Several elements on Wednesday fueled a plunge in prices of many commodities, as the perfect storm of information resulted in big sell offs.
Among the major concerns was the release of the minutes from the latest meeting of the U.S. Federal Reserve, which hinted at the possibility of it slowing down its latest QE or stimulus program before the hiring numbers it was targeting are even close to being met.
It sounds like a deliberate attempt by the Fed to influence the market, as the chances of it stopping its stimulus any time soon is very unlikely at best. Hiring really hasn't moved at all since the introduction of the latest round of QE, so the idea the central bank is going to just slow down or close up shop is pretty ludicrous.
Nonetheless, a somewhat spooked market over responded by punishing commodities across the board. Gold and silver were hit particularly hard by the news, with gold settling down 2.6 percent and silver 2.7 percent. That brought gold to 7-month lows, while silver experienced its sharpest decline in 2 months.
The other ambiguous news was a rumor a commodity hedge fund had to liquidate positions in oil and metals, putting more downward pressure on commodities. As of this writing there is no proof this has even happened. Most of the sell-off in commodities happened between 10 am and 11 am, the time the rumor of the hedge fund sell off was at its peak.
Some analysts look at it all as speculative trading more than anything else. The fact that the majority of the commodities fell on average about 2 percent points to a blip more than a rush out of the sector.
Finally, what has some potential legs one way or the other for commodities is the demand factor, in that regard there continues to be mixed data and outlook concerning the growth rate of the U.S. and global economy, causing ongoing uncertainty in the commodity markets
There is no doubt though that this was a news-related downward push on commodity prices, and shouldn't continue on until there is more clarity over the issues, which outside of the rumored hedge fund, will take time to reveal itself.
Commodity demand and the presumptions the Fed may end easing sometime soon, are things that won't be known for some time, with the ending of stimulus assuredly not going to happen any time soon. Once that's realized, things will level off again until commodity demand is better understood.
Showing posts with label Commodity Demand. Show all posts
Showing posts with label Commodity Demand. Show all posts
Wednesday, February 20, 2013
Wednesday, August 11, 2010
BHP Billiton (NYSE:BHP) Concerned Over Commodity Demand
BHP Billiton (NYSE:BHP) is one of the few companies in the world that is considered a bellwether of the global economy. Essentially that means, how BHP Billiton goes, so will go the economy. It also means guidance from BHP is among the most important in the world, as it does give a snapshot of the global economy as they see it at the moment, and BHP usually sees it as good as anybody does.
With that in mind, BHP said in its most recent earnings report, that they were cautious of the demand for commodities going forward, based on how much governments would implement austerity, which would in many cases determine the demand for commodities and/or raw materials.
There are a couple of different major scenarios playing out at the same time. The first is the austerity measures being implemented in Europe, and the Chinese slowing down their heated up urban property markets, which will have some negative effect on prior estimates of commodity demand.
That doesn't mean there still won't be significant demand, just that the demand will be nowhere near the levels they've been in the recent past.
The second scenario playing out is the recent reminder and commitment from the U.S. government and Federal Reserve that they're willing and able to continue "quantitative easing," i.e. printing money in another attempt to stimulate the economy. It has completely failed, but that isn't going to stop them from continuing to do it again.
Just today the Federal Reserve announced they're going to buy long-term Treasury securities by using the proceeds from sales from their gigantic mortgage-bond portfolio.
As the securities they acquired mature, the Fed said they'll continue to roll them over. In other words, they'll continue to use that money to acquire Treasuries.
What that does is keep the enormous amount of money spread around into the economy.
The question is whether that will help the economy. History, and even the last couple years of history, have proven this is a failed strategy, and it's a giant waste of money.
So when BHP Billiton says they're concerned about the demand factor as it relates to policies of governments around the world, these are the type of things they're looking at.
With that in mind, BHP said in its most recent earnings report, that they were cautious of the demand for commodities going forward, based on how much governments would implement austerity, which would in many cases determine the demand for commodities and/or raw materials.
There are a couple of different major scenarios playing out at the same time. The first is the austerity measures being implemented in Europe, and the Chinese slowing down their heated up urban property markets, which will have some negative effect on prior estimates of commodity demand.
That doesn't mean there still won't be significant demand, just that the demand will be nowhere near the levels they've been in the recent past.
The second scenario playing out is the recent reminder and commitment from the U.S. government and Federal Reserve that they're willing and able to continue "quantitative easing," i.e. printing money in another attempt to stimulate the economy. It has completely failed, but that isn't going to stop them from continuing to do it again.
Just today the Federal Reserve announced they're going to buy long-term Treasury securities by using the proceeds from sales from their gigantic mortgage-bond portfolio.
As the securities they acquired mature, the Fed said they'll continue to roll them over. In other words, they'll continue to use that money to acquire Treasuries.
What that does is keep the enormous amount of money spread around into the economy.
The question is whether that will help the economy. History, and even the last couple years of history, have proven this is a failed strategy, and it's a giant waste of money.
So when BHP Billiton says they're concerned about the demand factor as it relates to policies of governments around the world, these are the type of things they're looking at.
Monday, June 7, 2010
Falling Commodity Prices Suggest Ongoing Recession
The ongoing drop in commodity prices implies the recession continues on, as the decline in prices tell us demand has plummeted.
