Posts Tagged ‘Agriculture’
China Unveils $586-billion Economic Stimulus Plan
Sunday, November 9th, 2008
China’s stunning $586-billion (4-trillion Yuan) economic stimulus package, unveiled Sunday evening, aims to give the country’s domestic demand and global GDP a massive shot in the arm. This should also give commodities and commodity stocks a mighty boost. Here are a few excerpts from the Wall Street Journal on the subject:
The announced sum of four trillion yuan represents about 16% of China’s economic output last year, and is roughly equal to the total of all central and local government spending in 2006. New spending of even half that amount would be substantial next to China’s six trillion yuan annual budget for this year.
The plan includes spending in housing, infrastructure, agriculture, health care and social welfare, and features a tax deduction for capital spending by companies. China’s economy won’t be able to absorb so much spending immediately: Economists expect one or two more quarters of slowing growth at a minimum before a rebound could take hold.
With the announcement, China will enter a meeting Saturday of the Group of 20 largest economies with a plan that would dwarf stimulus measures by others in the group, which is convening in Washington to discuss ways to stem a global slowdown in growth.
…
In the new stimulus package, total new investment could be less than the headline figure of four trillion yuan, since the plan does appear, for instance, to incorporate rebuilding programs for the areas affected by May’s massive earthquake. Those have already been allocated one trillion yuan in funds.
Although Chinese officials have been meeting daily on the financial crisis, most observers hadn’t expected leaders to reach final consensus on a stimulus plan until an annual economic-policy meeting scheduled for the end of this month. The rapidity of the response underscored the government’s concern about the growing risks of a real downturn.
A stimulus this large comes once in a generation, or two, as does the opportunity, especially when the margin of safety is this high. As of Friday November 7, 2008, the Shanghai Stock Exchange Index was down 72% from October 16, 2007 peak closing of 6,092 points, having closed at 1,747 points, and roughly 44% below its 200-day moving average of 3,120 points.
Other packages have been relatively in the same ballpark, but set to span much longer periods of time, like ten years. A few years ago, for example, China earmarked 2.7-trillion Yuan ($300-billion) towards augmenting the country’s railroads, a sum to be invested over ten years.
Giving details of the package, Xinhua said China would invest an additional 100 billion yuan in national construction this quarter and would earmark an extra 20 billion yuan next year for reconstruction in areas hit by major natural disasters.
Sectors that will benefit from the extra spending include affordable housing, rural infrastructure, transport networks, environmental protection and technical innovation, Xinhua said.
The cabinet also confirmed a long-awaited reform to the way value added tax is calculated. The result will be to reduce companies’ tax bill by 120 billion yuan a year, the agency added.
This sum, a grand total of 4-trillion Yuan ($586-billion) is set to be dispensed over 2 years. You do the math…this is enormous.
Click for the complete WSJ.com article here [PDF]
Sources: Reuters
WSJ, China Sets Big Stimulus Plan In Bid to Jump-Start Growth
http://online.wsj.com/article/SB122623724868611327.html
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Tags: Agriculture, China, chinese officials, economic policy, Economy, GDP, government spending, Infrastructure, Markets, Yuan
Posted in Markets | 1 Comment »
Donald Coxe: Barron’s Interview
Sunday, November 9th, 2008
This week’s issue of Barron’s features an in depth interview with Don Coxe, Chief Investment Strategist, BMO Capital Markets. Mr. Coxe is best known for his highly read monthly newsletter, “Basic Points,” as well as his bi-weekly conference calls. His convictions that we are in the midst of a biggest long-term commodities bull market have been severely tested during the most recent months since this past summer, when he launched the Coxe Commodity Strategy Fund, but he remains convinced that the thematic fundamentals are in tact.
Here are a few excerpts from the must read interview, “Feed the World - and Boost Returns.”
How should investors approach today’s stock market?
If you aren’t deeply in the equity market, this is not a time to be committing large amounts of money. Stocks are cheap but they can get cheaper; we know that. We got back to the Dow having a multiple of 5.9 in December of ‘74, which was the foundation of Warren Buffett’s wealth because he started buying at that level. The Dow isn’t anywhere near 5.9 [its multiple last week was 11], but some of my favorite stocks are trading at lower P/Es than that. I can tell you they are the fertilizer, oil and agricultural companies.
