediction it most definitely looks like there is a growing acceptance(unless you are a Politician or in Saudi Arabia) that we may actually be running out of oil. If this prediction comes true (like the last one did) then it really will have some ramifications for the world economy and possibly also stability.

May 6 (Bloomberg) -- Crude oil may rise to between $150 and $200 a barrel within two years as growth in supply fails to keep pace with increased demand from developing nations, Goldman Sachs Group Inc. analysts led by Arjun N. Murti said in a report.

The price of crude traded in New York averaged $56.71 in 2005, $66.23 in 2006 and $72.36 in 2007. Oil rose to an intraday record $120.93 today on speculation demand will rise during the peak U.S. summer driving season.

``The possibility of $150-$200 per barrel seems increasingly likely over the next six-24 months, though predicting the ultimate peak in oil prices as well as the remaining duration of the upcycle remains a major uncertainty,'' the Goldman analysts wrote in the report dated May 5.

A report yesterday showed U.S. service industries expanded in April, signaling higher energy use. The Institute for Supply Management said its index of non-manufacturing businesses, which make up almost 90 percent of the economy, grew for the first time since December. China is increasing refining capacity and boosting imports to meet rising demand for the Olympic Games.

U.S. gasoline demand typically climbs going into the summer season when Americans take to the highways for vacations. The peak-consumption period lasts from the Memorial Day weekend in late May to Labor Day in early September. Monthly fuel sales were the highest during August in five of the last six years, according to data from the Department of Energy.

China Consumption

China, the world's fastest-growing major economy, has more than doubled oil use since New York crude oil dropped to this decade's low of $16.70 a barrel on Nov. 19, 2001. Record prices have failed to stem rising consumption in developing nations, with demand led by China, India and the Middle East.

Price forecasts for spot U.S. benchmark West Texas Intermediate crude oil for 2008 to 2011 were revised higher by Goldman. The 2008 price estimate was raised to $108 a barrel from $96, the 2009 forecast to $110 from $105, and 2010 to 2011 estimates are projected at $120 from $110, the analysts said, citing slowing supply growth in Mexico and Russia, and low spare production capacity in OPEC.

Oil has also rallied amid a dispute between the U.S. and Iran regarding the Persian Gulf oil producer's plan to develop nuclear energy.

In Nigeria, Africa's biggest oil exporter, militants have attacked oil installations and kidnapped workers since the beginning of 2006, forcing Royal Dutch Shell Plc to halt output.

Venezuela Slump

In Venezuela, production has slumped to about 2.34 million barrels a day from almost 3 million barrels a day in 2002, according to Bloomberg's estimates, before President Hugo Chavez fired almost 20,000 workers who had closed the state oil company in an attempt to overthrow the government.

Iraq's oil production has yet to reach levels attained before the U.S.-led invasion of 2003 as the country struggles with sectarian fighting and attacks on its energy infrastructure.

Mexico's production has fallen below 3 million barrels a day since October as Petroleos Mexicanos, the state-owned oil company, failed to compensate for a 30 percent drop at Cantarell, its largest field, which accounts for 40 percent of output.

``There are supply constraints with many producers, especially from non-OPEC struggling to find new reserves and China and Middle East demand keeps growing,'' said Victor Shum, senior principal at energy consultant Purvin & Gertz Inc. in Singapore. ``The fundamentals are prompting investors to get into oil in a big way and all that points to higher prices.''

OPEC Capacity

Spare production capacity of the Organization of Petroleum Exporting Countries is low and the group's exports may fall because of ``lackluster'' supply growth and rising domestic consumption in member countries, the Goldman analysts said.

``Non-OPEC supply is struggling to grow, with notable declines being seen in Mexico and Russia showing signs of rolling over following an extended period of rapid growth,'' said the analysts from Goldman, the world's biggest securities firm by market value.

Prices are also poised to gain as major oil-exporting countries restrict foreign investments, limiting supply growth, while demand from developing countries, or ``non-OECD'' nations is rising on economic expansion and power shortages, prompting higher demand for gasoil and fuel oil, the Goldman analysts said.

Crude oil for June delivery was trading at $120.47 a barrel, up 50 cents, at 8:42 a.m. in London in after-hours trading on the New York Mercantile Exchange. Yesterday, futures closed 3.1 percent up at $119.97 a barrel, the highest closing price since trading began in 1983.

`Super-Spike'

``The core of our super-spike view has been that a lack of adequate supply growth coupled with price-insulated non-OECD demand growth'' is leading to higher prices, the analysts said. That could result in a ``sharp correction in oil demand,'' the Goldman analysts said.

Crude oil's increase above $100 a barrel was partly because of the dollar's decline against the euro, which boosted oil prices because it made commodities cheaper for buyers outside the U.S. and attracted investors as a hedge against inflation. Oil in New York touched $100 a barrel on Jan. 2.

The U.S. currency has declined 5.4 percent against the euro so far this year, and 11 percent last year.

Members of OPEC, which supplies about 40 percent of the world's oil, have said supplies are adequate and blamed speculators for pushing prices up to records. The producer group won't consider raising output before it meets in September as the market is well supplied, Qatari Oil Minister Abdullah al-Attiyah said on May 2.

There's a fundamental misperception that so-called speculators are driving prices to unjustified levels, the Goldman analysts said. ``Unfortunately, we do not think the energy crisis will be solved by finding and punishing the big bad speculator.''

Commodity investors, the Goldman analysts wrote, are ``helping to solve the energy crisis'' by speeding up the process for oil companies to spend more on energy projects and at the same time encourage efficiency.

Bloomberg.com: Worldwide

Technorati Tags: $200 Oil,$100 Oil,Peak Oil

Steel is getting more expensive so invest in Coal

2008-05-05T15:15:00.001Z

As if most people are not struggling enough with the increases in Gas and Food prices which I wrote about here (Higher Food Prices) but the latest blow comes in the form of increases from the utility companies to the price of your electricity.

In a recent article the Associated Press writes "NEW YORK (AP) — "Consumers struggling with high gas prices, rising food costs and falling home values have something new to worry about: Sharply rising electricity rates due to a surge in coal prices over the past year."

As the article highlights the increase in the price of coal has meant that there have been hikes by the utility companies in the price of Electricity to the end user.One of the main reasons for the increase in coal prices is the demand from emerging countries(yes China again !!) for coal to fire their increased demand for Steel.

U.S. coal exports jumped 19.2 percent last year, according to the Energy Department, and are expected to rise another 15 percent this year.

"As more of the world develops and uses more energy, and supply tries to keep up with demand, we're going to have these pinch points," said Carol Pfeiffer, director of fuels for the U.S. for utility giant E.On AG.

Coking coal is the type of coal used in steelmaking. Demand from steelmakers is driving prices higher. In fact, many steelmakers, including the world's second-largest producer (Nippon Steel), recently agreed to pay triple what they previously paid for coking coal.

The chart above shows the price of coal over the last five and a half years up an 450%.The above index doesn't contain any U.S. coal – it's 60% South African, 30% Colombian, and 10% Australian. But the market for coal, like oil, is global. When the price of foreign coal spikes, the U.S. exports more of its coal... resulting in higher U.S. prices.There are a limited number of ways to bet on the price of coal but you can do it mainly through coal stocks... but they are expensive right now.A few of the big names are Peabody (BTU), Consol (CNX), Massey (MEE), and Arch (ACI).

My favourite play would probably be buy a basket of coal producers with the Market Vectors Coal ETF (KOL).Currently prices are high and I would wait for a pullback maybe to around the $43 dollar level at support before considering a purchase. There is no doubt that high energy costs are here to stay whether the cost of our gas in the tank or the price of our electricity one way to mitigate the impact is by buying the companies an sectors that will benefit from us paying them more.

Best Wishes

Alan

Technorati Tags: Peabody Coal,Utility prices,Steel,Invest in Coal,Massey,Consol

Invest in Water it is the new Oil

2008-05-04T20:17:00.001Z

I was working recently in Lisbon in Portugal and was talking to some of the locals about the weather,being from Scotland I was looking forward to some of the Lisbon sunshine and warm temperatures.Unfortunately for the three days that I was there the weather was similar to my native Glasgow- wet and windy. The locals had commented that they had a lot of rain so far this year but not enough to make an impact on water prices.

Now being from Scotland as I mentioned it is strange to me that people pay for water usage-in Scotland we pay a local tax for sewerage and treatment facilities but not the amount of water that we use.What struck me as I thought about it was the wastage that there is in countries like Scotland compared to other countries in the world where water is a much scarcer commodity. Loch Katrine which supplies most of Glasgow's water has a capacity of approx 64.6 million litres and is regularly topped up by the Scottish Weather.

Listening to my colleagues in Lisbon I realised that we could do a lot more such as not having the tap running constantly when brushing our teeth and not using running hot water to do dishes .These practices are fairy common in Scotland but in other parts of the world would be considered crazy and wasteful. We are in the privileged position in Scotland( but not all of the UK where some areas do suffer from droughts and water restrictions) of not having to worry about a plentiful supply of clean water.In the rest of the world it is a very different story. The world's immediate need for fresh water remains paramount.

Loch Katrine: Scotland

In China, for example, two out of every three major cities have less water than they need. Cities in northeast China have roughly six years left before they run completely dry.

A recent report on the water situation in China says up to 300 million people are drinking contaminated water every day, and 190 million are suffering from water related illnesses each year. If air pollution is not controlled, it says, there will be 600,000 premature deaths in urban areas and 20m cases of respiratory illness a year within 15 years.One third of the length of all China's rivers are now "highly polluted" as are 75% of its major lakes and 25% of all its coastal waters. Nearly 30,000 children die from diarrhoea due to polluted water each year

Although China is the world's fourth largest economy, growing 10% a year and closing rapidly on the US, Japan and Germany, its environmental standards are often closer to those in some of the poorest countries in the world, says the report. More than 17,000 towns have no sewage works at all and the human waste from nearly one billion people is barely collected or treated. Nearly 70% of the rural population has no access to safe sanitation.

"A majority of the water flowing through China's urban areas is unsuitable for drinking or fishing. Some 300 million people drink contaminated water on a daily basis," says the report.

Although China has tried to improve its air quality, it has not invested enough to keep up with the flood of people to its cities, many of which have some of the worst pollution in the world. The burning of more than 2bn tonnes of the dirtiest coal a year is costing the economy the equivalent of 3-7% of GDP (£8-15bn a year), according to the report. While no specific figure is given for the overall cost of China's pollution, in 2004 it was thought to be in the region of £32bn.

Songhua River in Harbin China

The report estimates that 27% of the landmass of the country is now becoming desertified. Much of the country already suffers from water shortages, but the Chinese Academy of Sciences expects water demand to increase by nearly 50% in the next 40 years. Industry's share of this is expected to grow from 16% to 41%.

Low environmental standards are now making people wary of buying Chinese goods, said Lorents Lorentsen, OECD's environmental director in Beijing yesterday. "If you have a reputation for being a polluted country, then you have a bad trademark abroad. It's very hard to sell pharmaceuticals, to sell food and feed from a country that has a reputation for being polluted," he said.

A lot of westerners, however, take water for granted. We simply turn on the tap and it flows. But that's certainly not the case the world over. And from they way things are looking, that may not be the case here much longer. Lakes around the U.S. are running dry. In the West, we see this happening at Lake Mead. In the East, it's Lake Lanier.

While it may not be traded in Chicago, water is a commodity. When scarce, it's the one commodity even more valuable than oil or gold.So when Big Oil starts pouring money into water rights and alternative energy, we want to pay special attention. We tend to believe that water rights will be valued in this century much as oil rights were in the last.

Companies that invest in cleaning up water I believe will do well in the years to come as the world realises that it has to do more to ensure clean drinking water for all.Countries like China are a huge market for these companies.

One of my favourite stocks in this area is Veoila Environment (NYSE:VE) they are a a world leader in environmental services and stand to do well out of the shortage of clean water in the future.

We can see from the chart that the trend is most definitely up but there has been a pullback since the beginning of the year which may present a good buying opportunity.

Best Wishes

Alan

Technorati Tags: Invest in Water,Ve,Veolia,Water Stocks

Why a Weaker Dollar is good for America

2008-05-01T16:31:00.001Z

For a long time now we have been exposed to the US President ,Treasury Secretary and various Senators talking about the benefits of a strong Dollar and how that is in the interests of America.This is really all just political rhetoric the reality is somewhat different . In its current situation the last thing that the US needs or wants is a strong dollar- but unfortunately it just isn't politically the right thing to say.So why is a weak dollar good for America ?

Well if anyone has been to the US recently or if you are indeed a US citizen you cannot fail to have noticed the increased prevalence of foreign accents that seem to be in every restaurant or store.It seems that America is on sale and the rest of the world is buying. Since 2002 the dollar is down about 25% and the rest of the world is taking advantage .Not only do they flock in their droves to the US to spend their money but it is good for exporters as well who find that demand for their goods increases the more the dollar weakens.

Tourism is a huge industry for the US but not only for attracting foreigners to its shores but as the dollar weakens and it becomes more expensive to go abroad more and more Americans are opting for Disneyland Florida and not Disneyland Paris. Not only does the weaker dollar make it more attractive to vacation there but it also makes it far more attractive for foreign investors -whether it is the huge cash piles of some of the Far East and Middle Eastern Sovereign Wealth funds or someone looking for a US holiday or retirement home

Foreign ventures put $407 billion to work in the U.S. in 2007. That was a 93% increase over 2006. The Chinese, in particular, were an active bunch. Chinese investment soared from only $66 million in 2006 to $9.6 billion last year.American assets should attract even more foreign buyers this year. The Chinese are eyeing American timberlands, for example. American farmland, mines and other hard assets must also seem cheap.The weak dollar affects things in a couple of ways. On the one hand, it makes imports more expensive. So far, a weak dollar has not stopped imports from growing nationally, though it has slowed the pace. On the other hand, the weak dollar has really benefited America's export engine as I indicated above.