I say an ongoing recession because I've never believed we've left the recession, but only the government stimulus plans and unprecedented printing of money has kept it from being exposed for what it is.
But whether you want to call it a double-dip recession, , u-shaped recession, or something else, the fact is we're set to face more economic difficulty, and after spending trillions around the world, it has done nothing to stop the recession we've been in for several years, and now has been made worse because of the government spending that has hidden and masked the reality.
There is only one reason commodity prices will drop, and that's based on supply and demand. In this case it's all about demand, which has simply dried up.
That drying up comes from the emerging narrative of slowing demand in China, the European Union, and the United States.
The frantic attempts to spin the situation by the U.S. governments and other governments around the world are no longer believable, and we need to be ready as it hits the fan again.
If spending trillions has ended with nothing, we can be sure spending trillions more will do nothing as well, other than continue to decimate people and their spending power.
Consequently gold prices will continue to rise, as well as quality gold mining stocks, as it becomes the only place of safety that can be counted on going forward.
I say an ongoing recession because I've never believed we've left the recession, but only the government stimulus plans and unprecedented printing of money has kept it from being exposed for what it is.
But whether you want to call it a double-dip recession, , u-shaped recession, or something else, the fact is we're set to face more economic difficulty, and after spending trillions around the world, it has done nothing to stop the recession we've been in for several years, and now has been made worse because of the government spending that has hidden and masked the reality.
There is only one reason commodity prices will drop, and that's based on supply and demand. In this case it's all about demand, which has simply dried up.
That drying up comes from the emerging narrative of slowing demand in China, the European Union, and the United States.
The frantic attempts to spin the situation by the U.S. governments and other governments around the world are no longer believable, and we need to be ready as it hits the fan again.
If spending trillions has ended with nothing, we can be sure spending trillions more will do nothing as well, other than continue to decimate people and their spending power.
Consequently gold prices will continue to rise, as well as quality gold mining stocks, as it becomes the only place of safety that can be counted on going forward.
Thursday, June 3, 2010
Citigroup (NYSE:C) Sees Economic Troubles Ahead
Although the mainstream media is attempting to spin some type of recovery, an increasing number of economists and analysts see something different, including some from Citigroup (NYSE:C), who are starting to have a much different take on the situation.
Citigroup analyst David Thurtell said this, “China is cooling from very strong levels, the European recovery threatens to stall, and the U.S. is leveling out.”
Other than that, everything is going fine I guess, at least if you believe news reports.
This is already starting to make a major impact on commodities companies who had especially been looking to China to drive revenue and earnings growth. That has all changed from their efforts to curb their property market which has generated high inflation.
Take it all together and there's no way it can be spun to make it look like we're in a recovery.
The days of being able to count on providers or raw materials to be certain winners are over. We need to comb through data much more closely going forward, as some commodities will do better than others, along with those companies with strong exposure to them.
Citigroup analyst David Thurtell said this, “China is cooling from very strong levels, the European recovery threatens to stall, and the U.S. is leveling out.”
Other than that, everything is going fine I guess, at least if you believe news reports.
This is already starting to make a major impact on commodities companies who had especially been looking to China to drive revenue and earnings growth. That has all changed from their efforts to curb their property market which has generated high inflation.
Take it all together and there's no way it can be spun to make it look like we're in a recovery.
The days of being able to count on providers or raw materials to be certain winners are over. We need to comb through data much more closely going forward, as some commodities will do better than others, along with those companies with strong exposure to them.
Monday, May 24, 2010
Morgan Stanley (NYSE:MS): Crisis Could Trigger Massive Sell-off
According to Morgan Stanley (NYSE:MS), if the current sovereign debt crisis in Europe continues, we could see a massive sell-off of up to 15 percent in the markets, according to managing director and head of equities at Morgan Stanley India, Ridham Desai.
On the other hand, if things don't worsen, Desai says markets could be up by a similar percentage on the positive side.
As I don't see how things won't worsen, I expect the worst in Europe, and believe we'll see a drop in equities as the width and depth of the debt crisis emerges. We're only at the beginning of seeing a large number of banks in the region default, and countries as well.
Overall, Desai sees India outperforming other emerging markets, and this time that could be the case, depending on how deeply China responds to their inflation problems, which should cut back on growth and related imports for the country.
On the other hand, if things don't worsen, Desai says markets could be up by a similar percentage on the positive side.
As I don't see how things won't worsen, I expect the worst in Europe, and believe we'll see a drop in equities as the width and depth of the debt crisis emerges. We're only at the beginning of seeing a large number of banks in the region default, and countries as well.
Overall, Desai sees India outperforming other emerging markets, and this time that could be the case, depending on how deeply China responds to their inflation problems, which should cut back on growth and related imports for the country.
Saturday, May 22, 2010
Why Commodity Prices Remain Down
While there is no doubt the bull commodity market will continue on, as demand for raw materials isn't going to decline any time soon, we do have to look at what is causing the temporary drop in commodity prices in the midst of the bull market.
Although there are numerous variables, I only want to touch on the major ones, as most of the others are primarily offshoots of these several factors, and aren't as important in understanding the big picture.