…
Tell us some more about those industries.
The core investment concept of our time is that we are living through the greatest simultaneous effervescence of personal economic liberty in history. When people go from abject poverty to dwellings with indoor plumbing, electricity, basic appliances and access to motorized transportation, they have more economic liberty than 99% of humanity enjoys and we are adding 50 to 150 million people a year to that list. The gigantic investment returns are all going to be tied to companies that meet real human needs and do it better than other companies. What a great time to be an investor, because it is not just about the dwellings and the transportation, it is about the high-protein diet. When I came back from a trip two years ago, I said the biggest commodity story is going to be food, bigger than the other ones. It is high-protein food. The way to play that is through the fertilizer stocks, the genetically modified seed stocks and the farm-equipment stocks.
Which commodity groups do you like best?
Agriculture is first. We will need more fertilizer. There are only three farm-equipment companies of any size in the world. Terms of entry are difficult. You have to have dealerships. CNH Global [ticker: CNH] is one of the top three companies in the world in the field. It’s a subsidiary of Fiat and its stock has collapsed, but earnings haven’t collapsed. In May it sold for $45 a share. It’s $17 now. The next group has to be gold stocks. A period of massive reflation always leads to a good move in gold.
To read the entire interview click here.
Source: Barron’s, Feed the World — Boost Your Returns, November 10, 2008
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Tags: Agriculture, Barron's, Basic Points, BMO Capital Markets, CNH, Commodity, Donald Coxe, electricity, fertilizer, Gold, interview, oil, Trading, Warren Buffett
Posted in Markets | No Comments »
Governments Keep Making Mistakes: Jim Rogers
Wednesday, October 22nd, 2008
Jim Rogers, CEO, Rogers Holdings, appeared on CNBC’s European Squawk Box this morning with Geoff Cutmore, to discuss the progress of markets and his outlook.
click image for video
Rogers stated that the economy is in for high inflation given the size and nature of the central bank interventions and injections in to the financial system, and pre-ambles this saying,
“The world is unfolding. The American government keeps making mistake after mistake after mistake. Other governments do too. Unfortunately this is going to be a mess,” Jim Rogers, CEO of Rogers Holdings said Wednesday.
“Bernanke, and Paulson and the guy at the NY Fed, Tim G-r-eithner [or whatever his name is: slips Rogers] have been wrong every week for the last two years. Why do you think they know what they’re doing?”
He has covered most of his “shorts,” and wishes that he had not yet covered them, as their has been more downside.
He is long short-term US government bonds and short and shorting long term government bonds as he believes that we are heading for inflation. He has been buying agricultural commodities, though he admits that his timing is bad, as they are down.
“I bought some more agriculture earlier this week and it promptly went down. The fundamentals for commodities and agriculture have not changed,” says Rogers. “What’s happening in the world right now means that there will be less supply of everything coming out of this, and nobody can get a loan for a new zinc mine or a loan to increase their crop production.”
Rogers adds that
“What’s happening now is that we are in a period of forced liquidation; we’ve had 8 or 10 of these in the last 100-150 years; 1929 in the US, 1974 in the UK…We’ve had these before. The things that come out on the other side have always been the things that are unimpaired. The US financial system is impaired. The investment banking system is impaired.”
“But, commodities and agriculture are totally unimpaired by all of this. If history’s any guide, the things to buy will be the things that are doing fine; water treatment in Asia [for example], agriculture’s gonna do fine; that’s what you should buy.” Rogers adds, “However, my timing’s not very good.”
Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke should resign for keeping alive “zombie banks” that should be allowed to fail, he said.
The Japanese government refused to let financial institutions fail in the 1990s, Rogers said.
“It’s 18 years later and their stock market is 75 or 80 percent below what it was 18 years ago,” he added.
Rogers also said that interest-rate cuts are coming.
“I know we are going to get aggressive rate cuts everywhere, that’s why I’m long short-term government bonds in the U.S., but shorting long-term government bonds because it’s not going to help, it’s going to add to inflation.”