Exports grew twice as fast as imports in 2007. For the first time since 1995, the gap between the two narrowed. America's commodity producers get a lot of help when the dollar falls. They incur their costs in dollars. Yet they sell into the global market for metals, minerals and other commodities. Global prices are all near multiyear highs, thanks in some measure to the weak purchasing power of the dollar.

America's manufacturers - what's left of them - also gain. Strong demand from overseas drives their sales. Suddenly, America's goods look cheap. "Foreign demand for advanced machinery is huge," reports The Economist. "Civilian aircraft, drilling tools, agricultural machinery and excavators all rose at double-digit rates in 2007."

So in terms of investment opportunities we should be thinking about companies that export a lot of their goods overseas and possibly those in the Hospitality and tourist industries. So no matter what Hank Paulson and his cronies trot out at each press conference the weaker the US dollar gets the more likely they are to be able to find a way out of their current situation and to reduce the Current Account deficit.

Best Wishes

Alan

Technorati Tags: Strong Dollar Policy,Weak Dollar,Foreign Investment in US,Investing in US Tourist Industry

How to get Fat profits from the Obesity Epidemic

2008-04-30T19:52:00.001Z

It is well known that the worlds developed nations are increasingly struggling with the Health Crisis caused by Obesity. Type II Diabetes is on the rise and is increasingly being seen in younger and younger patients. Previously a disease of middle age ,it is not uncommon to see cases now in teenagers in the US and the UK.

It seems now though that this epidemic is spreading its wings beyond the UK and US and is going Global

The World Health Organisation projects that 2.3 billion people will be overweight by 2015 and a further 700 million will be obese – a staggering 45% and 75% increase from current levels.

What is the main underlying cause of this problem ? Well for the most part, it’s poor lifestyle. As developing economies grow rapidly, more and more people around the world are becoming richer and leading more urban lifestyles. That generally means eating more and doing less physical work compared with an agrarian lifestyle. In addition, stressed and harassed workers spending more and more time at work or their desks are increasingly defaulting to processed and prepacked food which is generally less good for you than freshly prepared meals.Longevity is another factor, as we get older and live longer more sedentary lives after retiring from work we can expect obesity levels to rise further.

According to the International Obesity Task Force, the percentage of overweight and obese children in England has more than tripled since the mid-1980s to around 25%. As research suggests that around 70% of overweight children go on to become overweight adults, this is clearly storing up problems for the future.

The Rand Corporation, a US think-tank, estimates that if current trends continue, obesity could account for 20% of US healthcare costs by 2020. Of course, where there’s a problem, there’s someone trying to solve it – and that means investment opportunities.Given today’s tendency to try to solve problems by popping pills, the most promising way to make money from our expanding waistlines is via the pharmaceutical sector.

A drug that can melt off the pounds is a holy grail for the pharmaceutical industry and several firms are trying to develop one. Two are already available – Roche/GSK’s Xenical and Abbott’s Meridia – but both have unpleasant side effects. Sanofi-Aventis had high hopes for Acomplia, but last year withdrew its application to market the drug in the US for weight-loss purposes after suggestions of increased suicide risks.

So we are possibly some way away from a safe well tolerated "Fat Busting Pill" there is also debate as to whether the financial pressures on the Worlds Healthcare systems will allow for funding to be generally available to pay for drugs that treat what can be a preventable disease .

Currently some of the best ways to play this trend is via the companies that treat diabetes. There are three or four companies that are well established in the market and would warrant further investigation, there are also one or two higher risk/reward plays that might be worth looking at if you are less risk averse

One established play is Denmark’s Novo Nordisk (US: NVO) around three quarters of its revenues are from the $21bn diabetes-care market.It isn’t the cheapest pharmaceutical stock on the market, but offers a record of strong growth and high-quality management.

A shift towards higher-margin treatments, such as insulin substitutes, growth hormones and blood-clotting drugs is paying off, and double-digit profit growth should be sustainable – as long as new drug Liraglutide, which stimulates insulin production, performs well against a long-acting version of Eli Lilly’s Byetta.

Riskier, but with the potential for far higher rewards is Arena Pharmaceuticals (US: ARNA) one of many firms trying to develop that blockbuster weight-loss drug. Its drug, Lorcaserin, stimulates a protein in the brain that makes people feel full – the same approach used by a previous drug called Fen-phen, developed by Wyeth. Fen-phen was withdrawn in 1997 after causing heart-valve damage in some patients, but the latest trials suggest that Lorcaserin will not cause the same problem. Further studies are continuing, but if all goes well, Arena plans to seek US regulatory approval in 2009.

If it comes to market the analysts view is that it will likely be a $1 billion drug and will make a real difference to the bottom line for Arena which currently has no products on the market

For those who are looking for a more steady and possibly safer play then you may want to look at GlaxoSmithkline (GSK).Over the last year they have had a real rough ride with their Diabetes drug Avandia after an article indicating it could cause cardiovascular problems . This resulted in a number of patents being switched to their rival Takeda's drug Actos.

Recent indications have been that the loss of prescriptions has slowed and may be reversing, Takeda are a lot smaller than their UK rival and they cannot match GSK in terms of Investment or resource so may find it increasingly difficult to hold off a sustained marketing onslaught from GSK.

Best Wishes

Alan

Technorati Tags: Arena,GSK,Takeda,Sanofi Aventis,Novo Nordisk.Diabetes,Obesity

Time to Buy Housing-Am I crazy......on the Contrary

2008-04-29T16:32:00.001Z

A recent poll in Barron’s suggested that amongst its readers the most hated asset class (not surprisingly) was real estate investments and the most loved class was Latin American stocks so most of us would think that the right trade is to buy Latin stocks and sell real estate stocks.

Funny, then, that real estate stocks are now the best-performing sector this year... Simon Property Group – the benchmark real estate stock – is up more than 20% year-to-date.

Meanwhile, the Latin American Discovery Fund (LDF) a collection of South American blue chips, is down for the year.

How does this work ??

Quite simple really when everyone is bearish then there are little or no sellers available as everyone of any size has got out of the markets previously.When there is no one selling then the price stops going down-simple really !!

So as an example : In the second week of March Simon Property Group (SPG) traded for around $86. Now – just six weeks later – it's at $105.

Conversely the Latin American Discovery Fund peaked at the end of April and has treaded water ever since... Why hasn't it gone up? For the opposite reason -there's nobody left to buy – Everyone who wanted to be invested in Latin America had already bought.

You have to wait for the extremes in sentiment. The old saying is, "The crowd is wrong at the extremes, and right in between."

If we look at the Barrons poll... Only 3.6% of investors are bullish on 10-year Treasury bonds. So nearly everyone believes long-term interest rates are going up.

Currently Long term Interest Rates are less than 4% so most pople (based on theri past experiences thinks they are unlikely to go any lower. Lets cast our eyes over to the Far East, in 1990 Japan's Interest rates were about 7% when the property market crashed the rates fell to below 1% . Today they are still only 1.5%

All the talk is about the potential for inflation... and everyone expects interest rates to head higher. however it is entirely possible that long-term interest rates could surprise us all and head lower. Already, interest rates on 10-year Treasuries have fallen from more than 5% in the summer of 2006 to below 4% now.

If you want to follow the crowd , bet against real estate stocks and bet that interest rates will head higher. But if you are a contrarian then to get extraordinary" returns, you must be willing to do something extraordinary.

I am buying the IShares Home Construction Index (ITB) I don't expect it to move up overnight but I think over 6 months it will be a good call.

Best Wishes

Alan

Technorati Tags: Invest in Latin America,Home Construction Fund,Investing in Real Estate

Starbucks focuses on Coffee ?

2008-04-28T18:22:00.001Z

A little while back I looked at whether you should buy Starbucks or the Coffee ETF-Should I buy Coffee or Starbucks ?

My conclusion was that I thought Coffee would go higher and that as I favour for most commodity related stocks I prefer (if you can to buy the Commodity as there are a number of factors that can negatively impact on a stock that are not related to supply and demand. That proved to be a fairly good call as Starbucks unveiled weaker-than-expected estimates for its fiscal second quarter and year--sending shares down a whopping ten percent last Thursday.

Like a lot of successful companies Starbucks in a bid to grow started to expand and diversify away from its core business-selling coffee.

Starbucks CEO Howard Schultz is trying to get Starbucks focused on coffee--which means the entertainment business it's been building up over the past four years is now due to be pared down.

After the market close last week, the company announced it will no longer be managing its Hear Music record label, which launched just over a year ago with Paul McCartney on board. Schultz is also shaking up the entertainment division's management -- Ken Lombard, an SVP and president of Starbucks Entertainment "has left the company," which usually means code for "pushed out." Now the division will be run by Chris Bruzzo, Starbucks' Chief Technology Officer, indicating the division the direction is moving towards-- digital downloads, and away from old fashioned CD sales.

Last year Starbucks made a deal to offer access to Apple's iTunes music store, in 600 plus of its stores through WiFi networks, and just last week it announced that it'll be handing out cards to allow customers to access songs and music videos online-- for free.

Starbucks isn't getting rid of this division. It just doesn't want to be in the business of producing music. It'll keep selling music in stores, though it's unclear if the company will change the style or variety of music it sells.

The company is trying to learn from its mistakes. It has no more plans to market movies again as the two films it promoted in-store had quite disappointing box office performance, so there doesn't seem to be incentive on either end.

But Starbucks will continue selling books in stores and working with William Morris Agency to find projects they think will sell. And Starbucks is powerful in the publishing industry--almost like when Oprah picks a book, getting chosen to be sold by Starbucks register almost always guarantees that a book becomes a best-seller.

AS I said in my previous posts my personal preference is for Coffee itself and I am looking for an opportune time to buy the Coffee ETF (COFF) which is building a nice base at the moment around the $3.15-$3.20 area.

Best Wishes

Alan

Technorati Tags: Starbucks,Coffee ETF,Investing in Coffee,Commodity Investing

Using Currency ETFs and ETNs to reduce Currency Risk And Investing in Indian Rupee and Chinese Yuan

2008-04-27T19:55:00.001Z

For a while there have been a substantial number of ETF's that track the major currencies around the world. These give investors the opportunity to be able to position themselves based on Global Macro Economic views.Over the past few years you would have dine very well being invested in the higher yielding "Commodity based Currencies such as the Australian Dollar.

What Are They?

Currency ETFs (exchange-traded funds) track a singe foreign currency or basket of currencies by using foreign cash deposits or futures contracts. For the ETFs that use futures, excess cash is usually invested in high quality bonds, typically US Treasury bonds. The management fee is deducted from the interest earned on the bonds.
Currency ETNs (exchange traded notes) are non-interest paying debt instruments whose price fluctuates (by contractual commitment) with an underlying currency exchange rate. Because they are debt obligations, ETNs are subject to the solvency of the issuer.

It is also a useful way to hedge a portfolio if you are heavily invested in a currency that is not your home currency. It means you can reduce the currency based risk when you repatriate your funds back to your home bank account.

Over the past few years I have suffered as a UK investor with a substantial number of positions in the US dollar. To my knowledge there are no US brokers that will allow you to hold your funds in any other currency beside US dollars.That is not too major an issue if you are a US investor or plan to retire there or make any major purchases in US dollars.

However if you are based outside the US then it can turn a good portfolio performance in to a poor one or even a loss when you try to bring your funds back to your own Country.

Using Currency ETF's can help manage this risk-in the last little while there has been an increasing number of these ETF's launched and I have listed them below

Australian Dollar
CurrencyShares Australian Dollar Trust (FXA)
ELEMENTS Australian Dollar (ADE)

British Pound
CurrencyShares British Pound Sterling Trust (FXB)
ELEMENTS British Pound (EGB)
iPath GBP/USD Exchange Rate ETN (GBB)

Canadian Dollar
CurrencyShares Canadian Dollar Trust (FXC)
ELEMENTS Canadian Dollar (CUD)

Chinese Renminbi
Market Vectors - Chinese Renminbi/USD ETN (CNY)

Euro
CurrencyShares Euro Trust (FXE)
ELEMENTS Euro (ERE)
iPath EUR/USD Exchange Rate ETN (ERO)

Indian Rupee
Market Vectors - Indian Rupee/USD ETN (INR)

Japanese Yen
CurrencyShares Japanese Yen Trust (FXY)
iPath JPY/USD Exchange Rate ETN (JYN)

Mexican Peso
CurrencyShares Mexican Peso Trust (FXM)

Swedish Krona
CurrencyShares Swedish Krona Trust (FXS)

Swiss Franc
CurrencyShares Swiss Franc Trust (FXF)
ELEMENTS Swiss Franc (SZE)

Recently there have been two new exotic additions to the Currency ETF/ETN portfolio's namely an ETN that tracks the Indian Rupee and and ETN that tracks the Chinese Yuan.

Since it is not easy to directly invest in either of those currencies then the ETN may be a good way to go if you wish to get in early particularly on the Chinese Yuan which most people are thinking about going long on with the expectations of the continued revaluation against the US Dollar in the years to come.

Best Wishes

Alan

Technorati Tags: Renminbi,Yuan,Rupee,ETF,ECN Currency ETF Currencies,Hedging

Scotland's Oil-Are we going back to the 1970's ?

2008-04-25T17:54:00.001Z

Some of you may know that I am Scottish and still live in Scotland which is why today's post is of particular interest and relevance to me. It is not often that Scotland gets a mention in terms of the Global Economy but today we have been all over the news.

The reason for this is that oil workers at the Grangemouth oil refinery in Scotland are going on a two day strike starting on Sunday. The dispute is not about pay so much as pensions. The Wall Street Journal reports

It reminds me of when I was much younger and the last time that Labour was in power in the UK-we had the so called "Winter of Discontent" and the Miners and Dustbin Men Strikes.

“It was the decade of strikes, electricity shortages and piles of rotting rubbish on the street,” recalls a BBC report.

I was fairly young at the time but I can remember fairly frequent power cuts and problems getting coal for the fire we used to heat my parents Central heating System.It was also the time when arguably one of the UK's most militant Union Leaders Arthur Scargill head of the National Union of Mineworkers came to prominence.

