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The Mighty Bean (Soybean, That Is)
By Julian Murdoch
An article covering the recent soybean rally that, among other things, explains how soybean prices have impacted DBA. From Hard Assets Investor (excerpt):
"So how do you get your soybean exposure beyond trading futures? Many agricultural exchange-traded products hold soybeans, but two with the highest holdings are PowerShares DB Ag Fund ETF (DBA) and iPath DJ-AIG Grains ETN (JJG).
As of May 29, the DBA ETF held 24.20% of the fund in soybeans split between two contracts - 15.72% in the Nov. '09 contract and 8.48% in the Jan. '10 contract. For further soy exposure, the fund also held 2.37% in soybean oil. The other commodities the fund holds are corn (23.19%), wheat (19.84%) and sugar (30.395)."
Full article at http://www.hardassetsinvestor.com/features-and-interviews/1/1595-the-mighty-bean-soybean-that-is.html
Brazil's Big Oil Bet
By Julian Murdoch
Another article on the Tupi oil fields that tries to put everything into perspective. From Hard Assets Investor (excerpt):
"Petrobras discovered the Tupi reserves in October of 2006, announced its existence to the world on November 2007 and on May 1, 2009, the first barrels of oil started flowing in an extended well test (EWT). The EWT is expected to peak at 15,000 bpd and last 15 months. By late 2010, after completion of the EWT, the Tupi Pilot Project is expected to begin, with production levels forecast at 4 million cubic meters of natural gas and 100,000 barrels of oil produced per day.
Full production at Tupi is forecast to top out at 1 million barrels of oil per day - effectively increasing Brazil's production to close to 3 million bpd. That's enough to take Brazil from the No. 16 position on the top oil-producing country list, up to No. 6 - leapfrogging over places such as Mexico, United Arab Emirates, Canada, Kuwait, Venezuela, Iraq, Norway, Nigeria, Angola and Algeria. And that's not all - Petrobras is aiming to increase overall production to 3.6 million BOE by 2013 as it continues to add new wells.
Look out big boys - here comes Brazil!"
The full article's available here: http://www.hardassetsinvestor.com/features-and-interviews/1/1570-brazils-big-oil-bet.html
Coal (Stocks) On Fire
Written By Julian Murdoch
The new feature up at Hard Assets Investor examines why coal stocks are up 50% on the year, even though prices have plummeted, and what KOL's future might hold.
From Hard Assets Investor (excerpt):
"Last summer, I wrote about the prospects for getting into the coal market. At the time, I pointed out that "just because coal is up 140% does not mean that Joe's Coal Mine is all of a sudden 140% more profitable." And indeed, like so many bull markets of that halcyon summer, the bull market in coal came to a crashing halt, and brought down with it coal stocks, as well as the only coal-focused exchange-traded fund in town at the time, the Van Eck Market Vectors Coal (KOL).
The story has been pretty straightforward and painfully familiar: The global economy tanked, including China, and thus energy and steel demand for coal dried up. At least, that's what happened to the demand for the spot coal that shows up on charts. The reality from the coal company's perspective is that long-term contracts drive the bottom line, and those long-term contracts are negotiated based on real supply and demand - how many boatloads of the stuff go from point A to point B, and on what schedule.
One theory for the big pop in coal prices is that it was driven by the participation of speculators taking long positions, and it's quite possible that some of those longs are now out of the market. That speaks to a potential bottom in coal prices, a theory that was at least hinted at in our interview with Howard Gatiss, CEO of coal marketing giant CMC, in January.
So if coal has found a bottom, does that mean it's time to consider the coal miners themselves?
It might just be too late."
The full article is up at http://www.hardassetsinvestor.com/features-and-interviews/1/1559-coal-stocks-on-fire.html.
Gold Stocks Not Driven By Broader Market
By Brad Zigler
Just wanted to point out this latest by Brad Zigler at Hard Assets Investor about GDX, and how it's been doing relative to GLD and the S&P.
From the article (excerpt):
"Bullion, represented by the SPDR Gold Shares Trust (NYSE Arca: GLD), just couldn't keep up with the stocks comprising the Market Vectors Gold Miners Index ETF (NYSE Arca: GDX). GDX shares shot up 6% by Monday's close, while the GLD trust ended the day with less than a 2% gain.
With its 3.4% gain, the broad-based S&P 500 stock index covered only half the ground taken by miners. That's not surprising when you think about it. After all, there are a lot more stocks in the blue-chip index; only 28 issues make up the GDX portfolio.
Despite the apparent outsized volatility of gold stocks Monday, miners have actually been less risky than the broader market this year. Compare the performance of the miners ETF to the S&P 500-tracking S&P Depository Receipts (NYSE Arca: SPY): SPDRs only turned positive for the year on Monday's action, eking out a 0.7% gain. Year-to-date, GDX is up 3.4%, and has at one point been up as much as 14%.