Source: CNBC
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Tags: Agricultural commodities, Agriculture, Asia, Banks, Bernanke, Commodities, Economy, EFU, Euro, Fed, Federal Reserve, inflation, Japan, Jim Rogers, Markets, Paulson, UK, Video, Water
Posted in Commodities, Markets | No Comments »
Jim Rogers: Buying Commodities, Yen and Swiss Francs
Friday, October 10th, 2008
Jim Rogers appeared on CNBC this early this morning on Capital Connection on CNBC World Edition, and had the following to say, when he was asked what he’s doing with his money.
What are you doing with your money now?
“I have an enormous amount of cash and I’ve been using it to buy more Japanese Yen, more Swiss Francs, more agricultural products. We’re in a liquidation phase, you know. I bought agriculture last week and their down this week. They’re liquidating everything.”
“I’ve covered some shorts today [too] this morning, that’s what I’m doing with my money now.”
At what levels would you look to buy equities again?
“I’m not sure I want to buy equities now. Equities are not going to come out on top. The way you make money in a market like this is you buy the things that have been unimpaired, and they will lead the market coming out.”
“Morgan Stanley is not coming out of this unimpaired. I’m buying commodities, Commodities are the only thing I know that are coming out of this thing unimpaired where supply and demand are still terribly out of balance, and Yen and Swiss Francs.”
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Tags: Agriculture, Commodities, Japan, Jim Rogers, Video
Posted in Markets | 1 Comment »
Hendry: Financials “Infected” by Bubble
Wednesday, July 2nd, 2008
Hugh Hendry, CEO, CIO, Eclectica Asset, guest hosted European Squawk Box this morning. A very informative interview with a bold discussion on what’s ailing the financial sector, and where Hendry, one of the UK’s top performing and most outspoken asset managers, is investing today.
Segment 1: http://www.cnbc.com/id/15840232?video=782713231
Segment 2: http://www.cnbc.com//id/25490573, includes CNBC Europe.
Hendry also sees few signs that the outlook is picking up for the US economy.
“I think we have to recognize the recessionary forces that are bringing to bear,” Hendry told CNBC. “Don’t fight that, just go with the flow of the relative momentum.”
Hendry said the outlook is particularly bleak for financial and technology stocks — the two largest components of the S&P 500 — which he said have both seen a bubble.
“When a sector becomes infected by a bubble…what history reveals is it takes 25 years to regain the highs that we saw in real terms,” he said.
(click on image to see video)
Hendry took the view that in a sustained market downturn, successful investing requires looking for more unconventional assets such as agriculture that have the potential to outperform the market.
“I think the most important thing to know is you don’t have to short this market,” Hendry said.
“If you want to stay involved the most important thing is make sure the stock you own is trending higher vis-à-vis the marketplace.”
This is one of the best interviews we’ve seen in a long time.
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Tags: Agriculture, Commodities, Gold
Posted in Agriculture, Commodities, Credit Markets, Financials, Markets, Strategy | No Comments »
Derek Webb Interview, Part 1 - Outlook and Investment Strategy
Tuesday, May 13th, 2008
May 12, 2008 - GreenLightAdvisor.com recently interviewed [Part 1] Derek Webb, Portfolio Manager, Webb Asset Management. Here are some excerpts from Part 1, in which Mr. Webb shares his outlook and his thoughts about how he trades in volatile and range bound markets. Here are some excerpts:
Regarding the Fed’s recent moves…
Anytime the Fed puts this much liquidity in to the system it’s like blowing into a pipe; all that pressure has to go somewhere—When the Fed drops hay bails of money out of the helicopter, those hay bails of money are like molecules. They have to attach themselves to something.
When you look at the huge amount of money put into the system because of the Long Term Capital Meltdown and Russia—now that liquidity event created the internet bubble. This is no different.
All of this liquidity is going to find a home. I’ll tell you that I think it’s finding its home right now. Fundamentally I am very bullish because of all this liquidity.
On his investment focus…
Through our quantitative homework we found that the delta or change in earnings is the only thing that’s predictable in terms of determining the direction of a stock’s price. That’s all we focus on; that’s all our research focuses on. So, where is that delta accelerating right now—it’s in commodities. Agriculture is number one, Oil and gas are number two, some base metals number three, like copper—The shine has kind of come out of precious metals in the short run, but I don’t think that trade’s over, I think it’s more of a seasonal thing right now.