Then in ‘73 the oil crisis broke. Arab OPEC members were outraged at the West’s support for Israel in the Yom Kippur war . They ceased shipments of oil to the US and Western Europe. At the same time all of OPEC decided to increase its prices following earlier failed negotiations with the “seven sisters” – the seven biggest Western oil companies at the time.

The result of this action was a damaging blow to the heart of the oil-dependent industrialised world. The price of crude went up fourfold (to $12!) and sent Britain’s already troubled economy into a tailspin. Growth stalled and inflation rose from 5% in 1970 to a high of almost 27% by August 1975. From a low of 5% in 1971, interest rates soon rose into double digits and hit 15% by 1976.

It is spookily similar to what we are seeing today history may not exactly repeat itself, but today oil’s and food prices have been shooting up and workers industrial action is once again making the news.

The question I guess is why is some relatively small refinery in Scotland making the news anyway? Well it is the receiving end of the major artery in the North Sea oil pipeline network. An artery that stretches from Grangemouth, south of Edinburgh, at one end to the Forties oil field over 200 miles away out in the North Sea at the other.

This pipeline transports crude from around 70 oil fields in the North Sea, amounting to over 40% of the UK’s entire crude production . It means BP -(BP-LSE) may have to close the pipe, with costing approx £50m per day ,the strike may only be for two days but it will take a week to boot up the refinery again afterwards.

So after more than three decades, with another Labour Government in power oil prices are high, food prices are going up and now, strikes are back. In the ‘70s the food/fuel double whammy led to stagflation . Deflation in the housing market forces consumers to tighten their belts and their resultant lower spending crimps growth.

So not only does it look like the UK is heading down the path of the US but the Global oil situation that I discussed in an earlier post this week- Has Oil Peaked ? is of severe enough dimensions that a 2 day strike in a refinery in the East Coast of Scotland merits Global headlines on the likes of Bloomberg- U.K. Braces for Fuel Cuts and CNBC Pipeline Strike

Break out the Candles-there may be trouble ahead !!

Best Wishes

Alan

Technorati Tags: Oil,Gas,North Sea,BP,Grangemouth Refinery

Brazil's Booming Economy Drawing More Investors - Markets * US * News * Story - CNBC.com

2008-04-25T12:20:00.001Z

Interestingly after my post earlier this week (Investing in Brazil) this appeared on CNBC yesterday-just goes to show reading this blog keeps you ahead of the Crowd :-)

Brazil's Booming Economy Drawing More Investors - Markets * US * News * Story - CNBC.com

It further reinforces my view that Brazil is a worthwhile longer term opportunity to consider for your portfolio.

Best Wishes

Alan

Technorati Tags: Brazil Fund

Has Oil Peaked ?

2008-04-24T23:21:00.001Z

A lot of you will be familiar with the Peak Oil theory -for those who are not then you can read more about it here-Peak Oil. Oil reached more or less $120 a barrel recently but today backed off and was at one point down $4.

A recent Reuters report quoting Saudi's King Abdullah did not seem to be reported much but could have big implications for the Peak Oil story and Oil prices in general it said:

Saudi Arabia's King Abdullah said he had ordered some new oil discoveries left untapped to preserve oil wealth in the world's top exporter for future generations?

"When there were some new finds, I told them, 'no, leave it in the ground, with grace from god, our children need it'," King Abdullah said?

Saudi production capacity stands at around 11.3 million bpd, and is scheduled to rise to 12.5 million bpd next year

Al-Shaybah oil field, southeastern Saudi Arabia

If , as you could interpret by these comments there may be a reduction in available oil to the world from the Saudi's in years to come then this could have major global macro economic ramifications.

Currently the US relies heavily on Middle Eastern Oil and this has been reasoned as one of the major drivers of the conflicts in that area, namely control of Oil supplies or at least ensuring they do not fall into the hands of states that the US may find difficulty dealing with.

Whatever the reasons for any conflicts ion the Middle East it has been well documented that the US is keen to reduce its reliance on Oil from the Gulf.So where can it go to get alternative supplies?

We are all aware of the claims being made on the Arctic and Antarctic driven a lot by the belief of huge reserves in these areas, Alaska is another area where there is the potential for some large finds.Politically though these areas are going to come up against a lot of resistance from the Conservationist lobby's and there could easily be a lot of the NIMBY (not in my backyard) fraternity unhappy as well.

A less problematic solution particularly with the price of Oil at $115-$120 a barrel is the Tar Sands of Canada.

The most talked about of these is in the country's Alberta region.Over the past few years, companies like Suncor, Canadian Oil Sands Trust, and Western Oil Sands have all shot up more than 1,000% by literally extracting valuable crude oil from the province's sandy Northern terrain.Alberta was the first province to set up a regulatory framework and workforce infrastructure. Today, nearly two-dozen companies have a stake in Alberta's oil sands.

However there's a region of Canada that geologists believe holds even richer oil deposits than Alberta.

In fact, it's the province right next to Alberta... Saskatchewan.

The Saskatoon StarPhoenix reports, the "Saskatchewan side of the oil sands formation could lead to a long-term economic bonanza for this Province."

The National Post writes, the "bitumen find in Saskatchewan could spawn a new industry."

The Regina Leader-Post writes, "Although the Alberta oil sands tend to get most of the publicity, the oil sands in Saskatchewan contain ‘significant world class deposits' that are of ‘top quality.'"

How much oil is in Saskatchewan?

Preliminary estimates are 60 BILLION barrels of oil.

Thing is, less than 5% of Saskatchewan's oil property has been fully explored! So there could potentially be even more undiscovered oil!

For more than 40 years Saskatchewan has sat idle—untapped—chock-full of rich oil sands because the Saskatchewan government had refused the necessary permits to allow exploration

Recently the Saskatchewan government finally granted access to this region.Without a doubt the Canadian Oil Sands would solve a lot of the issues facing the US

Canada is sitting on a huge oil reserve with a "no risk" transport route to the world's largest consumer. Currently with Oil priced as it is then extraction is a worthwhile exercise compared to when Oil was at $50 a barrel.

I believe that in years to come the Canadian Tar sands will become a key plank of the US strategy for reducing its reliance on the Gulf for its Oil. This can only bode well for the companies that are involved such as :

Suncor
Western Oil Sands
Canadian Oil Sands Trust
Nexen Inc.
Imperial Oil
Statoilhydro
Encana
Shell
Exxon.

I would look for some pullbacks on some of these companies and start tucking away small amounts at a time when the price has dropped back.I believe that companies such as these will continue to grow at the rates that they have done in the last 5-10 years.

Best Wishes

Alan

Technorati Tags: Suncor,Oil,Tar Sands,Peak Oil

Investing in Emerging Markets using ETF's

2008-04-23T13:30:00.001Z

Continuing on my recent themes of investing in emerging Markets, it may be worth looking at the Deutsche Bank x-trackers these will give you exposure to numerous emerging markets including India, Vietnam, Korea, Taiwan, Brazil and Russia.

You can find details at www.dbxtrackers.com

Best Wishes

Alan

Technorati Tags: Russia,Brazil Fund,Investing in Brazil,Investing in Russia,ETF,Emerging Markets

Investing in Brazil

2008-04-22T20:55:00.001Z

A few Years ago Morgan Stanley came up with the original idea that four big countries – Brazil, Russia, India and China – would together soon become so important in the world economy that they could be viewed as a single group, much as we think of Europe or Latin America.

They dubbed the group BRIC, after the first letters of their names, saying that their combined economies, from being just 15 per cent the size of the world’s six most advanced countries’ – including the US and Japan -- would grow to become even larger than them in combination in fewer than 40 years.

There has been a lot of focus on India and China and I have written about these countries in past articles Broken China ?? & Investing in India The challenge with both these countries is that they do seem to still be linked to the fortunes of Wall Street and have suffered along with the US Markets

Brazil and Russia, by contrast, are among the handful of countries best situated to supply those increasingly valuable natural resources and so are fairing a lot better and seem less exposed to the US story and more exposed to the Commodities and Energy story that is doing well in the face of the US recession.

Russia is a huge exporter of oil and natural gas, nickel and platinum group metals. Brazil is the world’s biggest supplier of internationally-traded agricultural products such as sugar, soybeans, coffee, corn, orange juice, beef and poultry.

Both still have enormous resources that can be developed to meet Asia’s growing demands.

No shortages of energy, food or water

Last year Brazil’s main stockmarket index rose 71 per cent in US dollar terms, or even faster than India’s, suggesting that international investors are awakening to the potential of the South American giant.

Much of that interest was focused on Brazil’s two biggest stocks – Vale (NYSE:RIO) and Petrobras (NYSE:PZE). Vale is the world’s biggest exporter of iron ore; Petrobras has just made the world’s second-largest oil/gas discovery in 20 years, deep beneath Atlantic waters.

But it’s renewable resources, rather than minerals, that are increasingly attracting investor interest.

The well-known British investor, Jim Slater, says Brazil is “insulated against the world’s main shortages – fresh water, agricultural commodities and energy.”

It contains nearly a fifth of the world’s fresh water, available to expand agricultural production and carbon-free electricity generation. Hydro-power already provides 80 per cent of Brazil’s electricity needs, and two big new dams are being built on the Amazon at a cost of $10 billion.

Because it can produce alcohol fuel from sugarcane, without subsidies, for prices competitive with petrol, Brazil has been dubbed “the Saudi-Arabia of ethanol.”

David Fuller, the London-based analyst, says: “No country is better positioned to benefit from the agricultural boom than Brazil, with its large and fertile land mass, absence of any desertification, and ample supply of fresh water.”

Other commentators point to the nation’s economic growth rate (around 5 per cent a year), a foreign trade surplus (running at about $40 billion a year), large foreign reserves, a strong currency and a buoyant stock market.

Last year Brazil attracted FDI (foreign direct investment in factories and business operations) of $37 billion, or twice as much as India. It was the world’s third biggest raiser of investment capital via equity issues after the US and China. And its international bonds are expected to be granted investment-grade status within two years.

Brazil has a flourishing middle class of 20 million – depending how you define “middle class,” five times larger than India’s – as well as political stability, a favourable environment for foreign investment, and strong job creation (5 million new jobs since 2000).

Years of favourable international environment, combined with good policies such as more disciplined public finances and trade liberalization, have delivered low inflation and falling interest rates. One result is the emergence from poverty of a new lower-middle class, so the nation’s notorious income inequality has been declining.

Sensitive to foreign capital flows

What are the negatives?

The public sector is bloated and corrupt, packed with time-servers with jobs for life and fat pensions to look forward to. Taxes to pay for it gobble up more than a third of national output – a proportion much higher than in other emerging markets and out of proportion to the low quality of services provided.

As is commonplace in countries where planning, building and operating infrastructure is almost entirely in the hands of bureaucrats, Brazil has some serious infrastructural problems, including power-supply shortages. The regulatory environment is not sufficiently clear to attract private investment.

Labour laws are highly restrictive, with welfare and other compulsory contributions adding 60 to 100 per cent to employers’ payrolls.

The stockmarket is very sensitive to flows of foreign capital, therefore exposed to adverse money shifts that may be triggered by developments unconnected with conditions in Brazil itself, such as the US sub-prime crisis.

Finally, remember that although Goldman Sachs’ BRIC study projected good per capita growth rates for the Brazilian economy over the coming decades, it suggested the three other nations in the group would grow even faster.

If you are interested in adding Brazil to your international portfolio to provide balance, the best way to do so is probably via one of the exchange traded funds listed in London or New York. There is an iShares MSCI Brazil Fund in London which I would favour as it is priced in Sterling and not Dollars or there is the Brazil Fund (BZF) that trades in new York if you are looking for a dollar denominated fund.

Best wishes

Alan

Technorati Tags: Investing in Brazil,Coffee,Brazil Fund,Russia,China,India

How to Invest in Russia-What to Buy

2008-04-07T22:28:00.001Z

Yesterday I looked at the story behind Russia and outlined some of the positives and negatives for investing there.From Russia with Love ? Today I am going to look at some of the ways you can invest in Russia if you feel positive about the potential in that emerging market.

Since we discussed the story behind Natural Gas then the most obvious play is Gazprom (LSE : OGZD). Its former chairman is now the Russian president ..........so you do the math re the environment for Gazprom going forward !! There have also been recent increases in Domestic gas prices in Russia which are going to be of benefit. I also mentioned the deal that Vladimir Putin had struck with companies in the Caspian Sea area and Gazprom will also be a beneficiary of that.

The increased need to get more out of the worlds agricultural supplies is having a big impact on fertiliser companies-just look at Mosaic (MOS) over the last few days. Russia's answer to Mosaic is Uralkali (LSE: URKA) and it should do well over demand from China for fertilisers in the medium term.

The need to improve the railways will also impact positively on Evraz Group (LSE: EVR).

If you are uncomfortable picking individual stocks then Lyxor have a Russia ETF (LRUS) which will give broad exposure to the Russian Titans 10 index.

In my next post I will look at Brazil and the opportunities that may be there for investors looking to invest in South America and its economies.

Best Wishes

Alan

Technorati Tags: Investing in Russia,Gazprom,Russia ETF,Invest in Brazil

Investing in Emerging Markets-From Russia with Love ?

2008-04-06T19:22:00.001Z

Vladimir Putin has taken leave of office and is being "replaced" by Dmitry Medvedev.Despite what some may think in the West ,Putin is extremely popular in Russia.During his premiership Russia has had a remarkable economic transformation . Since the early nineties the Russian Economy has been growing at a remarkable rate of 8% per annum.

Most of this growth has been down to the massive reserves of Natural resources that it can draw on particularly Oil, Gas and Precious Metals.The demand for these Natural resources from the emerging countries such as China and India has fuelled a boom that has seen a thriving middle class developing in Russia.

Like all middle classes these Russians are splashing out on cars, holidays and electronic goods. There is no doubt that some people may have concerns about investing in Russia, we can all remember when the Russian government was seizing power of Yukos and we were hearing stories of the "Red Mafia" running wild.However those who have invested in Russia in the past few years have seen some serious returns.