First of all, nothing has changed in ordinary market behavior. Prices fall because demand falls. There's nothing else to it.
Having said that, we need to understand what's behind demand falling in order to grasp the implications and how to invest in response to them.
I do want to start with natural gas, not because it's actually connected to what I want to get into, but because it has unique elements outside what we're going to talk about, so I want to get that out of the way.
It's not that there isn't the potential for a lot of natural gas demand, it's that there is now so much more natural gas to supply our needs, that the sheer volume of it has changed the supply/demand picture, and prices are falling because of the enormous quantities in the U.S., and continually being discovered in other parts of the world.
So there's an oversupply for decades, if not longer, and that has changed the prices as far as natural gas goes.
Now as far as most other commodities, there's a different reason for demand falling, and that's because banks are doing little lending, and businesses are doing very little borrowing. Even though we here the occasional media story to the contrary, the truth is there is no confidence in the economy, as it has been propped up by government spending on dubious stupid and unsustainable projects and not by the private sector.
But the reason why the private sector isn't participating in the recovery, is because they, along with the banks, don't trust this so-called recovery either, and aren't trying to secure loans because there has to be projected demand for products and services, and they don't believe that the demand is out there. And no matter how hard politicians call for business loans to be made, there aren't that many buyers out there that want or need them.
So with with bankers and businesses not trusting the recovery, or that there really is one, other than taxpayer money being thrown at the problem in attempts to prop up prices, it's likely that commodity prices will continue to be under downward pressure, with occasional exceptions related to a specific commodity.
Here's another example of that to watch for, so you don't take this as a blanket statement for every commodity. I'm just talking about commodities as an overall sector will probably continue to lose value.
One exception may be aluminum. A unique factor has recently been introduced which could drive the price up because of a new source of demand, and that is the introduction of several aluminum ETFs in the latter part of the year, which will include in the holding of physical aluminum, just like gold ETFs do with physical gold.
That means there will be an increased aluminum demand that has never been there before in history; at least in the way the ETFs operate.
So near the end of 2010 and onward, we could see aluminum prices go up because Rusal, and to a lesser degree, Alcoa (NYSE:AA), will be the major providers of aluminum for the funds, and Rusal is reportedly having a difficult time coming up with enough aluminum, so Alcoa will be a secondary provider.
The point is revealing this is to understand any commodity can be an exception at one time or another, and even though the overall commodity sector will probably continue to fall in prices in the near-term, there are always exceptions, and we need to remain vigilant while understanding why prices are being pushed downward.
Once banks start releasing their money into the economy again, i.e., lending to businesses, there could be, and should be, an explosion of upward commodity price movement. Until that happens, we have to watch for anomalies in the market which could make it different for specific commodities within the sector.
Without getting into it, gold should be another exception for pretty obvious reasons, as it will continue going up for some time, and is of course unique to the overall picture concerning commodities.
Although there are numerous variables, I only want to touch on the major ones, as most of the others are primarily offshoots of these several factors, and aren't as important in understanding the big picture.
First of all, nothing has changed in ordinary market behavior. Prices fall because demand falls. There's nothing else to it.
Having said that, we need to understand what's behind demand falling in order to grasp the implications and how to invest in response to them.
I do want to start with natural gas, not because it's actually connected to what I want to get into, but because it has unique elements outside what we're going to talk about, so I want to get that out of the way.
It's not that there isn't the potential for a lot of natural gas demand, it's that there is now so much more natural gas to supply our needs, that the sheer volume of it has changed the supply/demand picture, and prices are falling because of the enormous quantities in the U.S., and continually being discovered in other parts of the world.
So there's an oversupply for decades, if not longer, and that has changed the prices as far as natural gas goes.
Now as far as most other commodities, there's a different reason for demand falling, and that's because banks are doing little lending, and businesses are doing very little borrowing. Even though we here the occasional media story to the contrary, the truth is there is no confidence in the economy, as it has been propped up by government spending on dubious stupid and unsustainable projects and not by the private sector.
But the reason why the private sector isn't participating in the recovery, is because they, along with the banks, don't trust this so-called recovery either, and aren't trying to secure loans because there has to be projected demand for products and services, and they don't believe that the demand is out there. And no matter how hard politicians call for business loans to be made, there aren't that many buyers out there that want or need them.
So with with bankers and businesses not trusting the recovery, or that there really is one, other than taxpayer money being thrown at the problem in attempts to prop up prices, it's likely that commodity prices will continue to be under downward pressure, with occasional exceptions related to a specific commodity.
Here's another example of that to watch for, so you don't take this as a blanket statement for every commodity. I'm just talking about commodities as an overall sector will probably continue to lose value.
One exception may be aluminum. A unique factor has recently been introduced which could drive the price up because of a new source of demand, and that is the introduction of several aluminum ETFs in the latter part of the year, which will include in the holding of physical aluminum, just like gold ETFs do with physical gold.
That means there will be an increased aluminum demand that has never been there before in history; at least in the way the ETFs operate.
So near the end of 2010 and onward, we could see aluminum prices go up because Rusal, and to a lesser degree, Alcoa (NYSE:AA), will be the major providers of aluminum for the funds, and Rusal is reportedly having a difficult time coming up with enough aluminum, so Alcoa will be a secondary provider.
