Stock Trading Views

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


Wednesday 14 May 2008

How to Invest in Livestock

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.Live Hog

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.Cattle

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



Friday 9 May 2008

The growing Food Crisis -what should I invest in

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.

800px-Tranplant-rice-tahilandIn 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 ChinaBrazil Soybeans .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




Thursday 8 May 2008

The Case for $200 Oil

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




Wednesday 7 May 2008

Gold Stocks -Time to Buy ?

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 HUInow 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