Russia is amongst the cheapest of the emerging market economies, it has huge resources of natural commodities that the world is crying out for and importantly at the moment has little or no exposure to the credit crisis that is impacting on a number of the rest of the worlds major economies. Some people may not like Vladimir Putin but you cannot fault what he has achieved in the economy.

The Case for Investing

The case for investing in Russia is based mainly on energy.It has vast oil reserves in its Western States and a third of the Worlds gas reserves sit in Siberia, this makes Russia by far the worlds biggest gas exporter and producer. On top of this its neighbours have an increasing reliance on buying from Russia. Over 20% of the EU's natural gas comes from Russia.

The current record prices for oil means that the Kremlin is generating a fortune in taxes that it has levied on the oil producers. It is estimated that Russia takes in over 80% of every dollar that the price of oil increases at the current levels.Learning from the past where they squandered the wealth that these Natural Resources generated Russia has created its own Sovereign Wealth Fund which is known as the Stabilisation Fund.The current estimates are that this fund has something in the region of $150bn.Russia also must be the envy of many economists and politicians in the west in that it is estimated to have a budget surplus of 5-6% of GDP.

Downside Risks

As with all things where there is the potential of high reward there is attached risk, there is no doubt that there are risks associated with investing in Russia.State ownership has always meant that investment levels tend to lag behind what you would expect from private ownership.This is certainly the case in Russia, the limited investment in the Siberian Oil fields has seen an impact over the years in the levels of production growth.In the late 90's estimates were that production growth was around 10% per annum, the estimates now are that this has dropped to around 1%.

The picture with gas however is more rosy the Kremlin has been very active encouraging ( some would say bullying) big Gas companies such as BP into investing in infrastructure in Central Asia.Putin has also got agreement from countries in the Caspian Region which allow Russia to get access to the reserves in the area for a fraction of what they are worth to the West so when selling these on to countries in the EU Russia is guaranteed a tidy mark-up.

One of the other potential downsides for to consider for the future is infrastructure, since the collapse of the Soviet Union there has been a major decline in the maintenance of Russia infrastructure, transport networks are very underdeveloped and this will have an impact on its competitiveness if plans are not soon put in place to invest in the road and rail network as well as the oil and gas pipelines.

The Russian government has recognised this and plans to throw around $1trn at the problem. The Kremlin has committed around $200bn with the rest coming from the private sector.

What to Buy ?

In my next post I will look at some of the ways and companies that could do well on the back of the continued boom in Russia .

Best Wishes

Alan

Technorati Tags: Invest in Russia,Oil,Natural gas,Resource Stocks,Commodities

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

2008-03-27T21:55:00.001Z

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 ?

2008-03-26T23:28:00.001Z

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 ?

2008-03-25T22:23:00.002Z

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

2008-03-24T19:33:00.001Z

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 ?

2008-03-21T00:29:00.001Z

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

2008-03-19T14:19:00.001Z

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 ?

2008-03-18T18:12:00.002Z

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

2008-03-17T14:27:00.001Z

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

2008-03-17T01:50:00.002Z

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 ?

2008-03-17T01:15:00.001Z

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 ??

2008-03-14T14:28:00.001Z

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 !!

2008-03-13T14:45:00.001Z

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

2008-03-13T00:23:00.002Z

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 ?

2008-03-12T17:06:00.001Z

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 ?

2008-03-11T13:56:00.001Z

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 ?

2008-03-10T22:14:00.001Z

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

2008-03-10T00:42:00.001Z

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

2008-03-06T15:56:00.006Z

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

Trading Psychology

2008-02-23T02:01:00.002Z

When I first started trading many years ago one of the things that struck me was how even when using the same trading system, getting the exact same signals, people would invariably come up with different results. It seemed really strange it wasn't until I realised the difference was not in the systems but in the individuals that I started to look into trading psychology. Trading can be compared to top-class sport. It very often places the same level of mental stress and need for psychological preparation that you find in top-class athletes. When you speak to or read about the best traders in the world it becomes apparent that they know being mentally prepared is absolutely essential in today's markets. Traders, just like athletes face unbelievable amounts of stress ,pressure and expectation that cannot be easily understood by the ordinary amongst us.

If you read any of the well known trading books such as the Market Wizards, you will find that most of these top-class traders indicate that psychology and the mind ,play as much if not more of a part in their success than picking the right trades. As human beings, we are not generally wired to be successful traders we all know that successful trading is about letting your profits run and cutting your losses short, however in reality, most human beings find it easier to take a quick profit and hang on to losing trades in the hope that they will come good in the end. It is not easy, mentally to suffer the drawdowns that we often experience as traders without some form of help or guidance about the mental side of trading and investing.

A number of the top trading houses and investment banks have started turning to trading coaches to help their top traders as they realise that success in trading is as much mental as it is about picking the right trades.Part of my business www.Learning2Live.co.uk is as a Trading Coach , my interest in Trading and Investing coupled with my qualifications in NLP (Neuro Linguistic Programming) lend themselves naturally to helping traders deals with the mental challenges of trading and investing. Over the next little while I am going to write some articles on this blog focusing on how you can improve the mental side of your trading and create wealth through the power of effective mental preparation.

Best wishes

Alan

Mindful Trading Methods » Blog Archive » Trading In The Zone

Trading Like A Millionaire (Billionaire?) « Jumping Bear’s Inco..

Forex Trading Psychology - Why Most Traders Can’t Acquire This Trait ..

Trading Psychology | Online Stock Market Trading

The Essentials of Trading

A quick fix for the feelings of failure after a losing trade » Onlin..

Commodities -How to invest without using Futures or Leverage

2008-02-19T01:40:00.002Z

Technorati Tags: Commodities,Corn,DBA,Agricultural Commodities,Jim Rogers Investing,Gold,India,Oil,Powershares,Silver,Soybeans,Wheat

In the last month the volatility in the stock market has been greater than it has been for some time, we have seen three figure up and down days regularly. In an environment such as this it is easy to understand why some people lose sight of the macro environment. If we look at what is actually happening in the world then it becomes a bit more obvious the the areas we could consider investing in. One investment area that has been consistently on the up over the last few years is commodities.

Most commodities have performed extremely well over the last few years, the obvious ones like the precious metals we are fully aware of, some of the less well known is commodities are also doing extremely well. The question is can we take advantage of these also. For many years I traded commodity futures this is definitely not a market for the fainthearted, but until recently was the only way that most people could invest in things such as Corn, Wheat, Cotton and Coffee. In the last little while however ETF's that invest in these commodities have become available. It is now possible to buy, ETF's that follow the price of individual commodities such as the ones I have mentioned earlier, in fact ETFS securities in London allow you to buy ETF's that track pretty much any commodity that is traded on the futures exchanges including things such as Live Cattle and Pork Bellies.

With the increasing affluence in countries such as India and China we are seeing unprecedented command for all commodities, not just the Base metals for construction and infrastructure but foodstuffs such as sugar , and wheat.The demands being placed on these crops are such that we are starting to experience real pricing pressure on a lot of our staple foodstuffs.This pressure is unlikely to go away and in fact is likely to increase as these markets demand more and more of the types of food we eat and take fro granted in the west e.g. Chocolate, Refined sugar products breakfast cereals etc.An other pressure on crops such as corn will be the increased demand for meat and poultry, it takes a lot of corn to feed livestock and as demand for meat products increases then there will be a subsequent demand for feed for them.

One of the best performing ETF's this year is the Powershares Agriculture ETF (DBA ) it is up around 30% this year already

This trend is likely to continue for a good while yet as the demand for agricultural commodities is far outweighing the supply, I recently bought the DBA again(the Green B on the chart) and intend to hold it for the longer term.The other ETF's that I like are in Cotton (CTN) Sugar (SUGA) and Coffee (COFF). Coffee and Sugar have run up quite fast of late so I am waiting for a pullback to enter these but have recently added the cotton ETF as I think we may see Cotton breaking out sometime soon.

I will talk in a bit more detail about some of the other ETF's that are available in Oil etc in a subsequent posting, but if you are not too keen on trying to pick an individual commodity there are some good baskets that you can look at DBA is one as is AIGG (Grains) AIGS (Soft's-Sugar, Cocoa etc). Another very interesting basket to look at is the Rogers Commodity Index, which is a basket of commodities that tracks picks from Jim Rogers of Quantum Fund fame, Jim has been singing the praises of commodities for many years now and as in the past has proved to be very accurate in predicting Macro trends to invest in.The table below outlines what is contained in the RJI Index and the percentages of each commodity it holds.

This will give you a broad exposure to pretty much all commodities and is a great way to gain exposure to these markets, Jim reckons we are still only midway through this commodity bull cycle and sees another 5+ years or so before we risk reaching a top.This could be one to add to your portfolio and top up pullbacks. Certainly I am of view that in the 2-3 years most if not all commodities are likely to definitely outperform the stock markets and also probably prove less volatile. I currently am holding a lot in the commodity sector and will be adding to my holdings on weakness.

If you want to learn more about Jim Rogers views on the markets I highly recommend any of these books he has written, they are not only highly informative but also a good and easy read.

THE ULTIMATE INVESTOR'S ROAD TRIP: ADVENTURE CAPITALIST.: Books: Jim. Rogers

Investment Biker: Books: Jim Rogers

Hot Commodities: How Anyone Can Invest Profitably in the World's Best Market: Books: Jim Rogers

A Bull in China: Books: J. Rogers

Good Trading

Alan

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Bear with me !!

2008-02-13T00:52:00.000Z

Generally as a rule we all want the stock market to go up, it feels right , it means things are all well with the world at large.However any of you who have been investing for more than a few years will know that sadly markets do not always go up.So what to do when they start to go down or start behaving in a very volatile fashion like they have been doing lately, I guess there are three things you could do:

1 If you are a long term investor-hold off and wait for the inevitable good times to come back-I find this hard to do sitting through drawdowns watching your capital disappear drop by drop

2 Move to cash, certainly this makes it easier to sleep at night but unless your timing is immaculate it can mean that you miss out on a lot of money making opportunities

3 Use some form of investments that allow you to make money as stocks go down.

I have spoken before about my use of options, however options are not for everyone and in certain accounts(like my ISA in the UK) you cannot use options.Lately there has been a growth in a number of what are being labelled Contra ETF's-basically ETF's that go up when the market declines-they can be on indices such as the Dow, S&P 500 or the Russell or they can also be on certain commodities such as Oil.

I personally like to use Proshares ETF's go here for a list of the short ones that they offer http://www.proshares.com/funds?products=98616&fundType= .They offer a vast range but I tend to favour the more liquid ones such as DOG (Short Dow) or DXD (Ultra Short Dow-twice the index).I also use the PSQ and the QID which are the short and the ultra short on the QQQQ index. These are a great way of either hedging some of your longer term positions or trading to take advantage of some of the volatile swings that we have seen of late. I use them for both purposes.

The advantages of being able to trade the market long and short as well as being able to hedge are immense and can make a real difference to your returns over the short and long term. I urge you to check out the opportunities that are available with using these types of fund.

Over the next few weeks I will share with you some of the ETF's that I will be purchasing and using to try to rid out the volatility in the market that we are currently experiencing.

All for now

Good Trading

Alan

Broken China ??

2008-02-08T17:07:00.001Z

We are all well aware of the impact of the sub-prime debacle on the US and European markets.There is also a lot of debate going around about so called "decoupling" basically the premise that not all markets are so intertwined with the US that they are likely to suffer if the US does go into a recession.

One of the markets identified as possibly not being linked to the US is China, that being said though there is a definite desire within the Chinese government to try to put the brakes on their economy without causing it to slow down to much.So is China Broken?

(In my view ) One of the greatest investors of all time doesn't think so. here is a recent article from Fortune magazine which puts Jim's perspective on China.

NEW YORK (Fortune) -- You might expect Jim Rogers to be gloating a

little bit. After all, the famed investor has been predicting a

recession in the U.S. economy for months and shorting the shares of

now-tanking Wall Street investment banks for even longer. And with fears

of a recession sparking both a worldwide market sell-off and emergency

action from Federal Reserve chairman Ben Bernanke, Rogers again looks prescient - just as he has over the past few years as the China-driven commodities boom he predicted almost a decade ago began kicked into high gear.

But when I reached him by phone in Singapore the other day there was little hint of celebration in his voice. Instead, he took a serious tone.

"I'm extremely worried," he says. "I have been for a while, but I just

see things getting much worse this time around than I expected." To

Rogers, a longtime Fed critic, Bernanke's decision to ride to the

market's rescue with a 75-basis-point cut in the Fed's benchmark rate

only a week before its scheduled meeting (at which time they cut it

another 50 basis points) is the latest sign that the central bank isn't

willing to provide the fiscal discipline that he thinks the economy

desperately needs.

"Conceivably we could have just had recession, hard times, sliding

dollar, inflation, etc., but I'm afraid it's going to be much worse," he

says. "Bernanke is printing huge amounts of money. He's out of control

and the Fed is out of control. We are probably going to have one of the

worst recessions we've had since the Second World War. It's not a good

scene."

Rogers looks at the Fed's willingness to add liquidity to an already

inflationary environment and sees the history of the 1970s repeating

itself. Does that mean stagflation? "It is a real danger and, in fact, a

probability."

Where the opportunities are

The 1970s, of course, was when Rogers first made his reputation - and a

lot of money - as George Soros's original partner in the Quantum Fund.

And despite his gloomy outlook for the U.S., he still sees opportunities

in today's world. In fact, he sees the recent correction as a potential

gift for investors who know where to head in global markets: China.

Rogers has been fascinated with China ever since he rode his motorcycle

across the country two decades ago, and he's been a full-fledged China

bull for several years. In December he published his latest book, an

investor-friendly tome titled "A Bull in China: How to Invest Profitably

in the World's Greatest Market." And that same month he sold his beloved

Manhattan townhouse for $15.75 million to a daughter of oil tycoon H. L.