The point is revealing this is to understand any commodity can be an exception at one time or another, and even though the overall commodity sector will probably continue to fall in prices in the near-term, there are always exceptions, and we need to remain vigilant while understanding why prices are being pushed downward.
Once banks start releasing their money into the economy again, i.e., lending to businesses, there could be, and should be, an explosion of upward commodity price movement. Until that happens, we have to watch for anomalies in the market which could make it different for specific commodities within the sector.
Without getting into it, gold should be another exception for pretty obvious reasons, as it will continue going up for some time, and is of course unique to the overall picture concerning commodities.
Tuesday, May 18, 2010
Canadian Dollar Close to One-week Low
The Canadian dollar fell 0.5 percent as of 4:02 p.m. Toronto, against the U.S. dollar dropping from C$1.0325 yesterday to C$1.0375 today.
With the strong possibility of another global slowdown, one that really hasn't began to recover in any meaningful way, Matthew Strauss, senior currency strategist at Royal Bank of Canada, noted that Canada's reputation as strong producers of raw materials will help the currency and its bonds.
The European sovereign debt crisis is part of that concern, but even more so, and under-reported at this time, is the challenges facing China, who is battling the threat of inflation by increasing interest rates and regulating their property industry more.
But there's no doubt about the fact that China is the major consumer of base-metal commodities from Canada, and it's probably not a matter of whether or not demand will lower, but the degree to which it will.
That also has commodity countries like Brazil and Australia concerned as well, who have been counting on China to help their emerge out of the recession in a sustainable manner. That expectation is no longer a certainty for any country or company providing commodities to them.
It's unlikely the Canadian dollar will continue to fall, although if it happened for a short period of time, it would be advantageous to Canadian business, as the lucrative tourist season is coming, and Canadian exporters could compete better with a lower currency
With the strong possibility of another global slowdown, one that really hasn't began to recover in any meaningful way, Matthew Strauss, senior currency strategist at Royal Bank of Canada, noted that Canada's reputation as strong producers of raw materials will help the currency and its bonds.
The European sovereign debt crisis is part of that concern, but even more so, and under-reported at this time, is the challenges facing China, who is battling the threat of inflation by increasing interest rates and regulating their property industry more.
But there's no doubt about the fact that China is the major consumer of base-metal commodities from Canada, and it's probably not a matter of whether or not demand will lower, but the degree to which it will.
That also has commodity countries like Brazil and Australia concerned as well, who have been counting on China to help their emerge out of the recession in a sustainable manner. That expectation is no longer a certainty for any country or company providing commodities to them.
It's unlikely the Canadian dollar will continue to fall, although if it happened for a short period of time, it would be advantageous to Canadian business, as the lucrative tourist season is coming, and Canadian exporters could compete better with a lower currency
Thursday, March 4, 2010
JPMorgan (NYSE:JPM) and Citigroup (NYSE:C) Chasing Commodity Investment Leaders
JPMorgan and Citigroup Looking to Commodities
Now that many of the banks and investment banks like JPMorgan (NYSE:JPM) and Citigroup (NYSE:C) have finished shoring up their foundations and building up their reserve capital, they're looking at generating revenue, and the commodity bull market may be the best place to do that in the years ahead, as they try to catch up with competitors like Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS) who make a lot of money in the sector, and are positioned well to continue doing that.
Although mergers and acquisitions and initial public offerins are expected to increase some this year, that business won't be a huge revenue generator until we truly emerge from the recession.
So commodities are one of the few growth sectors left which have a good chance of increasing revenue and profits for banks and their investment bank units.
JPMorgan and Citigroup Looking to Commodities
Now that many of the banks and investment banks like JPMorgan (NYSE:JPM) and Citigroup (NYSE:C) have finished shoring up their foundations and building up their reserve capital, they're looking at generating revenue, and the commodity bull market may be the best place to do that in the years ahead, as they try to catch up with competitors like Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS) who make a lot of money in the sector, and are positioned well to continue doing that.
Although mergers and acquisitions and initial public offerins are expected to increase some this year, that business won't be a huge revenue generator until we truly emerge from the recession.
So commodities are one of the few growth sectors left which have a good chance of increasing revenue and profits for banks and their investment bank units.
JPMorgan and Citigroup Looking to Commodities
Wednesday, March 3, 2010
Mark Mobius Likes Commodity Countries
Mark Mobius - Commodities in Emerging Markets
Emerging market guru Mark Mobius likes two things about investing in the BRIC countries, and that is consumers and commodities.
The head of Templeton Asset Management said he continues to look for strong performances from countries with strong natural resources and infrastructure and consistency in place to extract and distribute them.
With growing middle classes in BRIC nations, Mobius also likes industries prepared to service them like retail, banking and disposal product firms.
Anyone investing in BRIC economies need to have a longer term outlook to be successful says Mobius, as they are volatile and move up and down quite a bit.
Market timers and other need not apply here or you could get slaughtered from the short term fluctuations of the markets.
Mark Mobius - Commodities in Emerging Markets
Emerging market guru Mark Mobius likes two things about investing in the BRIC countries, and that is consumers and commodities.