On when to sell:
[Firstly], If we saw one analyst lower EPS forecasts for Potash, for example, WE WOULD BE OUT. Analysts are out there doing site visits. They’re doing their homework – as long as they’re raising their numbers we’re going to be long. As soon as we would see them hold steady or lower their numbers we would be out.
Secondly, if the earnings themselves just start to de-accelerate, meaning we are looking at a smooth line of earnings, not to get complicated, but we look from 3 quarters ago out to the next quarter and if that rate of change de-accelerates were out.
Thirdly, one negative earnings surprise and we’re out.
And lastly, if the relative strength indicator of the stock de-accelerates were out.
We’re ruthless on all our positions.
And lastly, if the relative strength indicator of the stock de-accelerates were out.
PART 1: Derek Webb Interview, GreenLightAdvisor.com.
Visit Webb Asset Management for more information.
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Tags: Agriculture, bifurcation, Derek Webb, Fed, Investment Strategy, liquidity, Markets, Metals, Monetary Policy, Oil and Gas, Webb Asset Management
Posted in Agriculture, Banks, Canadian Stocks, Commodities, Credit Markets, Crude Oil, Economy, Financials, Gold, Markets, Oil & Gas, inflation | No Comments »
Don Coxe’s Recommendations (Basic Points, 04/29/2008)
Monday, May 5th, 2008
May 5, 2008 – Here we feature the recommendations of Don Coxe, BMO Capital’s Chief Investment Strategist. As usual, his paragraphs are eloquent and provide significant guidance.
Don Coxe’s Investment Recommendations, excerpted from Basic Points, The Hinge of History II, April 29, 2008
1. In long-only equity portfolios, continue to underweight Wall Street banks and others that have been reporting high exposure to perfumed products of indeterminable value, including those which last year revealed—under duress— high exposure to SIVs. Within the financials, emphasize those whose loan losses are of the traditional, cyclical variety—not in derivatives or in untraditional banking businesses. Good banks that have stuck to their knitting—and whose CEOs compensation has suffered along with their stock prices—should be retained.
2. In long/short portfolios, be long commodity stocks and short bank stocks that make headlines for untraditional losses. That trade hasn’t been working lately, but it remains an overall portfolio risk-reducer. The list of banks that have shown great skill and profitability by going heavily into new kinds of products and new kinds of accounting is roughly as long as the list of major copper, oil and gas producers that profited by selling heavily forward.
3. A financial-led bear market within a financial-led recession can be particularly perilous if central banks run out of ways to reflate the system—and surprisingly benign if the central banks’ rescues remain timely. To date, the central banks have been up to the job—if propping up a badly-behaving financial sector is a key component of their job descriptions. Result: the overall stock market has outperformed our expectations. We still don’t like the risk/reward ratio.
4. Dividends become more attractive as central banks cut rates. The problem for investors is that many of “The Great Dividend-Paying Stocks” are financials that have been reporting ghastly blunders. In many cases, their payout ratios have climbed far above the 50% threshold that has made these stocks better investments than bonds. Opportunities remain—and dividends may be the only positive return most US stocks will deliver this year.
5. Although North American consumers have yet to see the cost pass-through in major foodstuffs of $6 corn and $8 wheat, it will come sooner or later. Based on past periods of food inflation, one of the first consumer cutbacks is on eating out. Restaurant stocks are especially unappetizing when food costs soar out of control.
6. Gold has pulled back from its high because the dollar stopped falling and the bank bailouts seem to be working. Remain overweight gold as a clear-cut hedge against further bad news on both those fronts.
7. The Canadian dollar decoupled from the euro, failing to rally to new peaks—which makes little sense to us. US clients should continue to use Canadian government bonds and Canadian short-term investments as alternatives to Treasuries and US cash.
8. Within the commodity group, continue to accumulate the leading agricultural stocks. Given the spectacular performance of the fertilizer stocks, the best bargains currently on offer are in the farm machinery companies. The global food crisis will almost surely cripple the opposition to GM seeds, which means the seed stocks have great upside room.
9. Within debt portfolios, continue to emphasize inflation hedge bonds—preferably in strong currencies. Treasuries remain overvalued, despite the recent strong run-up in yields from barely-observable levels.