Hunt and moved his family full-time to Singapore - the better to be

closer to the action in Beijing and Shanghai. (He bought the New York

mansion 30 years ago for just over $100,000; not a bad return on his

investment.)

But in a November interview with Rogers, he admitted that he was rooting for a serious correction in China to cool off an overheating market and bring back prices to a reasonable level.

With the bourses in Shanghai and Hong Kong both some 20% off their

recent highs as of late January, Rogers says he's starting to consider

new investments.

"I'm delighted to see what's happening in Shanghai and Hong Kong," he

says. "As I've said, if things hadn't cooled off, the Chinese market was

in danger of turning into a bubble. I find this most encouraging. The

government's been doing its best to try and cool things off. Mainly

they've been trying to deal with real estate but it's having an effect

on stocks, too. I would suspect the correction isn't quite over in

China. But I'm gearing up. I didn't put in any orders for tomorrow but

I'm starting to prepare my list of things to buy in China. Whether I buy

this week or this month or this quarter, who knows. But I'm starting to

think about buying new shares in China for the first time in a while.

And I'm not thinking about buying in America."

Ultimately, Rogers doesn't think that the troubles in the United States

will be much of a drag on the prospects for the People's Republic.

"Anybody who sells to Sears (SHLD) or Wal-Mart (WMT) is going to be affected, without question," he says. "Some parts of the Chinese economy are going to be untouched, however. They won't even know America's in recession. They won't care if America falls off the face of the earth."

Having been someone who has had an an uncanny knack of being ahead of the curve on most of the recent big Macro trends, I personally would not be betting against Jim being right again this time.

Good Trading

Alan

Clapham House (CHP-L) added to Portfolio

2007-05-08T15:27:00.000Z

The market today looks like it might be having one of its(recently) rare down days.The early part of this week is likely to be a non event whiel everyone waits for the FED and the Bank of England announcment.I added Clapham House (CPH-L) to my Sipp today-even with the FTSE down around 50 points today Clapham House still managed a small rise.

Clapham House is in the travel and Leisure sector of the London AIM market but it is being run by David Paige ex Pizza Express(one of the successes of the 90's).

Clapham House consists of two strong brands-Gourmet Burger Kitchen and Bombay Bicycle Club, both these franchises are well known and set for rapid growth, they are also not in the high end so less likely to be hit by any downturn in the economy.

The potential for Clapham House is huge and there are plans to grow the business into sizeable restaurant chains,currently there is little in the way of dircet competition for Clapham, although that could change, financials are strong and over the next 18 months or so we should see some strong growth.

I bought the shares at 418p and have a 25% stop loss in place.

I am also watching closely my LEAPs in Valero Energy (VLO) and Cameco (CCJ) both still have a lot of time left in them but are up over 100% each,I will be ready to take profits on any sign of a mkt downturn.

Best Wishes

Alan

Tags: Clapham House, CPH, Valero, VLO, CCJ, Cameco, LEAPS, FTSE

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Dow at all time highs-what next !!

2007-04-29T22:19:00.000Z

I am just back from a well earned break and the mkts have reached all time highs, with the Dow Jones above 13,000 for the first time in its history.We need to be ever vigilant here as it is quite possible for the marlets to continue higher from here and for a good while.

However if we retrace we could find a lot of profit taking and overshoot on the downside. I am still holding my protective puts from earlier in this year-they are underwater but they are insurance not a means to make money. I will continue to hold them and may even look to add a few more for further out months such as Aug-October.

I am also going to look to prune some of my positions and take the opportunity to protect some profits and indeed possibly take some money off the table and increase my cash holdings.The old adage of "Sell in May and Go away" is nearly upon us and it has been right more often than not, indeed last year I saw drops of around 10-12% in my portfolio around this time.

Menatime I am looking to add one or two new stocks with the potential for some big upside.These are more speculative and I would be careful re position sizing, I am not going to risk more than 1% of my equity on these.

The first one is American Drug Store retailer Rite Aid Corp (NYSE : RAD)

This stock has languished for years after reaching $50 a share in the 90's, I think they may be starting to get things right and we could see some swift gains if other agree. I am buying at current levels and am placing a stop at $4.95.

For those of you that trade UK shares I am looking at another couple of companies I am not ready to buy yet but they are :

Clapham House (LSE : CPH)

Finsbury Foods (LSE : FIF)

Charter (LSE (CHTR)

I will let you know when I am going to place some trades but it could be as early as tomorrow .

I will post an updated portoflio equity curve sometime this week.

Best Wishes

Alan

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Iran and the Stock Market

2007-03-30T01:17:00.001Z

The current situation in Iran is captivating the markets currently and will likely do until the British Military personnel are released.It seems to have been a blatant negotiation tactic on the part of Iran , with the news today that they have sent a letter to the British Government telling them to withdraw their troops from Iraq.

Since the likelihood of this is less than zero we will no doubt see some more posturing over the coming days on both sides .Ultimately I believe that Iran will release the hostages,but they may hold on a lot longer than people are currently speculating.

The impact of this is that Crude Oil has shot up in the last few days and in fact yesterday when there was a rumour of some confrontation it shot up $5 in seven minutes.The likelihood is that Crude could hit over $70 again in the near term if this standoff continues.If it only lasts a short time then it is unlikely to have a major impact on any economies, however what is more important is the perception that may be created of increased risk in the markets.

I personally am still nervous about taking any major positions one way or another until the mid term direction becomes a bit clearer.If I was pressed I would probably favour another pullback but to be honest it could go either way, hence my reluctance to make any major moves.

I am still looking for opportunities to take profits where I can and lighten up my exposure.I am also still holding my protective puts in QQQQ and SPY.I would hold these for another month or so unless we get a major move , then I may look to roll them further out.

Quite often the smart move is to do nothing and wait and see-I feel that this is one of those times.

Best Wishes

Alan

Powered by QumanaTags: QQQQ, SPY, PUTS, IRAN, Stockmarket, Oil, Crude Oil

More Downside to come and longer term ETF for the Energy Sector

2007-03-14T00:13:00.000Z

Well the market broke below support today around lunchtime on the back of more bad news coming out of the US sub prime mortgage sector.This prompted a big move down in the Yen crosses as people scrambled to reduce risk.As I have been saying for a while(-http://retirementtrader.blogspot.com/2007/01/stock-market-dropped-sharply-today-as.html)

I have been nervous about this market and have been taking profits where I can and buying PUTS or ETF's that protect my portfolio from downside movements. Tomorrow will be important to see whether we have any follow through on today's sell off.If we do then it could be a case of "Look out below".

I urge you to consider some protection for your portfolio either by hedging or by taking money off the table until we get a better handle on the direction of the market over the next month or so.

I am still bullish on energy in the medium to long term and came across a very interesting ETF recently released by Wisdom Tree-www.wisdomtree.com

It is the Wisdom Tree International Energy Sector ETF (DKA-NYSE) this ETF holds a broad spectrum of the worlds leading Oil companies such as Total, BP Amoco,Royal Dutch Shell, and Statoil, it looks like a great way to play the energy sector with a good amount of diversification. I am looking to add this to my portfolio, but am going to wait a few days until we see which way the market goes.

I would be a buyer up to $30 and would use a stop loss of 15-20% and expect to keep it for a few years.

Lets see what tomorrow brings, I still feel we are starting a downward leg -whether it continues tomorrow or not I don't know , if we get a bounce it may be a good opportunity to consider taking some profits and sitting on the sidelines a bit until things become clearer.

Best Wishes and Good trading

Alan

Tags: ETF, Wisdom Tree, DKA, BP, Shell, ENI, Total, Statoil, Energy, PUTSPowered by Qumana

How to protect your profits and Portfolio in a downturn.

2007-03-07T22:34:00.000Z

Well the last week has been interesting.....If you have been following this blog then you will know over the last month or so I have been becoming increasingly nervous about a downturn and we have seen some of the markets teeth in the last week or so.

I dont think it is over and I believe we have more downside to come-increasingly people's appetite for risk is diminishing and we are seeing the Yen Carry trade possibly starting to unwind as people get nervous and start to liquidate their Yen positions.If this happens then it will have ramifications across the globe.

One of the more challenging things to be able to do in a downtrend is trade it-either as a speculator looking for profit or to hedge your longer term holdings.This can be more difficult in certain types of accounts as there may be restrictions in selling short or using options.

If you are in this situation then I urge you to look at some of the Pro Shares at

www.proshares.com

They have a number of Short Proshares which you buy like a stock but they move in the opposite direction i.e. as the index they are related to goes down the Proshare price increases.It allows you to profit from a down market or use them as a hedge to protect your existing positions.

Two of the Proshares I like are the Short Dow 30 (DOG) and the Short S&P 500 (SH), you can also get Ultra Short funds which are double the downside .In this market I urge you all to look at doing one or both of the follwing :

1/ Take Profits off the table and lighten up your exposure

2/ Hedge what is left in your portfolio to reduce your downside

If you cannot or dont want to do either of these then consider going in to cash until the dust settles.

As ever good trading

Alan

Tags: Shorting, Pro Shares, DOG, SH, UltraShort, Hedge

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Lightening up on Some positions-Think there is increased possibility of Downside

2007-02-28T18:46:00.000Z

Firstly apologies that I have not been able to post for a week or so I had some computer problems and I was travelling so was not able to get any posts out.Well yesterday was a real shake out.Today there seems to be some buying on weakness, I am glad I bought some SPY Puts a little while back as they softened some of the downside-I still was down around 3.5 % yesterday though.

I am not convinced we have seen the last of the selling and yesterday was a timely reminder of what can happen when everyone rushes for the exits at once.I am waiting to see where the Market closes and also what the voulume is like today, if we are up but volume is weak then I think we are in for some more selling sooner rather than later.

Some selling was long overdue, it would have been nice if it had not all happened at once though !! I took the opportunity to lighten up on some positions today so that I have some cash to take advantage of any opportunties but also to take profits or to reduce my exposure to some of the more High Beta stocks which will move a lot if the market sells off again.

I sold the following from my Pension Portfolio and My ISA

Linear Technology- LLTC sold for an annualised 6.38% Loss

Realty Ome Exchange -O sold for an annualised 24% Gain

Level 3 Comms LVLT-Sold for an annualised 26.5% Gain.

I would be extremely cautious about adding any positions at the moment I think we need to take some time to see what transpires in the next couple of weeks before we decide our next moves.

Sometimes the smart trade is to do nothing !!

For those of you old enough to remember the TV series Hill Street Blues -

" Lets be careful out there "

Best Wishes

Alan

Tags: LLTC, LVLT, O, Level Three, Realty, Stock Market Decline, SPY, PUTS

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LEAP in to Caterpillar(NYSE:CAT)

2007-02-16T00:16:00.000Z

As I have said before I am increasingly looking at using longer term option plays to get myself in to stock. I have been looking at Caterpillar( NYSE: CAT) for a while as it has come off its highs steadily since May last year. It is currently not in favour as most people think it is a play on the state of the US housing Market.As I have outlined in this blog on previous occasions the big money is to be made going against what your psyche is telling you.

We tend to not want to buy something that is out of favour but want to pile in with the crowd-remember the halcyon days of Dot.com ?? The issue with Caterpillar is that it is not solely reliant on the US housing mkt in fact a large proportion of its revenue comes from the heavy mining and construction side of things.Therefore these two old chestnuts of Natural resources and China come to the fore again.

If you look through this blog, it is unmistakable that I am a commodities bull, as our needs for raw materials and commodities such as copper, coal, iron ore etc etc increase-China and rest of world demand, then the machinery necessary to excavate, transport and deliver these commodities is bound to be in increasing demand.Caterpillar is a major player in this market so increased demand for these commodities is likely to drive increased demand for their equipment.

This is not a story that has been really picked up by the general investing public hence the shares are languishing. I believe though that eventually this will sink in and people will start to pile in.

To further enhance the potential upside Caterpillar today announced a 5 year plan to buy back $7.5 Billion in stock, that is about 17% of the outstanding shares.On its own that would be enough to give them a boost.Coupled with a likely increased demand for the shares then I think Caterpillar is a good mid term play.

The shares were up today closing at $67.62, there are a couple of ways to place this, you could buy the stock outright, or as I favour you could look at a LEAP option, if you have read my previous post on Delta then you will know we want to go for an ITM (in the money option).I favour the Jan 2008 60 Call, it shot up a bit today closing around the $11-50 mark this means you would pay $1150 for the right to buy 100 shares of CAT for $60 any time up to Jan 2008.The break even is $71.50 at today's close, the delta is around 80 which means you will get approx 80c movement in the option for each $1 movement in the stock -but you are paying a lot less to control 100 shares worth of stock than you would buying them outright.

I am going to buy the LEAP and will pay up to $12 with a view to holding it for 6-9 mths unless we get a short sharp increase in the stock when I may consider selling it early.

Best Wishes

Alan

Tags: LEAP, options, Caterpillar, CAT, Delta, share buyback

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Performance Curve Updates

2007-02-11T18:47:00.000Z

Posted above are the latest Performance Curves for my Pension Plans.The top graph is the GBP Portfolio and the lower one is the US$ Portfolio, pleasingly both have shown improvements this month particularly the GBP portfolio with a 4% gain on the month bringing the overall performance from the start to 40% return. The US Portfolio was also up but only slightly up about 0.5% for the month.The US portfolio is showing a 15% increase since inception.The US portfolio suffered a bit this month as the LEAP options on Microsoft (MSFT) gave back some of their gains.I am expecting that the US portfolio will shine when the Commodity and Natural Resource stocks do well as it is fairly heavily weighted in that direction. If we continue to see gains in Crude Oil and Precious Metals then the holdings in companies such as Goldcorp (NYSE:GG), Silver Wheaton (SLW-T) and the Oil and Equipment Services ETF (NYSE : IEZ) will generate some good returns. Silver and Gold seem to be looking to go higher here , although we could see some consolidation or even a pullback before we see Gold over $700 and Silver over $14.