The head of Templeton Asset Management said he continues to look for strong performances from countries with strong natural resources and infrastructure and consistency in place to extract and distribute them.
With growing middle classes in BRIC nations, Mobius also likes industries prepared to service them like retail, banking and disposal product firms.
Anyone investing in BRIC economies need to have a longer term outlook to be successful says Mobius, as they are volatile and move up and down quite a bit.
Market timers and other need not apply here or you could get slaughtered from the short term fluctuations of the markets.
Mark Mobius - Commodities in Emerging Markets
Wednesday, February 24, 2010
Charlie Munger Warns on America
Charlie Munger on Economics and America
Anyone reading Charlie Mungers parable over at Slate over the weekend should come away very sober, with the realization why precious metals like gold and silver, along with other commodities, will do well over the years ahead.
The parable by Charlie Munger attacked on two fronts. The first was the outrageous practices of the U.S. government which is out of control with its spending and taxation, and discourages entrepreneurs from flourishing when all they do is take wealth away from them and redistribute it like the growing socialist government and administration we now have.
On the private business side, Munger blasted the derivative trading of the banks which were a major part of the underlying problems many of us face.
While this is all true and accurate, we still face the consequences of the actions of the U.S. government and major banks no matter what is done in attempts to deal with the root causes.
This is why commodities will continue to be the major success story over the next decade or more, as real things will continue to be in demand, rather than things most people can't begin to understand.
Charlie Munger on Economics and America
Anyone reading Charlie Mungers parable over at Slate over the weekend should come away very sober, with the realization why precious metals like gold and silver, along with other commodities, will do well over the years ahead.
The parable by Charlie Munger attacked on two fronts. The first was the outrageous practices of the U.S. government which is out of control with its spending and taxation, and discourages entrepreneurs from flourishing when all they do is take wealth away from them and redistribute it like the growing socialist government and administration we now have.
On the private business side, Munger blasted the derivative trading of the banks which were a major part of the underlying problems many of us face.
While this is all true and accurate, we still face the consequences of the actions of the U.S. government and major banks no matter what is done in attempts to deal with the root causes.
This is why commodities will continue to be the major success story over the next decade or more, as real things will continue to be in demand, rather than things most people can't begin to understand.
Charlie Munger on Economics and America
Tuesday, February 23, 2010
Managed Commodity Assets Fall
Managed Commodity Assets Fall
Managed commodity assets fell for the first time in over a year, said Barclay's Capital, evidently based on worries over the global economy.
Overall commodity assets under management dropped to $245 billion, a $12 billion fall from the $257 billion from last month.
In what I think is a strange response to uncertainty, investors took close to $500 million out of exchange-traded funds, with the majority of that being funds backed by gold and a variety of other precious metals.
At a time when uncertainty should drive smart investors to gold, the idea that taking it out of gold and moving it to something else is ignorant and bizarre, although obviously a lot more was happening than only that in the overall commodity managed assets picture.
Managed Commodity Assets Fall
Managed commodity assets fell for the first time in over a year, said Barclay's Capital, evidently based on worries over the global economy.
Overall commodity assets under management dropped to $245 billion, a $12 billion fall from the $257 billion from last month.
In what I think is a strange response to uncertainty, investors took close to $500 million out of exchange-traded funds, with the majority of that being funds backed by gold and a variety of other precious metals.
At a time when uncertainty should drive smart investors to gold, the idea that taking it out of gold and moving it to something else is ignorant and bizarre, although obviously a lot more was happening than only that in the overall commodity managed assets picture.
Managed Commodity Assets Fall
Sunday, February 14, 2010
Commodities and Sovereign Default = Opportunity
Commodities and Sovereign Default
It's interesting to read what some think will be the ruin of commodities because of the potential sovereign default from a growing number of countries, including Greece, Ireland, Spain and Portugal.
Of course the problem with ignorant writers on commodities is they're clueless as to how you make money with commodities, which is when they're on the way up or on the way down, so whether the price is going up or down for commodities is irrelevant from that point of view.
These writers only think in terms of whether or not those trying to make money on commodity prices going up are going to get clobbered, not realizing or even in some case - even knowing, that you make money either way.
For those investing in commodities, it doesn't make any difference whether you make the money on upwards or downwards price movements.
So don't forget to include that in your decision making going forward, as potential significant price movements in commodities one way or the other are always potentially great opportunities to make a lot of money.
Commodities and Sovereign Default
It's interesting to read what some think will be the ruin of commodities because of the potential sovereign default from a growing number of countries, including Greece, Ireland, Spain and Portugal.
Of course the problem with ignorant writers on commodities is they're clueless as to how you make money with commodities, which is when they're on the way up or on the way down, so whether the price is going up or down for commodities is irrelevant from that point of view.
These writers only think in terms of whether or not those trying to make money on commodity prices going up are going to get clobbered, not realizing or even in some case - even knowing, that you make money either way.
For those investing in commodities, it doesn't make any difference whether you make the money on upwards or downwards price movements.
So don't forget to include that in your decision making going forward, as potential significant price movements in commodities one way or the other are always potentially great opportunities to make a lot of money.