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Tags: Agricultural commodities, Agriculture, Bank stocks, BMO Capital Markets, Commodities, Donald Coxe, Emerging Markets, energy, Financials, Grain prices, Investment Strategy, Markets
Posted in Agriculture, Banks, Commodities, Credit Markets, Crude Oil, Economy, Financials, Fixed Income, India, Markets, contango, energy, gold stocks, inflation | 1 Comment »
Don Coxe: Food Prices and Investment Strategy
Friday, May 2nd, 2008
May 1, 2008 - Coutesy of BNN.ca - Don Coxe, the must-read and must-see, BMO Capital Markets Chief Investment Strategist, discusses food prices, shortages, and the appropriate investment strategy in the face of the recent food crisis;
click for video
courtesy of BNN
Source:
Global Portfolio Strategy [04-30-08 10:10 AM]
BNN, April 30, 2008
http://watch.bnn.ca/#clip49664
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Tags: Agriculture, BMO, Canadian Stocks, energy, Markets
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Worldwide Fertilizer Consumption
Wednesday, April 30th, 2008
April 30, 2008 - Courtesy of NYTimes.com - This is for those of you who have invested in Potash, Monsanto, Mosaic, Agrium, et al.
Click for the larger map.
Hat Tip: Barry Ritholtz, The Big Picture.
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Tags: Agriculture, Markets
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Jim Rogers: All My New Money Is Going To Commodities and China
Wednesday, April 30th, 2008
April 27, 2008 - A recent Bloomberg article quotes Jim Rogers as to his bent for Chinese stocks and Commodities. Specifically, Rogers is focusing his attention in China in the areas of agriculture, airlines, tourism, and education.
“All my new money goes to commodities and China,’’ said Rogers.
“All the panic looks like a bottom,’’ he said. “I have bought in the last four to five weeks. I’ve been buying shares in China for the first time in a long time.’’
“China has a huge agricultural problem,’’ Rogers said. The “government is doing everything it can to revive the agriculture industry.’’
Rogers was bullish on the Chinese yuan, saying it could eventually rise to 2 yuan per dollar.
“Don’t sell your renminbi (yuan), because it will go a lot higher in the next 20 years,’’ Rogers said.
Apparently the folks at Morgan Stanley do not agree with Rogers, saying that China is a “sell.” Rogers appears to disagree vehemently.
Selling Chinese shares in 2008 “is a big mistake,’’ said Rogers, adding that he had also bought stocks in Singapore, Taiwan and Hong Kong. “I have never sold any Chinese shares.’’
The complete article is available by clicking below:
Investor Jim Rogers Buys Chinese Shares as Markets Hit Bottom, April 27, 2008, Bloomberg
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Tags: Agriculture, China, Commodities, Jim Rogers, Markets, RMB, Yuan
Posted in Agriculture, BRIC, China, Commodities, Crude Oil, Emerging Markets, Gold, Infrastructure, Markets, inflation | No Comments »
Jim Rogers: Bullish China and Commodities
Sunday, April 13th, 2008
In this week’s Barron’s interview (Jim Rogers, Light-Years Ahead of the Crowd: Interview With James B. Rogers, Private Investor), with Laurence Strauss of Barron’s, Jim Rogers, author of Investment Biker, notable hedge fund manager and former partner of George Soros discusses his point of view on China, commodities, and the US economy. Here are some excerpts: On China:
Why are you so bullish on China?
China is going to be the next great country. The 19th century was the century of the U.K. The 20th century was the century of the U.S. The 21st century is going to be the century of China. Even if I’m wrong, there are 1.5 billion people who speak Chinese every day, so it’s not as if our daughter is learning Danish. Even if she winds up working in a Chinese restaurant, she is going to be the maitre d’ — not the dish washer.
What else intrigues you about China?
China was in decline for 300 years and then around 1978 Deng Xiaoping said, “OK, let’s find something new.” He reintroduced entrepreneurship and capitalism to a country that has had a long, long history of both. In China they save and invest more than 35% of their income; in America we save less than 2%. The Chinese work from dawn to dusk. When they come to work, they don’t say, “How many holidays do I get?” They want to live like we do in America and they are willing to work hard, save and invest for the future.
What about investment opportunities in China?
Perhaps the safest investment is the renminbi, the Chinese currency. I don’t see how the renminbi should not go up against the dollar, anyway, for the next several decades. Commodities, of course, are a great way to invest in China. If you have nickel, they will take you to dinner, pay for dinner and pay you on time. They have to buy commodities. And there are some industries in China that are going to do well, no matter what happens to the world economy — water treatment, for instance. China has a horrible water problem that it is doing something about.