Oil has been flirting with $60 all week and it is still uncertain which way it will go, weather and increasing Geopolitical tensions are playing their part and if these ease then we may see another pull back to the $55 area or below.However I firmly believe that Oil at those prices is a good buying opportunity as I do not believe these low levels will be sustainable.

It is interesting to note that once they got used to the revenue with oil at $60+ a barrel the OPEC Cartel seem very reluctant to see oil back down at the $50 mark.I imagine every time we see any pullbacks to those levels we will hear the jawboning from the Oil rich countries about production cuts etc, which will serve to put a floor under the price.

In my next article I am going to look at the part Dividends and High Yielding Assets can and should play in your Portfolio.

Best Wishes

Alan

New Purchases FXS & FXE

2007-02-06T00:20:00.000Z

Just a quick note to say that I am adding two of the Currency ETF's to my ISA. I am buying the FXS( Swedish Krona ETF) and the FXE (Euro Currency ETF).

Sweden is performing very well and its economy is strong, I expect that the Swedish Krona will strengthen further as we move into 2007.It will also give me some hedge against the potential of a falling Dollar(which doesnt seem to have happened yet !!-but I think it will).The dollar may confound its critics for the next while as (if you buy in to the conspiracy theories) the Presidential elections may mean that certain factions within the US government do not want their currency falling out of bed and impacting on the economy, in the run up to the Presidential elections.

I am looking at this holding being a longer term one anyway-assuming we do not hit our stop loss.I do not believe however that Krona strength will be dependent on Dollar Weakness anyway.

The second ETF was the FXE-Euro Currency Trust, the euro has pulled back here and we should find support in the mid 128 range if not before, from there I see that as a good launching pad for the euro to hit 133-136 sometime later in the year.

I have placed a stop loss of 5% on each of these as a 5% swing in the currency would be a fairly substantial move.

Best Wishes

Alan

Tags: ETF, Currency ETF, FXE, FXS, Dollar, Krona, Sweden, Euro, ISA

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Options Trading-Mind Your Delta Part2

2007-02-04T23:01:00.000Z

Following on from my last post let's look at how to use Delta to ensure we get the best possible opportunity for options to move nearly dollar for dollar with the underlying asset.

In order to do this it will be necessary to look at the Delta of the option this will tell us how the option will move in relation to the stock or asset, the higher the Delta the more it will move in relation to the underlying stock. A Delta of 100 means that the option will move more or less identically to the underlying asset.

What we want to do then is to find options with a Delta of at least 85 this will ensure that we get good movement of the option in relation to the asset. If you trade options frequently then it may be worthwhile investigating some of the options software available on the market today. Alternatively lot of modern brokers platforms will provide the relevant information for options, assuming they allow you to trade them.

An excellent site is http://www.ivolatility.com/ this site will allow you to find out the Delta of the option that you are considering using, it will also provide you with a number of other statistics such as implied volatility and the rest of the Greeks such as Theta.

Another advantage of trading options rather than the stock is they allow you to utilise a lot less in terms of your accountfunds than buying say one hundred shares of the stock, this means that you can either buy more positions thus increasing the diversification of your account or utilise the funds that would otherwise have been used to buy the stock in another fashion such as an interest bearing account or T Bill.

It is therefore a very important that we start to think of options not as cheap or expensive(in terms of dollars to buy) but whether are not we have the necessary Delta to ensure the upside or downside that you are looking for based on the movement of the stock or other asset.

Certainly looking for options with a Delta of 85 or greater will cost a bit morer than it would do to buy out of the money options but your chances of success are greatly increased, no longer will you watch the stock move in the direction you want it to but find that your option stays the same or goes backwards.There are other factors at play that will determine the value of your option such as volatility levels but if you have historically been purchasing out of the money options then this one change to your approach will radically improve the success that you have.

If you want to learn more about options I can highly recommend any or all of the following Books :

High performance Options Trading by Len Yates

http://www.amazon.co.uk/exec/obidos/ASIN/0471323659/flatwave-20

Trade Options Online by George A Fontanills

http://www.amazon.co.uk/exec/obidos/ASIN/0471359386/flatwave-20

How I trade Options by Jon Najarian

http://www.amazon.co.uk/exec/obidos/ASIN/0471312789/flatwave-20

Best wishes

Alan

Tags: Options Trading, Delta, Stocks, Theta, Volatility

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Options Trading-Mind Your Delta Part 1

2007-02-02T01:02:00.000Z

I wanted to look a bit at Options trading-increasingly I am trading more and more options.They are extremely versatile and the more you use them and learn about them the more you will start to appreciate what they can do for your portfolio.

I like most options traders when they first started out made the classic mistake of focusing on price.I perceived that cheap meant they only cost 5 cents !!! and that an option costing $6 must be expensive. So like most people I watched as I bought a call or a put and .............YES fantastic the stock moved in the right direction AND my option-stayed the same or worse-went backwards.

I had made the classic mistake of buying "cheap" out of the money options.

Options can be one of three things :

Out of the Money (OTM)

At the Money (ATM)

In the Money (ITM)

For example Stock XYZ is trading at $25

If you want to buy an option then

a $25 option is at the money(same price as the stock),

a $20 option is in the Money(less than the price of the stock)

a $30 option is out of the money(More than the price of the stock)

Options that are out of the money do not move in line with the movement of the underlying stock, options that are at the money will move at approximately half the pace of the stock(i.e. for every $1 movement of the stock up or down then the option will move approx 50 cents).

For options that are in the money then the more they are in the money the closer they will move dollar for dollar with the stock.

There are other factors that affect the price like time to expiry etc-but we will cover that in another post.

Therefore the reason I was not getting any movement in my option even when the stock move din the direction I wanted it to was because I was buying "cheap" out of the money options-ahhhhh I eventually realised...there is a reason they are "Cheap"

In fact they were not cheap at all and in some instances they were a lot more expensive than options at 10 or 20 times the price.

In the next part of this article I will look in a bit more depth at why this is the case and what you can do and what you should look at to give yourself more of a chance .

Best Wishes

Alan

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Tags: Options, Delta, Calls, Puts, Options Trading

Water Water everywhere..............or is there ? How to invest in Water or Blue Gold

2007-01-29T23:08:00.000Z

Some of you may have heard of T. Boone Pickens, for those of you that have not he is one of the worlds most famous Oil and Gas Billionaires. He founded a company called Mesa Petroleum with $2,500 and turned it into a billion-dollar company.So with oil reportedly running out and prices still way higher than they have been for years( we are currently thinking oil has become incredibly cheap at $50 a barrel-it was only in Oct 2004 that oil hit $50 for the first time and that was a record high!!!) then you would think that this 78 yr old billionaire would be very happy to sit back and enjoy the wealth brought on by one of the worlds most important Natural resources getting more and more scarce.It may surprise you then to know that he has been very busy buying up as many rights as he can to an even scarcer resource that we all tend to take for granted.........WATER.

He has set up a new company.Mesa Water and is investing heavily in water rights in Texas, he plans to pump the water to other areas in Texas such as San Antonio, Dallas-Fort Worth to name but a few.........for a price of course.

What this tells us is that the BIGGEST natural resource issue we will face in the coming years is access to fresh water.Our planet is awash with water, unfortunately a lot of it is salt water and with the increasing industrialization taking place in countries like India and China, the water resources they have(which were already fairly scarce) are becoming polluted and unusable not only for drinking but for use on crops and farmland.

This means that companies who own large amounts of water or those who are involved in desalination or water infrastructure could do very well in the years to come.Currently we are starting to see water and water related stocks hitting the mainstream press but I think we are still likely to be in ahead of the crowd if we move quickly.

I have had a holding in VEOLIA ENVIRONNEMENT -ADR, (VE) which provides environmental services to municipalities and corporations worldwide. for the past 6 months or so and in that time it has risen 32% or 60% annualised.I think in the mid term there is still plenty of upside for VE as it is I believe extremely undervalued given its prospects.

Another possibility is PICO HOLDINGS INC, (PICO) operates in five industry segments: property and casualty insurance; surface, water, geothermal and mineral rights; medical malpractice liability insurance; portfolio investing; and other.

PICO is slightly more diversified but nonetheless is well positioned to take advantage of the worlds increasing need for water.

As ever do your research, these stocks should not be too volatile so I would be comfortable placing a 15-20% stop loss on any purchase and be prepared to hold them for a few years.

Best Wishes

Alan

Tags: VEOLIA, VE, PICO, Investing in Water shares, Oil, Gas, Natural Resources

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Buying SPY Puts for Some Insurance

2007-01-26T01:11:00.000Z

The stock Market dropped sharply today as Bonds sold off and the existing Home Sales Numbers came out weaker than expected.At the close the Dow Jones Industrial Average (DJIA – 12,502.6) had lost 119 points, or 0.94 percent, and is now resting on its 20-day moving average. The S&P 500 Index (SPX – 1,423.9) is also on its 20-day trendline after losing more than 1.1 percent. The Nasdaq Composite (COMP – 2,434.2) dropped 1.3 percent, falling back below its 10-day and 20-day trendlines.

The Market is making me nervous at the moment, I have learned over the years that when I feel like this I should be proactive in protecting my capital and gains and taking out some insurance to protect the downside.

Now let me be clear I am not calling a top or saying that the market is going to decline from here-I think it is extremely brave (or stupid) to try to call market tops and bottoms,but I do feel that the market is behaving as if it is running a bit out of steam and it would not take much for it to roll over from here.

I cashed in a few postions today that have done well for me over the last little while, I closed out positions in the following :

Telecom Holders (NYSE TTH) 33% Gain

Madison Claymore(NYSE: MCN) 3% Gain

Vietnam Opportunities Fund ( LSE: VOF) 86% Gain

Drax Group (LSE : DRAX) 16.5% Gain

So I have lightened up on a few positions and realised some cash so I can take advantage of any opportunities that may present themselves in the next little while.

The Feb 43 QQQQ Puts that I bought a week or so ago came rocketing back today up around 80% to be back at break even. Depending on what happens tomorrrow I may roll these puts to the March contract as time decay will start to be a factor here.

I am also going to look at some "at the money" or "in the money" SPY Puts as I feel that the S&P 500 may be vulnerable to a further breakdown here as well.

It is important where we are trading for the mid to long term that we look at smoothing out the ups and downs and volatility as much as possible, if only for sanities sake.

If you cannot trade Options in your account or are not comfortable doing so, have a look at your portfolio and look for any opportunites to prune back your exposure.

You can do this by taking profits in stocks that may have run up but have been trading sideways for a while or ridding yourself of positions that have not really performed as per expectations.

There is always a danger that you may miss some further upside but my experience has taught me that missing out occasionally on some of the upside does not make up for the angst and "If only I had" regrets that taking big and swift losses brings.

As ever best wishes and Good trading

Alan

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How to Make Money in Agricultural Commodities

2007-01-23T01:01:00.000Z

The above are weekly graphs of Corn, Wheat and Soybeans,as you can see since the last quarter of 2006 these have been making new highs and in fact corn has hit over $4 a bushel, this is the first time since 1996 that this has happened.

Jim Rogers one of the most succesful commodity bulls of the last 30 years has been quoted on many occasions stating that the so called "Soft" Commodites are where he sees the big growth in the next 5-10 years.Everyone is familiar with the energy and precious metal stories , but agricultural commodities are not really something that many people outside of the CBOT(Chicago Board of Trade) have much to do with.This plays in to our hands, the big money is to be made buying in to these areas before we start hearing about it on CNBC and the Wall Street Journal.Jim was telling anyone who would listen about Oil and Gold around two or three years before they really took off and became big news.We want to be in these for the next few yeasr then be selling to the masses when everyone is talking about them.

One of the major challenges surrounding these assets was unless you were willing or able to trade Commodity Futures there was little or no opportunity to play these markets directly.I personally do trade Commodity Futures ..and they are not for the faint hearted,but they were the only direct way to play these markets up till now.

On Friday the 12th of January for the first time ever investors could buy Agricultural Products through the stock market...Powershares launched an agricultural ETF (NYSE: DBA).

This new fund tracks an index which is divided equally among wheat , corn, sugar and soybeans it is run by Deutsche Bank. There are many reasons why these commodities will I believe go much higher the main ones are :

Agriculture has been in a bear market for many years....it is now showing signs of breaking out.

A lot of the rationale for this can be placed at the door of higher energy costs, these commodities are used in the manufacture of alternative sources of fuel such as Ethanol-(it is rumoured that Ethanol will be given a big push by President Bush in the State of The Union address tomorrow night.)

China is importing more and more of these products and they are soaking up the supplies faster than ever before.

Lastly the USDA revised downwards its estimates on these commodities so there is likely to be less around than previously envisaged.

I like the agricultural commodity story and will be taking a position in the Powershares Agriculture Fund (NYSE:DBA) .I would be looking to hold this for a good few years and will look for opportunities to add to it on pullbacks.

My recommendation would be to scale in to it so if you are looking to own say 500 shares then buy 300 now and look for opportunites to add another 100 and then another 100 when we get some price weakness.

I will place a 25% trailing stop loss against my position.

The website for the DBA is http://www.dbfunds.db.com/dba/index.aspx

Best Wishes and Good Trading

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Portfolio Performance Curves

2007-01-22T01:10:00.000Z

Well at last I have sorted out some problems I was having with some of my software and can now post my equity curves for my US and GBP Pension Fund Holding showing performance since May 2005 when I started.
The GBP portfolio(Lower Graph) is showing the best returns compared to the US holdings.The GBP portfolio is solely made up of stocks which I have been holding for 6-18 mths as long as they do not hit my StopLoss.I think if you click on the charts they will open larger in your browser(well they do in mine)

The US portfolio is a bit more aggresive and uses Options as well as having a trading apporach.It will be interesting to see how they perform and whether one method consistently beats the other.For now I am happy that they are both showing returns that would outstrip what you would get from having them managed by the "Professionals" which was the whole reason for me doing this.

The performance is down from where it was last May-when the bottom fell out of the Commodities market, since I am a Commodities Bull my portfolio was (and still is) more weighted to the commodity and resource stocks so has suffered a bit for that.
I will post these graphs on an approximately Monthly basis to show how I am doing.