Commodities and Sovereign Default
Wednesday, February 10, 2010
Mark Mobius Likes Commodity Stocks
Mark Mobius Likes Commodities
While most of us that know Mark Mobius understand his focus and investment strategy concerning emerging markets, we also need to include his take on the commodity market as well.
For emerging markets, what all of us need to understand is commodities will continue to play a big part in their growth, whether its a large country or not, as for the most part it'll be stuff that generates growth for them majority of them, not high-tech products and services to start off with.
With that as a background, Mobius recently said that "Commodity stocks look good because we expect the global demand for commodities to continue its long-term growth. Consumer stocks are also favoured. With rising per capita income and strong demand for consumer goods, the earnings growth outlook for these stocks is positive."
Mobius added we must be good risk managers during this period of time, as there will continue to be huge fluctuations in all markets, of which commodities are usually always like, even in the best of times.
Some of the things Mobius advises to look out for and the risks he's talking about are:
"Risks such as the inability of governments to control the derivatives markets, loss of confidence, over or poor regulation and abandonment of the market economy philosophy do also exist. Therefore, we must pay attention to valuations and long-term earnings growth prospects in order to avoid buying or holding expensive stocks as a result of dramatic price rises that we have seen."
Mark Mobius Likes Commodities
While most of us that know Mark Mobius understand his focus and investment strategy concerning emerging markets, we also need to include his take on the commodity market as well.
For emerging markets, what all of us need to understand is commodities will continue to play a big part in their growth, whether its a large country or not, as for the most part it'll be stuff that generates growth for them majority of them, not high-tech products and services to start off with.
With that as a background, Mobius recently said that "Commodity stocks look good because we expect the global demand for commodities to continue its long-term growth. Consumer stocks are also favoured. With rising per capita income and strong demand for consumer goods, the earnings growth outlook for these stocks is positive."
Mobius added we must be good risk managers during this period of time, as there will continue to be huge fluctuations in all markets, of which commodities are usually always like, even in the best of times.
Some of the things Mobius advises to look out for and the risks he's talking about are:
"Risks such as the inability of governments to control the derivatives markets, loss of confidence, over or poor regulation and abandonment of the market economy philosophy do also exist. Therefore, we must pay attention to valuations and long-term earnings growth prospects in order to avoid buying or holding expensive stocks as a result of dramatic price rises that we have seen."
Mark Mobius Likes Commodities
Monday, February 8, 2010
Is Vale (NYSE: VALE) About to Explode Upwards in Price?
Vale Iron Ore Prices
I don't think there's any doubt Vale (NYSE: VALE) is positioned and poised for an extraordinary upwards run in its share price, as their 80 percent exposure to iron ore has them ready to partake in the increasing demand for iron ore, from which steel is made.
Probably the best example of this was the recent attempt by China to dampen down the price of iron ore in the market, which they failed to do because domestic Chinese companies had such a high demand for it that they were willing to pay the asking price even as the Chinese government attempting to pressure the major three iron ore producing companies - including Vale - to drop the price.
China attempted this last year and it backfired on them as the spot price was higher than the negotiated prices other companies paid for a contract for iron ore.
Anyway, Vale should have a nice, long run going up as the demand for iron ore should outstrip the supply for some time to come. Of course any of the major three iron ore producing companies should participate in that upward run, it's just that Vale's 80 percent exposure puts them in an enviable position.
Vale Iron Ore Prices
I don't think there's any doubt Vale (NYSE: VALE) is positioned and poised for an extraordinary upwards run in its share price, as their 80 percent exposure to iron ore has them ready to partake in the increasing demand for iron ore, from which steel is made.
Probably the best example of this was the recent attempt by China to dampen down the price of iron ore in the market, which they failed to do because domestic Chinese companies had such a high demand for it that they were willing to pay the asking price even as the Chinese government attempting to pressure the major three iron ore producing companies - including Vale - to drop the price.
China attempted this last year and it backfired on them as the spot price was higher than the negotiated prices other companies paid for a contract for iron ore.
Anyway, Vale should have a nice, long run going up as the demand for iron ore should outstrip the supply for some time to come. Of course any of the major three iron ore producing companies should participate in that upward run, it's just that Vale's 80 percent exposure puts them in an enviable position.
Vale Iron Ore Prices
XSTRATA (LSE: XTA.L) CEO: Commodities Boom Coming
Xstrata: Commodity bull run to continue
According to Xstrata (LSE: XTA.L) CEO Mick Davis, commodities are set to resume their bull run as demand for raw materials outstrips the ability to supply them.
Davis said: "In my opinion, the medium term outlook for commodity demand remains very promising, driven by the ongoing urbanisation and industrialisation of high-growth, populous economies, with China and other industrialising countries taking active steps to rebalance their economies towards domestic consumption-led growth over the next decade."
While I believe that's a true statement, Davis is obviously communicating it in response to the huge drop in annual profits it reported for 2009, which plunged by 41 percent from the year before.
Much of his hope and optimism stems from China and other emerging markets which in the building up of their domestic infrastructure which will require huge amounts of materials to accomplish.
Of course if there is more demand than supply can meet, there will be an inevitable rise in prices, which would be a huge positive for the company.