What other industries in China look interesting?
Agriculture. Mao Zedong [who ruled China from 1949 until his death in 1976] totally ruined agriculture. China now is spending huge amounts of money trying to rebuild agriculture. The same goes for power generation. Another growing industry is tourism; the Chinese have not been able to travel for some 300 years, for a variety of reasons. But now the government is making it much easier to get passports, and they are encouraging travel.
On Commodities:
Are we still in the early stages of a bull market for commodities?
I wouldn’t say it’s early; the commodities bull market started in early 1999. There are going to be corrections — and big ones — along the way. That’s true for every bull market.
But nobody has brought on any new supply of anything in the past 25 or 30 years. The last gigantic oil field was discovered in the 1960s. The number of acres devoted to wheat farming has been declining for more than 30 years. Food inventories are the lowest they’ve been in 60 years.
Our colleague Gene Epstein argued in a recent Barron’s cover story that there is a huge speculative element pushing up commodities prices.
But where is the oil coming from that’s going to drive down prices and keep them down? We are going to have corrections, as was the case in 2001 after 9/11. Is there speculation in commodities? Of course. Whenever you have a bull market, it draws money. If the fundamentals are right, investors make money and they want to make more. But people were buying commodities for 20 years in the 1980s and 1990s and nothing happened, because the fundamentals weren’t right yet. Now that the fundamentals are right, more money is going into commodities. It will end in a bubble and hysteria. But in 2018, or whenever this bubble finally starts to peak, if I’m lucky you will call me up and I’ll say it’s time to sell commodities.
On Emerging Markets:
Why have you sold most of your emerging market holdings?
Take Africa as an example. It’s a natural- resource-based economy, so a huge fortune is going to be made there in the next 10 years. Many countries will look a lot better because they do have lots of natural resources.
Having said that, right now there are probably 15,000 MBAs on airplanes flying around the world looking for emerging markets, some of which are now called frontier markets. I’ve been investing in these markets for many years and all of a sudden they have a name. That’s why I have sold all my emerging markets except China and Taiwan.
But I hope I’m smart enough that if and when there is a big correction, I’ll be able to buy back some of those holdings.
We’ve seen the correction in emerging markets…
Finally, a comment on the US economy as a debtor nation…
As recently as 1987 the U.S. was a creditor nation. We are now the largest debtor nation the world has ever seen. We owe trillions. That’s with a “t.” The real problem is that that our foreign debt is increasing at a rate of $1 trillion every 15 months. You can do the arithmetic.
For a complete transcript of this article click this link: http://www.ronpaulforums.com/showthread.php?t=132805
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Tags: Agriculture, China, Commodities, Currency, Emerging Markets, Markets, Metals, US Stocks
Posted in Markets | No Comments »
Commodity Snapshot
Monday, April 7th, 2008
April 7, 2008 - Courtesy of Bespoke Investment Group - Below we feature, as no one else does better, Bespoke’s commodity snapshot. It gives you an at-a-glance view of where commodities prices are in relative terms.
Below we highlight our trading range charts of ten major commodities. The green shading represents two standard deviations above and below the commodity’s 50-day moving average. When the price moves above or below this trading range, the commodity is considered overbought or oversold.
After a pullback from $110 to $100, oil is now trading at $104, which is just above the middle of its trading range. Natural gas declined sharply on the commodity pullback a couple of weeks ago, but it has since moved higher and is almost back to new highs. Declines in silver, platinum, wheat and copper left prices right in the middle of their trading ranges, while declines in gold and coffee put them close to oversold territory. Corn has actually moved back to new highs and is now trading above the top of its trading range.
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Tags: Agriculture, Commodities, energy, Gold, Metals
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Jim Rogers: Long agricultural commodities, RMB, Short investment banks
Sunday, March 30th, 2008
March 30, 2008 - On March 12, 2008, Jim Rogers appeared for a live interview on CNBC Europe. If you missed it, just click on the link below.
Just watched it… It is a must watch. In his usual candour, Mr. Rogers tells it like it is. If he woke up in Bernanke’s place, he would quit, and then abolish the Fed for providing t”socialism for the rich.”