Best Wishes

RT

Update on China Opportunities

2007-01-18T11:07:00.000Z

You will have seen a previous post regarding opportunities in China,I have been looking at another stock recently and am likely to buy some at the market open on Thursday, that company is Aluminium Corp of China (NYSE: ACH).

ACH is the second biggest Aluminium company behind Alcoa and it seems to be very favourably priced on a P/E basis(price Earnings Ratio) compared to its competition, it is trading at less than 8 times earnings compared to nearly twice that at its rivals, it also is on track to pay a dividend of 10%.

The fact that Aluminium has corrected in price recently is an added bonus. I will be looking to add ACH to my portoflio and place a stop loss of 20%.

Best Wishes

Tags: ACH, Aluminium, Alcoa, China

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Outlook for Gold and Oil-Should we buy or bail ?

2007-01-17T23:55:00.000Z

Sorry there has not been a post for a few days I have been away most of the week and was not able to access my PC. I wanted to have a quick look at Oil and also Gold.Both of these are some of the most well known commodities and if played correctly can give some real long term upsides to a portfolio. Those of you who have visited before will know that I am a commodity bull and am heavily invested in Natural Resources and the Precious Metals.Oil and Gold however have not had the most auspicious starts to 2007 with Gold bobbing up and down in a fairly narrow range and Oil being hammered, down 13% in January.Is this the end of the commodities bull run ? Absolutely not, in my view. I think we are seeing some tremendous bargains and opportunities for those of you looking for some medium term 2-3 yrs investment for your portfolio's.

Let's look at Oil-there are a no of reasons I am still bullish on oil namely :

Growth in economies such as India and China-economic growth in these countries will drive the need for oil for a great many years.When you factor in we are not really discovering much more and the developed countries such as the US and in Europe are using more not less then that can only mean one thing. Increased demand and limited supply= higher prices

Institutional Investors, the big hedge funds particularly have been dumping oil contracts all of this month. These guys are trend and momentum traders and they all rush for the exits at once-this exacerbates any movement up or down and we have to factor this in to the big moves we see these days.

Warm Weather in the US-particularly in the North East of the Country-the minute we get the first dump of snow and temperatures drop in New York and Boston we should see Oil start to climb

Geopolitical tensions, Iran and North Korea are still at the sabre rattling and other oil hotspots like Venezuelan and Nigeria are anything but stable. I do not think it will be too long before we see some geopolitical confrontations rearing their heads again.

One of the best values in the Oil sector just now are I believe the Oil drilling stocks, this sector is also ripe for take overs or mergers.

Currently it is almost impossible to get a drilling rig in the Gulf of Mexico or anywhere else-and if you can get one then rental fees are sky high.The best way to play the sector is to look at the iShares Dow Jones Oil Equipment and Services ETF (NYSE-IEZ).

This ETF gives you a broad exposure to the major drillers like Baker Hughes (BHI), Schlumberger and Halliburton.If you are looking for a higher risk but potentially higher reward play then cast your eye over the Russian Giant Lukoil (OTC-LUKOY).There may still be some downside in oil and the oil sectors but for me the upside potential far outweighs the downside risk at this stage of the game.

In terms of Gold, the main driver of the precious metals still remains supply and demand, supplies of Gold are tight and with the increased geopolitical tensions it may also have some safe haven status as well.

If you are looking for an individual company Goldcorp (NYSE:GG) is still one of my favorite plays or the iShares Comex Gold Trust (Amex-IAU) will track the gold price.

In the short term expect some volatility in these sectors but the mid to long term outlook for them both is in my opinion very positive indeed.

Best Wishes and Good Trading

Tags: Gold, Oil, ETF, BHI, SLB, Goldcorp

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Investing in India-More Potential than China ?

2007-01-12T00:50:00.000Z

I think we are all pretty familiar with the China Story-however not so many people are up to speed on the potential in the Indian Stock Market.We are constantly made aware of the Chinese markets ,possibly due to the continued shuttling back and forth of various American Senators and the like trying to persuade the Chinese that devaluing their currency a bit more quickly would be a great idea-so far they aren't doing too well in the convincing stakes and I am not certain that they will ever have any impact.I think the Chinese will do what they want when they want.

Less well covered is the India story-lets look at some of the facts -the Internet for example.India has a population of over 1 Billion of that less than 4% are online, in the US that number is closer to 70%.Other Asian markets such as Japan and Hong Kong have similar levels as the USA. It is easy to do the maths 25% of the Indian Population online would be 250 million plus and 50% would be half a billion.

This is just one area where the massive population means even small shifts in the usage of things we take for granted will mean huge revenue increases for any company that happens to be exposed to India.The increased level of outsourcing of call centres and IT development work-whether we like it or not is only going to continue and India's Pharmaceutical Giants such as Dr Reddy's are more and more moving away from the Generics markets to try to compete as R&D powerhouses along with the likes of Pfizer, Lilly ,AstraZeneca and GlaxoSmithkline.

Think of the potential for motor vehicles we are used to usually two cars per household, cars are still a relative rarity in certain parts of India-the potential for growth here is phenomenal-the list goes on and on but I think you get the picture.

Some of the stocks I like in India include Tata Motors (ADR) (NYSE: TTM) and also for broad exposure to the Indian Market I also have traded in and out of the JP Morgan Fleming Indian Investment Trust (UK:JII) and the India Fund, Inc (IFN).

I believe that India is a fantastic longer term bet for your Retirement Portfolio or IRA -there can be some volatility as you would expect in any Emerging Market but over a 3-5 year period then I think we could see some superb gains.

Best Wishes and Good Trading

Tags: Indian Stock Market, Glaxosmithkline, Pfizer, Tata Motors, India Fund, IFN, Retirement Portfolio, IRA Investment

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Australian Jobs Data Shocks to the Upside

2007-01-11T00:50:00.000Z

Following on from last nights post the latest Australian Jobs data was released tonight and was incredibly strong compared to analysts forecasts.The forecasts were for a median 15k jobs to be added, the number came in at over 44k.I have attached some news commentary below-this further strengthens my view that the Australian economy is posied to continue to do well this year and that should prove good for any position in the iShares Australia Index (NYSE-EWA).

"[AUST DATA REVIEW] Aust employment data shocks with its strength, with growth gaining by a mammoth 44.6k over the mth, on top of an upwardly revised 43.0k (prior 36.2k) gain in Nov, and well outpacing forecasts centered on a 15k rise. The unemployment rate also unexpectedly held steady at its 30yr low of 4.60% (f/c 4.70%), with the participation rate gaining to a fresh record high of 64.9% from 64.8% prior. The overall data was exceedingly healthy; with full time jobs growth rising by 17.7k on top of Novs huge 57.4k bounce; whilst part time jobs gained by 26.9k after falling by 21.2k prior. Decs strong data suggests that Austs labour mkt has remained overwhelmingly tight. With wage fears thus well intact, RBA will be nervously maintaining its tightening bias well into 2007; and risks to see further rate hikes pan out over the n/t"

Tomorrow I will look in more detail at another favoured non US Mkt for the mid term-India.

Until then Best Wishes and Good Trading

Tags: Australian Stocks, EWA, iShares, Indian Stocks, Australia Economy

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Australian Stock Picks-Commodities Power the Aussie ASX

2007-01-10T00:53:00.000Z

Continuing my theme of looking at the diversified ETF's(Exchange Traded Funds) coupled with my belief that we are in the midst of a secular Bull Market for commodities(who am I to argue with Jim Rogers !!) then I wanted to expand on my recent post around China and Taiwan and take a look at Australia.Since 2001 Australia has benefited from the boom in commodities especially the Metals such as Gold,Silver and Copper mined by companies such as BHP Billiton (NYSE : BHP) and the agricultural commodities-which some would argue are only recently starting to catch up with the rest of the booming Natural Resource Mkts-(witness Corn and Wheat over the last few months.)

If you believe as I do that we have a good few years to go before the Natural Resource boom tops out then the Australian Mkt should do very well in the next 5 or so years.Even although the ASX 200 broke out from its all time high in the last few weeks I still believe that we will see it higher in the years to come.It climbed 19% in 2006 topping its 2005 performance of just over 17%.

If that was not reason enough to look more closely at the opportunities in Australia the fact that the Australian Dollar has strengthened against the US dollar is another good reason for any American Investors or those who hold substantial amounts of their portfolio in dollars to consider the Australian Markets.

In order to benefit from the boom "down under|" then we could look at individual companies such as BHP Billiton (NYSE: BHP ) or Rio Tinto (NYSE: RTP) up 220% and 150% respectively over the last five years, but I prefer the diversification of a fund-especially when companies can be as volatile as BHP and Rio Tinto.I would therefore take a close look at iShares MSCI Australia Index Fund (AMEX: EWA).This will give you a broad exposure to Australian companies and also will give you the benefits of some protection against the potential of a falling US dollar.This ETF is up 180% since 2001 and put in a performance of nearly 30% last year-that being said I think there is still some more upside particularly if you take a 3-5 year view. I currently hold some of the EWA but would be looking to add some more on any weakness or pullbacks.

As ever do your research , I would be placing a Stop loss of 20% on my average price and be looking to hold,for 3+ years.

Best Wishes

Alan

Tags: EWA, BHP, RTP, ASX, iShares, Australia Stocks, Investing, ETF, Currencies, US Dollar

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A short Guide to Hedging

2007-01-06T15:55:00.000Z

As promised here is some background and insight around hedging-incidentally as I surmised the markets took a turn down yesterday and the QQQQ Puts I bought have already increased by just under 20% in one day.I cannot say if this is the beginning of a correction but I am glad I have some downside protection.Hedging is a little discussed but very important tool for investors.It may sound like an outdoor activity involving shears and ladders but it can be the difference between poor and great returns

What Is Hedging?
The best way to understand hedging is to think of it as insurance. When people decide to hedge, they are insuring themselves against a negative event. This doesn't prevent a negative event from happening, but if it does happen and you're properly hedged, the impact of the event is reduced. So, hedging occurs almost everywhere, and we see it everyday. For example, if you buy house insurance, you are hedging yourself against fires, break-ins or other unforeseen disasters.

Portfolio managers, individual investors and corporations use hedging techniques to reduce their exposure to various risks. In financial markets, however, hedging becomes more complicated than simply paying an insurance company a fee every year. Hedging against investment risk means strategically using instruments in the market to offset the risk of any adverse price movements. In other words, investors hedge one investment by making another.

Technically, to hedge you would invest in two securities with negative correlations. Of course, nothing in this world is free, so you still have to pay for this type of insurance in one form or another.

Although some of us may fantasize about a world where profit potentials are limitless but also risk free, hedging can't help us escape that hard reality of the risk-return tradeoff. A reduction in risk will always mean a reduction in potential profits. So, hedging, for the most part, is a technique not by which you will make money but by which you can reduce potential loss. If the investment you are hedging against makes money, you will have typically reduced the profit that you could have made, and if the investment loses money, your hedge, if successful, will reduce that loss.

How Do Investors Hedge?
For the most part, hedging techniques involve using complicated financial instruments known as derivatives, the two most common of which are options and futures. We're not going to get into the nitty-gritty of describing how these instruments work, but for now just keep in mind that with these instruments you can develop trading strategies where a loss in one investment is offset by a gain in a derivative.

How does this work in Practice
Say you have bought shares in Google(Goog) you believe that they are a good long term bet but you want to protect yourself from any potential downside in the short term.You would buy a number of PUT options in Google to protect you should they fall below a certain price-say $450.
Every put option is worth 100 shares so if you owned 200 shares you would need to buy 2 PUT options.If the share price fell below the $450 then your PUT options would increase in value to protect and minimise the losses.(This is a reasonably simplistic explanation as there are a no of other factors at play here but this is the general principle behind using Options to Hedge)
Keep in mind that because there are so many different types of options and futures contracts an investor can hedge against nearly anything, whether a stock, commodity price, interest rate, or currency.

The Downside
Every hedge has a cost, so before you decide to use hedging, you must ask yourself if the benefits received from it justify the expense. Remember, the goal of hedging isn't to make money but to protect from losses. The cost of the hedge - whether it is the cost of an option or lost profits from being on the wrong side of a futures contract - cannot be avoided. This is the price you have to pay to avoid uncertainty.

We've been comparing hedging versus insurance, but we should emphasize that insurance is far more precise than hedging. With insurance, you are completely compensated for your loss (usually minus a deductible). Hedging a portfolio isn't a perfect science and things can go wrong. Although risk managers are always aiming for the perfect hedge, it is difficult to achieve in practice.

What Hedging Means to You
The majority of investors will never trade a derivative contract in their life. In fact most buy-and-hold investors ignore short-term fluctuation altogether. For these investors there is little point in engaging in hedging because they let their investments grow with the overall market.

So why learn about hedging?

Even if you never hedge for your own portfolio you should understand how it works because many big companies and investment funds will hedge in some form. Oil companies, for example, might hedge against the price of oil while an international mutual fund might hedge against fluctuations in foreign exchange rates. An understanding of hedging will help you to comprehend and analyze these investments.

Conclusion
Because risk is an essential yet precarious element of investing, you should, regardless of what kind of investor you are, gain a fairly good awareness of how investors and companies work to protect themselves. Whether or not you decide to start practicing these intricate uses of derivatives, learning about how hedging works will help advance your understanding the market, which will always help you be a better investor.

Best Wishes

RT

Market Update and QQQQ Hedge

2007-01-05T00:16:00.000Z

The Dow Jones Industrial Average (DJIA – 12,480.7) added 0.05 percent on the day, edging into positive territory.The S&P 500 Index (SPX – 1,418.34) tacked on 0.12 percent, but was capped by its 10-day moving average. Finally, the Nasdaq Composite (COMP – 2,453.4) saw the largest percentage gain on the day, logging an increase of 1.25 percent.
In terms of news today orders for U.S.-made factory goods increased by 0.9 percent during November. The strongest demand was for computers, transportation equipment, and defense goods. Excluding transportation, orders for U.S. goods dropped by 0.5 percent for the month, which suggests an overall weakening of the manufacturing sector.