Overall revenue declined by 16 percent to $23.53 billion from 2008, showing it was the low prices of commodities which caused the 41 percent drop in prices, although demand was an ongoing part of the picture, while managing costs weren't able to turn profits around.
Xstrata: Commodity bull run to continue
According to Xstrata (LSE: XTA.L) CEO Mick Davis, commodities are set to resume their bull run as demand for raw materials outstrips the ability to supply them.
Davis said: "In my opinion, the medium term outlook for commodity demand remains very promising, driven by the ongoing urbanisation and industrialisation of high-growth, populous economies, with China and other industrialising countries taking active steps to rebalance their economies towards domestic consumption-led growth over the next decade."
While I believe that's a true statement, Davis is obviously communicating it in response to the huge drop in annual profits it reported for 2009, which plunged by 41 percent from the year before.
Much of his hope and optimism stems from China and other emerging markets which in the building up of their domestic infrastructure which will require huge amounts of materials to accomplish.
Of course if there is more demand than supply can meet, there will be an inevitable rise in prices, which would be a huge positive for the company.
Overall revenue declined by 16 percent to $23.53 billion from 2008, showing it was the low prices of commodities which caused the 41 percent drop in prices, although demand was an ongoing part of the picture, while managing costs weren't able to turn profits around.
Xstrata: Commodity bull run to continue
Thursday, February 4, 2010
Jim Rogers Still Likes China
Jim Rogers China and Commodities
...and China likes and need commodities.
While there are a few people zeroing in on the real estate market in China and exclaiming the country is in trouble, that's far from the truth, as China, as Jim Rogers continues to say, is still the hottest market on the planet. After all, where else in the world will you get close to 10 percent growth for a country?
Even if China drops to about 9 percent growth in 2010, who else is competing with those numbers?
Commodity demand continues to soar in China, as the recent demand for iron ore reveals, as China authorities attempted to negotiate prices down with major iron ore suppliers, but domestic demand was so high they were weakened by their own markets as internally steel producers were willing to pay the price companies like Rio Tinto asked for.
That's how demand even overcomes a command economy like China, where the needs outstrip the ability to centrally control or even negotiate prices, as demand is now and must be met quickly.
This is going to continue to happen with other commodities as well, even with the tightening up of the money in the country, which has made some people think China will cut back on spending.
Not only do I think that's doubtful, but I think it was an attempt by China to negotiate lower prices by giving the public appearance of tightening up money in the country.
That seems contrary in that tightening money would seem to make prices go up more. But like I mentioned, this more than likely is posturing by the Chinese who I think are trying to hide the demand so commodity prices may continue at lower rates.
Jim Rogers China and Commodities
...and China likes and need commodities.
While there are a few people zeroing in on the real estate market in China and exclaiming the country is in trouble, that's far from the truth, as China, as Jim Rogers continues to say, is still the hottest market on the planet. After all, where else in the world will you get close to 10 percent growth for a country?
Even if China drops to about 9 percent growth in 2010, who else is competing with those numbers?
Commodity demand continues to soar in China, as the recent demand for iron ore reveals, as China authorities attempted to negotiate prices down with major iron ore suppliers, but domestic demand was so high they were weakened by their own markets as internally steel producers were willing to pay the price companies like Rio Tinto asked for.
That's how demand even overcomes a command economy like China, where the needs outstrip the ability to centrally control or even negotiate prices, as demand is now and must be met quickly.
This is going to continue to happen with other commodities as well, even with the tightening up of the money in the country, which has made some people think China will cut back on spending.
Not only do I think that's doubtful, but I think it was an attempt by China to negotiate lower prices by giving the public appearance of tightening up money in the country.
That seems contrary in that tightening money would seem to make prices go up more. But like I mentioned, this more than likely is posturing by the Chinese who I think are trying to hide the demand so commodity prices may continue at lower rates.
Jim Rogers China and Commodities
Commodity Prices Drive Emerging Market Stocks Up
Commodities and Emerging Markets
Stocks reflecting emerging markets enjoyed their based gain in a couple of months as commodity prices helped them rebound as some are starting to believe the economic recovery is real and demand for raw materials will increase.
As a result, the MSCI Emerging Markets Index surged 1.8 percent to 957.11 at a little past 11:00 a.m. in London, the most dramatic increase since Dec. 1, 2009.
Other major indexes increased as well with the Russian Micex Index of stocks rising by 1.2 percent; the Shanghai Composite Index of China increasing by 2.4 percent; and the Sensex Index in India gaining 2.1 percent.
Commodities and Emerging Markets
Stocks reflecting emerging markets enjoyed their based gain in a couple of months as commodity prices helped them rebound as some are starting to believe the economic recovery is real and demand for raw materials will increase.
As a result, the MSCI Emerging Markets Index surged 1.8 percent to 957.11 at a little past 11:00 a.m. in London, the most dramatic increase since Dec. 1, 2009.
Other major indexes increased as well with the Russian Micex Index of stocks rising by 1.2 percent; the Shanghai Composite Index of China increasing by 2.4 percent; and the Sensex Index in India gaining 2.1 percent.
Commodities and Emerging Markets
Tuesday, February 2, 2010
Gold Gains Most in Three Months
Gold rises to best daily performance in three months
Gold posted a 2 percent gain on Monday, the best daily increase in gold prices in three months, as a weak dollar helped drive gold prices up.