His calls - Invest in agricutural commodities (in his opinion, this will be the most profitable trade for the next 2 to 5 years), long the Renminbi, short the investment banks.
http://www.cnbc.com/id/15840232?video=682734828&play=1
Even if you don’t like the guy, its a good interview with one seriously interesting and knowledgeable person.
Thank you Mr. Rogers.
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Tags: Agriculture, Banks, Commodities, Currency, Investment Strategy, Markets
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Don Coxe: Remain Heavily Overweight Commodity Stocks
Friday, March 14th, 2008
Mar. 14, 2008 - There are few who can rival Donald Coxe, BMO Financial’s Chief Investment Strategist, when it comes to providing what has historically been an accurate macro outlook on financial markets. Below, are Mr. Coxe’s paragraphed recommendations from February’s edition of Basic Points (courtesy of J’s Global Analysis). In a time of great uncertainty, this kind of clarity and direction is invaluable.
1. Long-term investors should remain heavily overweight commodity stocks, including the base-metal stocks. As the bear market grinds on, use days of stock market weakness to add to commodity stock exposure. They not only remain the asset class with the best earnings outlook, but also the asset class that is least understood by conventional asset allocators, who still see them as cyclicals dependent on OECD growth.
2. In the near term, the golds will continue to outperform stock markets and to act as a form of hedge against two kinds of shocks – financial panics and inflation shocks.
3. Remain heavily underweight bank stocks, and financials tied to “Jurassic Park Avenue” excesses. Within the financial group, overweight high-quality fire and casualty companies, life insurers, and asset management organizations.
4 Retain above-average cash positions, preferably in strong currencies.
5. Where possible, borrow in dollars and invest in assets denominated in strong currencies.
6. The Canadian dollar remains the Western currency with the best fundamentals. Canada’s problems arise because the Great Lakes are an insufficient barrier to the flow of bad economic and financial trends from the South.
7. Within the commodity groups, continue to emphasize investment in companies with long-duration unhedged reserves in the ground in politically secure regions.
8. The growth of sovereign control of energy assets means that the supply-side response to record-high oil prices will probably be inadequate to meet relentlessly growing global demand. Too many Third World governments with rich oil reserves have too many other demands for cash to reinvest heavily for the long term in new production. Retain exposure to the shares of producing Alberta Oil Sands companies with reserves that could outlast this century.
9. Long-term-oriented investors should use any temporary pullback in base metal producers to build their portfolios for the Final Movement of the Sonata – which will be the longest and loveliest performance of metal music in history.
10. The Treasury yield curve is now in recession mode – low yielding and upward sloping. It is of investment merit only for those who expect a long, deep recession. The Ten-Year note, with a negative real yield of 50 basis points, should appeal only to those who believe the recession will be accompanied by deep deflation. Oddly enough, credit spreads, though they have widened from their record-low levels, do not discount any recession at all.
We think bond investors should go for short- and medium-term high-quality non-Treasury paper – preferably in currencies other than greenbacks.
11. Defence stocks remain attractive, even if Democrats win it all in November. The next president may well choose to speak more softly than the incumbent, but if he or she doesn’t carry a big stick, the jihadists won’t listen.
Also, click here for Donald’s most recent webcast, dealing with the case for commodities and resources stocks.
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Tags: Agriculture, BRICs, Commodities, energy, Fixed Income, Investment Strategy, Investment Wisdom, Markets
Posted in Markets | 2 Comments »
Agriculture Stocks Belong in Long Term Portfolios
Friday, February 22nd, 2008
February 20, 2008 - James B. Stewart, Wall Street Journal, writes that Agricultural Stocks Belong In Long Term Portfolios.
Here are a few excerpts:
What’s remarkable about soaring agriculture prices is that corn, oats, barley and wheat aren’t finite resources, like oil or copper. Fortunately for the world’s ever-growing population, food is a renewable resource. Yet it isn’t inexhaustible. U.S. stockpiles of many grains are at record lows, according to some reports. A more affluent world population is clamoring for better-quality foods, starting with wheat, a natural high-protein grain and the essential raw material in bread. The ethanol boom may have peaked, but the biofuel movement has further super-charged demand.