The Markets are making me slightly nervous at the moment I feel something is in the offing.There does seem to be a bit of a struggle going on with the last couple of days swinging to and fro.It is always difficult at this time of year to ascertain whether we are seeing the results of thin markets and people window dressing, but I bought some QQQQ Feb 43 Puts today to give some downside protection to my Portfolio.
They will not be enough to completely hedge my positions but will cushion the blow a bit if we lurch downwards over the next month.

Increasingly I am using Options as a Hedge in my Portfolio to protect the downside.I am firm in my beliefs for the mid Term and the Macro Economic picture supports this, however we cannot force the market and we have to be patient, using options to hedge your portfolio and allow you to stay in the game longer to give your strategies time to unfold is good sense.It is extremely difficult (if not impossible) to pick Market tops and bottoms-but learning to use options as a hedge is a great way to allow you to ride out the daily and intra day noise that can be emotionally difficult to trade through when you are investing for the longer term.

I will post some insight into hedging tomorrow for those of you who are interested in a bit more detail-meanwhile if anyone has any questions on this or any other topic then please feel free to ask.

Best Wishes

RT

The China Syndrome-Part 2

2007-01-04T11:39:00.000Z

Following on from my previous post where we looked at Taiwan as a good potential mid term investment I want to touch on China.China is still one of the fastest growing economies in the World and although growth is not as high as it has been there is no real sign yet of it slowing dramatically.I believe that we will see good growth in China at least till post the 2008 Olympics and possibly beyond.The sheer size of China makes it a formidable market and one where if you pick the right stocks could generate some excellent returns over the next few years.It can be volatile so if investing I would be looking to hold the shares for 2+years with a 25% stop loss.

Some of the shares I like to capitalise on China are below :

China Medical Technologies (CMED)
Hong Kong Shanghai Bank (HBC 4% Yield)
Templeton Dragon Fund (TDF 4.5% Yield)

I also like iShares FTSE/Xinhua China 25 Index Fund (NYSE: FXI) it is up 102% in the last 18 months and 65% since June.

However you look at it China is going to become an increasingly large player on the Global Economic Stage and we really need to have some exposure to these markets.The fund route is a good option as it allows some measure of diversification-but may not deliver the opportunity for some stellar gains with indiviudal stocks such as CMED.

All for now I will report back later today hopefully on the US markets.

Best Wishes

RT

Trade Confirmation

2007-01-03T15:42:00.000Z

B half position at 14.80 in Taiwan Fund EWT-will wait to see what happens and whether I will buy more-if it moves up quickly will not likely and will just sit with what I have.If it moves down towards 14 in next couple fo weeks will buy second half.

Best Wishes

RTjavascript:void(0)
Publish

Trade at Open-iShares MSCI Taiwan Fund EWT-NYSE

2007-01-03T12:52:00.000Z

Hi just a quick note to confirm that I am going to open a position in the Taiwan Fund at the Mkt open, as this is a long term position I will probably scale in to it buying half my desired no of shares and then waiting to see if there is any pullback and I will buy the rest.So just to confirm I will be buying at the open the iShares MSCI Taiwan Fund EWT-NYSE at the open for my Pension fund.I will be back later on with the second part of the post from yesterday.

Best Wishes

RT

Go East Young Man-Made in Taiwan and the China Syndrome Part 1

2007-01-02T17:51:00.000Z

The US Markets are closed today so I thought this might be an opportunity to look beyond the US shores to another favourite market of mine-the Far East.For many years the Asian Markets have lagged far behind the US and Europe.I think we may be seeing the tentative shoots of recovery in certain markets.Japan is still a wildcard but I believe that 2007 may prove to be a good year for Taiwan. In 2006 a number of emerging mkts including some in Asia have hit all time highs but Taiwan still lags and is over 43% below its high from Feb 1990.Taiwan is home to some of the largest Tech and Electronics companies in the World. Companies that produce I-Pods and the Mini Mac as well as supply major IT companies such as Dell and Hewlett Packard-the link therefore to PC and Semi-conductors is inextricable-when these markets boom so does the Taiwanese economy.If you believe that these sectors are likely to start to move in 2007-(think Vista and PC's) then Taiwan is a good place to invest.For me the best way to play this is via the iShares MSCI Taiwan Index Fund(EWT-NYSE).This fund is broadly based and diversified but heavily weighted to Technology Companies. Another boost for Taiwan is that it is one of the major trading partners of China. The Chinese economy is still one of the fastest growing economies in the world and as the mass Chinese become more affluent then they will increase their expenditure on goods such as PC's and Technology-this can only be good for the Taiwanese economy and for the iShares MSCI Taiwan Index Fund(EWT-NYSE).I will be opening a position in this fund at the mkt tomorrow.I will also post Part 2 of this communication looking in a bit more detail at opportunities to gain some exposure to China such as Hong Kong Shanghai Bank (HBC) , Templeton Dragon Fund (TDF-NYSE) and China Medical Technologies (CMED-NYSE).

Best wishes for the New Year and Good Trading

RT

And Now...The end is Near....How to use Currency ETFs in your investing and Trading

2006-12-29T21:51:00.000Z

Well it could be a requiem for ol Blue Eyes, but I am referring to a couple of things, firstly 2006-isn''t it amazing as you get older how a year seems to get shorter and shorter.When I was younger a year seemed to last forever-nowadays a year feels like a long weekend !!

I am also referring to my view regarding the US Dollar, I feel 2007 will be the year where the fundamentals catch up on the dollar and we see a weakening, possibly with the Dollar Index making new lows.

This is of interest to me for two reasons, one -can we make money from this perception and two-being a UK based investor with a large portion of my investments in US $ how do I manage the currency risk, well there are a number of possible ways.Futures, Options, Certificates of Deposit and Multi Currency funds.My Pension fund is set up in such a way that I could utilise Futures and Options-these are highly leveraged and may not be for everyone but there is another option....Currency ETF's..

I have added below some background to these instruments but they trade on the NYSE just like shares so are easy to get in and out of and also are not leveraged like Futures and Options and are also not subject to Time decay like options.I am likely going to utilise some of these early in the New Year but this may serve as a primer and some background for those of you not so familiar with them.

Foreign Currency ETF Funds

ETFs (exchange traded funds) have made it easier for investors to to invest in all kinds things, usually with very low expense ratios. In December of 2005, Rydex launched their first CurrencyShares for Euros, trading under the symbol FXE (the FX stands for foreign exchange). Similar to the gold funds, Euros would be held in a trust at the JP Morgan Chase Bank in London, with each share purchased representing 100 Euros. With a slight twist, the currency would also be held in interest bearing accounts, meaning the funds expense ratio would be paid out of the interest, and any additional interest accrues to the share holders. So why would you want to invest in a Euro ETF? Well, if you think the value of the dollar is going to decline and the value of the Euro is going to increase, you buy some of these shares and they go up in value, and you can later sell them and have more dollars to spend. Pretty simple. Funds like these are a world away from the old school style of investing in foreign exchange futures. They give investors an easy way to diversify beyond stocks and bonds, to take financial positions for opportunities in the currency markets, and they do all this through easy access of a brokerage account. You can learn about the various Rydex funds at CurrencyShares.com. The the popularity of the Euro fund, Rydex also launched a number of other foreign currency investment funds:

CurrencyShares Australian Dollar Trust (06/2006) - FXA

Currency Shares British Pound Sterling Trust (06/2006) - FXB

Rydex CurrencyShares Canadian Dollar Trust (06/2006) - FXC

CurrencyShares Euro Trust (12/2005) - FXE

CurrencyShares Mexican Peso Trust (06/2006) - FXM

CurrencyShares Swedish Krona (06/2006) - FXS

CurrencyShares Swiss Franc (06/2006) - FXF

Best Wishes and Good Trading

RT

Mkt Report and Activity 29th Dec 2006

2006-12-29T00:09:00.000Z

Well the sluggish trading continued today with an early bout of selling reversing the Dow ended up at a new record intraday High of 12526.7.It was not able to close above Wednesday's intraday peak of 12,519. At the close the Dow lost 9.1 points, or 0.07 percent,the S&P 500 Index (SPX - 1,424.73) lost 2.11 points, or 0.15 percent, and the Nasdaq (COMP - 2,425.6) dropped back below its 10- lost 5.6 points, or 0.23 percent.

I made one trade today buying the Commodity Index (GSG) that I mentioned yesterday, the index is around its lows but may not yet have bottomed so I bought half a position and may leg in to the other half if we get a bit more of a pullback.

Action for the rest of the week is likely to remain choppy within narrow ranges, but again watch for any possible big swings tomorrow as big players position themselves at year end.

If I do not post again this year then I hope you all have a wonderful time celebrating the New Year whatever your plans.

Best Wishes & Good Trading

RT

Mkt Update-2007 View

2006-12-27T21:56:00.000Z

US mkts moved slightly higher on thin volume-The Dow Jones Industrial Average (DJIA – 12,407.6) added 64 points, or 0.52 percent, as it bounced off support at its 20-day moving average The S&P 500 Index (SPX – 1,416.9) jumped 0.44 percent, bounding off its 20-day trendline. However, the broad-market barometer remains below its 10-day trendline. Meanwhile, the tech-laden Nasdaq Composite (COMP – 2,413.5) increased 0.51 percent, but remains below both its short-term trendlines.

Nothing really much is happening and it is unlikely to in the short term-Friday may show some wild swings as there is some manouvering for Yr end-I am still big next year on Commodities and Energy.I have attached some commentary giving some background to this rational.

In 2007 I think crude oil will move upwards again and above $70-$75 a barrel there is a strong possibility it could consolidate most of the year north of $80.Natural gas, still in a downtrend since the beginning of the years highs, will also perk up and start to trend higher. I believe that exposure to commodities especially energy is the place to be. I am considering the iShares GSCI Commodity-Indexed Trust (NYSE-GSG) for 2007. GSG now trades right at its 52-week low, down 17.4% in 2006 and off around 22% from its high if I am right in my expectations then this could be a great medium term hold.
The GSCI currently holds 69.2% in energy futures, 13.1% in agricultural commodities 10.8% in base metals, 4.6% in livestock and 2.3% in precious metals.If you are looking for an index that has good diversified exposure to the commodity sector then this may be one worth researching.

Best Wishes and Good Trading

RT

Long Term LEAPS

2006-12-26T15:36:00.000Z

Well firstly I hope everyone had a great Christmas, I have been reviewing some longer term plays for my Account.I am starting to increase the useage of LEAPS to play these sort of situations.For those of you not familiar with LEAPS then please go to this link. http://www.investopedia.com/terms/l/leaps.asp

Basically they are long dated options plays-which allow me to control stocks for a lot less margin than buying them outright, the fact that they are long dated means the time decay is not such a big factor but I can still participate in the upside.

I have placed 3 positions today they are as follows :

MSFT-Microsoft

Microsoft is incredibly cheap right now and generates massive cash flow, I think that in the near term it is a good buy up to $30 and I am buying the Jan 2009 25 Calls

JOE-St Joe

St Joe owns massive tranches of Florida and despite the potential issues in the Housing Market I feel that the Mkt Cap of St Joes is massively undervaluing the value of the land that it owns and as such is a great long term bet , when people wake up to this fact then I think we will see a good re rating of the price of the company.
Again I am buying the Jan 09 45 Calls

WMT-Wal MArt

Wal Mart seems to either generate tremendous hatred or dedicated followers, personally I am only interested in looking at companies that I believe will generate a great return for my portfolio
Wal Mart is breaking in to the massive markets in China and India with some well placed strategic acquisitions and partnerships, when you consider the potential in these mkts I think this will prove to be an excellent move in the medium to long term and I ma buying the Jan 09 40 calls.

I am aware that not everyone is familiar with options or LEAPS and if people want a bit more insight I will be happy to pass on a bit more insight into their use.Alternatively you can just stick with buying stocks as the fundamentals are the same.

As ever these are not recommendations but an insight in to what I am doing , please make sure you do your own research and evaluate any positions based on your own situation.

RT

The time to take Stock-not trade

2006-12-22T11:40:00.000Z

Well unbelievably it is nearly Christmas, Markets get incredibly thin at this time of year and it is not really the time of year to be trading.In the US particularly Tax selling can really shift stocks and the big boys have free rein to swing things whatever way they like.
Personally I use this time of year to take stock of my positions and to try to evaluate the big trends for the coming year.My perspective is that the US dollar will come under more pressure, housing will suffer having an impact on the Market.We will see Oil and Energies start to increase in price again and anything related to Agricultural Commodities will continue to do well.
Some stocks I am looking at are Cresud, Nymex Exchange, and Silver and Gold related like the ETF Silver Trust, Silver Wheaton, Goldcorp.

Have a great Christmas and New Year.

Best Wishes

RT

Why am I here ?

2006-12-14T01:29:00.001Z

Well if you are reading this far then maybe you are asking the same question.If like me you want to give up the day job as soon as possible or retire with a big enough wedge of cash to finance the lifestyle you always wanted then this Blog and my journey may be for you.

I dont know about you but I got fed up receiving letters each year from my Pension Fund informing me that they had charged me 5% of the fund to only lose 15% when after all the market was down 20% so didnt they do well-Huh !!!

So I decided to start to invest for myself...........in the past year my fund has grown just over 20% and only had drawdowns of less than 5% ..not too shabby .

There seemed to be a dearth of information about doing this so I decided to set up this blog to allow anyone who is interested to see what I was doing.I am not giving trading advice just an insight into my thoughts and trades-but by all means if you wish to join in then feel free to do so.

I may on occasions meander and muse on life in general and on the odd occasion I may even rant.I would love to hear your views and thoughts and if anyone out there is doing something similar ..then hey let us know.

I will in the next couple of days post the list of current positions in my Pension and start to inform you of the buys and sells and the reasons behind it.

If anyone has any questions or comments would love to hear them-all for now

RT