Oil moving up in price was also attributed to gold responding in such a strong fashion.
The last time gold moved up this much in a day was on November 3.
April delivery for gold futures rose by $21.20 to $1,105 an ounce on the Comex division of the New York Mercantile Exchange, equal to the 2 percent increase mentioned.
With inflation expected to pick up in 2010, it's sure gold will continue on its upwards price trend, even though the U.S. dollar has recently strengthened. While the dollar is expected to resume that performance on a temporary basis, it's unlikely to continue for a long period of time, and gold will again be the focus for investors looking for safety and an inflation hedge.
There should be some price swings in gold based upon these two scenarios playing out over the months.
Gold rises to best daily performance in three months
Gold posted a 2 percent gain on Monday, the best daily increase in gold prices in three months, as a weak dollar helped drive gold prices up.
Oil moving up in price was also attributed to gold responding in such a strong fashion.
The last time gold moved up this much in a day was on November 3.
April delivery for gold futures rose by $21.20 to $1,105 an ounce on the Comex division of the New York Mercantile Exchange, equal to the 2 percent increase mentioned.
With inflation expected to pick up in 2010, it's sure gold will continue on its upwards price trend, even though the U.S. dollar has recently strengthened. While the dollar is expected to resume that performance on a temporary basis, it's unlikely to continue for a long period of time, and gold will again be the focus for investors looking for safety and an inflation hedge.
There should be some price swings in gold based upon these two scenarios playing out over the months.
Gold rises to best daily performance in three months
Monday, February 1, 2010
Mark Mobius: Brazil Versus China
Mark Mobius talks Brazil versus China
While Mark Mobius, like many others, continues to be bullish on China, he considers the economy of Brazil "more sustainable," as it has no need to depend on imports, in contrast to China, which must import large number of crops and metals in order to grow.
“Brazil’s economy is more sustainable because they don’t have to import anything. China has to import oil, iron ore and foods,” said Mobius. “Brazil is in a situation where it has tremendous resources. Not only mineral resources, but agricultural resources.”
Of course the difference is China has about a billion more people, which makes long-term demand for products and services a key element of its economic policies, which grant it leverage when dealing with foreign companies and governments.
Either country is to be considered a bull, and even with its better position of sustainability, China is still the country to look for over the next decade or two for major growth.
Of course Brazil will participate in that growth by providing a number of crops, metals and other raw materials needed to supply the growing Chinese needs.
Mark Mobius talks Brazil versus China
While Mark Mobius, like many others, continues to be bullish on China, he considers the economy of Brazil "more sustainable," as it has no need to depend on imports, in contrast to China, which must import large number of crops and metals in order to grow.
“Brazil’s economy is more sustainable because they don’t have to import anything. China has to import oil, iron ore and foods,” said Mobius. “Brazil is in a situation where it has tremendous resources. Not only mineral resources, but agricultural resources.”
Of course the difference is China has about a billion more people, which makes long-term demand for products and services a key element of its economic policies, which grant it leverage when dealing with foreign companies and governments.
Either country is to be considered a bull, and even with its better position of sustainability, China is still the country to look for over the next decade or two for major growth.
Of course Brazil will participate in that growth by providing a number of crops, metals and other raw materials needed to supply the growing Chinese needs.
Mark Mobius talks Brazil versus China
Will Agricultural Commodity Prices Rise?
Agricultural Commodity Supply and Demand
It seems on every turn the idea of agricultural commodity prices rising are an illusion rather than a reality, as recent data from the United States Department of Agriculture (USDA) confirms crop production was close to record levels, as supply continues to outstrip demand in the short term.
Even so, agriculture should be a great investment over the long haul, as there is no more land being made and the population of the world continues to grow. There is no way this can be stopped from eventually driving up agricultural prices, as they've been some of the worst performing sectors of all over the last 30 years or so.
There is no doubt grains are beaten down and out of favor, and that represents a buying opportunity.
Once supply and demand sorts itself out, we should see the beginning of a long-term bull market in agriculture, with little to hold it back.
It may take a little longer because of the tightness of the global economy and the near-record crop results this year. But we can be sure it will kick in sometime soon, and when that happens, those that have positioned themselves accordingly will make a fortune through their investments in agriculture.
Agricultural Commodity Supply and Demand
It seems on every turn the idea of agricultural commodity prices rising are an illusion rather than a reality, as recent data from the United States Department of Agriculture (USDA) confirms crop production was close to record levels, as supply continues to outstrip demand in the short term.
Even so, agriculture should be a great investment over the long haul, as there is no more land being made and the population of the world continues to grow. There is no way this can be stopped from eventually driving up agricultural prices, as they've been some of the worst performing sectors of all over the last 30 years or so.
There is no doubt grains are beaten down and out of favor, and that represents a buying opportunity.
Once supply and demand sorts itself out, we should see the beginning of a long-term bull market in agriculture, with little to hold it back.
It may take a little longer because of the tightness of the global economy and the near-record crop results this year. But we can be sure it will kick in sometime soon, and when that happens, those that have positioned themselves accordingly will make a fortune through their investments in agriculture.
Agricultural Commodity Supply and Demand
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