You thought $3-a-gallon gas was bad? On a recent visit to my neighborhood market, I saw loaves of bread fetching upward of $4, a small box of granola was $5, and a pound of beef filet was $27.99. Get ready for refrigerator shock.
There isn’t much consumers can do about it, short of going on a crash diet. But you can ease the pain by sharing in some of the profits that are flowing into the agricultural sector.
Here are some agriculture related stocks and ETFs:
Stocks Ticker 12-Month return AG Growth Income Fund AFN.UN-T Agrium AGU-T CNH Global CNH-N Deere & Co. DE-N Monsanto MON-N Mosaic MOS-N Potash Corp. POT-T Saskatchewan Wheat Pool VT-T Terra Nitrogen TNH-N ETFs Ticker Claymore Global Agriculture ETF COW-T PowerShares DB Agriculture Fund DBA-A Market Vectors Agribusiness ETF MOO-A
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Tags: Agriculture, Markets
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Stagflation Threat Requires Strategy
Wednesday, February 20th, 2008
Feb. 20, 2008 - Stagflation is a threat that is best defended against with commodities and Treasury Inflation Protected Securities or TIPS as they are commonly referred to.
A recent article by John Wasik, Bloomberg describes a few ways that investors protect against stagflation:
Several investments come to mind: commodities and Treasury inflation-protected securities, or TIPS.
…One refuge in inflationary times has been gold. Held in huge quantities by large banks and the favorite commodity of inflation speculators, it has been in demand over the past year.
You are better off buffering the ravages of inflation on your portfolio.
That means finding investments that combine income and price appreciation, and rise with inflation expectations.
Two investments come to mind: commodities and Treasury inflation-protected securities, or TIPS. A deft combination of TIPS and commodities can be found in the PIMCO Commodity Real Return Strategy Fund. It returned 23 percent last year. This is my portfolio’s key inflation buffer.
Whatever stagflation strategy you adopt, remember that overconcentrating in any of the inflation-fighting vehicles will add unnecessary risk to your portfolio.
Inflation is an often-unpredictable ogre that creeps up slowly. You will need a number of weapons to do the job.
Canadian investors seeking to invest in inflation protected securities and commodities may look at any of a number of Real Return Bond and diversified commodity products. Some of these include:
ETFs
iShares Real Return Bond ETF (XRB)
Claymore Global Agriculture (COW)
Canadian Mutual Funds
TD Real Return Bond Fund A (TDB755)
Investors Real Return Bond Fund (IGI491)
Don Coxe’s January 2008 recommendations include this particular paragraph:
Bond investors face two risks: inflation and credit. Nominal Treasury bond yields are far too low, and quality corporates are too rare – with 71% of corporate debt junk-rated. Buy inflation-hedged sovereign bonds – preferably in major foreign currencies. Simplicity is good: avoid complex products that are subject to drastic rating writedowns.
George Soros discusses the circumstances under which the Fed might be rendered impotent at macroeconomic control:
Credit expansion must now be followed by a period of contraction, because some of the new credit instruments and practices are unsound and unsustainable. The ability of the financial authorities to stimulate the economy is constrained by the unwillingness of the rest of the world to accumulate additional dollar reserves. Until recently, investors were hoping that the US Federal Reserve would do whatever it takes to avoid a recession, because that is what it did on previous occasions. Now they will have to realise that the Fed may no longer be in a position to do so. With oil, food and other commodities firm, and the renminbi appreciating somewhat faster, the Fed also has to worry about inflation. If federal funds were lowered beyond a certain point, the dollar would come under renewed pressure and long-term bonds would actually go up in yield. Where that point is, is impossible to determine. When it is reached, the ability of the Fed to stimulate the economy comes to an end.
Caution: One thing to remember is that TIPS or Real Return Bonds in a mutual fund do not provide investors with the same degree of risk management where date-driven spending plans are concerned. The maturity date of any bond is a guarantee the face value will be paid at an exact time in the future. Bond mutual funds, unlike the underlying security, do not provide any fixed maturity date or guranteed sum. Ideally, if you can get your hands on the bonds, then do so.
…leaves you wondering just how far the Fed may or will have to go with rate cutting in order to get the economy going again, and in the process, provide enormous [inflationary] stimulus to the rest of the world. This is truly a mixed blessing.
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Tags: Agriculture, Commodities, Credit Market, Investment Strategy, Markets
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