Those gains have been realized with vastly disparate risks. The standard deviation of daily returns for the S&P tracker is one and a half times greater than the gold stock ETF's.
You can forgive the holders of gold stocks, then, if they seem a little smug compared with other stock investors."
The full article is available here: http://www.hardassetsinvestor.com/component/content/article/3/1552-gold-stocks-not-driven-by-broader-market.html?Itemid=39
Yeah, SLX isn't doing half bad! Hopefully it can stay that way.
The Future of Agribusiness Isn't Golden... And That's A Good Thing
By Brad Zigler
Just pointing out Brad Zigler's latest over at Hard Assets Investor. From the article (excerpt):
""Good as gold" is a phrase that's meant to assure the listener of an item's intrinsic worth. Lately, you wouldn't have used that idiom to describe agribusiness. No, you'd have to say that agribusiness is actually better than gold.
Agribusiness, represented by the Market Vectors Agribusiness ETF (NYSE Arca: MOO), has been outperforming the bullion-holding SPDR Gold Shares Trust (NYSE Arca: GLD) since late February. The Market Vectors portfolio tracks 44 global firms making up the DAXglobal Agribusiness Index. Index constituents include companies producing agricultural chemicals and farm equipment, livestock operations and biofuels manufacturers. The index roster is populated with large-capitalization issues such as Potash Corp. of Saskatchewan (NYSE: POT), Archer Daniels Midland Co. (NYSE: ADM) and Komatsu Ltd. (Pink Sheets: KMTUF) as well as smaller outfits including Maple Leaf Foods, Inc. (Pink Sheets: MLFNF) and The Andersons, Inc. (Nasdaq: ANDE).
Year-to-date, the agribusiness ETF has gained 10.3% compared with a barely perceptible 0.9% inching up in the gold trust's price."
The full article's available here: http://www.hardassetsinvestor.com/component/content/article/3/1548-a-good-thing-agribusiness-future-isnt-golden.html?Itemid=39
Pork Catches the Flu
By Julian Murdoch
Forget about reality, perception is killing the pork contracts. The international overreaction has caused a similar outbreak in commodities prices and companies, but is it all just short term panic?
From Hard Assets Investor (excerpt):
"As you'd expect, the actual stocks of the companies making a living with pigs took a big hit as well:
Tyson (NYSE: TSN), Hormel (NYSE: HRL) and Smithfield (NYSE: SFD) all took a beating on Monday - with Smithfield suffering around a 12% drop in stock price. Smithfield has a major pig farm and processing operation in Mexico, and though it claims, loudly, that it is not the source of the flu, it hasn't been able to recover as well as Hormel, which is back even.
Beyond the immediate, gut reaction in pork-related stocks and commodities, people began speculating about other future ramifications."
The full article's up at http://www.hardassetsinvestor.com/features-and-interviews/1/1545-pork-catches-the-flu.html
ABX Looks Good This Earnings Season
Yin and Yang Gold Stocks
Written by Brad Zigler
From Hard Assets Investor (excerpt):
"Barrick Gold Corp. (NYSE: ABX) and Agnico-Eagle Mines Ltd. (NYSE: AEM) both release earnings Wednesday. Besides cranking out gold, that's about all these two companies have in common. Taken together, they're a study in contrasts; the yin and yang of gold miners.
That's made manifest in the companies' ability to surprise analysts. We postulated the surprise potential for these two companies in our recent earnings preview ("Will Gold Stock Earnings Surprise Anyone?"). Based upon Barrick's recent tendency to outperform expectations and Agnico-Eagle's propensity to lag analysts' estimates, we adjusted the then-current consensus earnings figures upward for Barrick and downward for Agnico-Eagle.
Last week, the Street thought Barrick would deliver 36 cents a share in first-quarter earnings. Our model says 37 cents is more likely. Analysts pegged Agnico-Eagle's EPS at 10 cents; we're looking for 9 cents.
So, why does one company gladden our hearts and the other disappoint? It's all in the numbers, really."
The full article is at http://www.hardassetsinvestor.com/features-and-interviews/1/1541-yin-and-yang-gold-stocks.html
July Cotton's Latest High Could Just Be Halfway Point
On Monday, July cotton closed at a near-time high above 53 cents a pound, a milestone the contract had difficulty closing above earlier this year. But if history holds true, this latest high might just be a stepping stone. Brad Zigler explains how in his latest blog post for HAI:
From Hard Assets Investor (excerpt):
"July cotton finished Monday with a near-term high close of 53.07 cents a pound, planting a milepost in a 10-cent ascent from its March lows. The 53-cent level represents strong resistance, after attempts to close above it failed earlier this year.
After a climb like that, you might think the market would take a pause to catch its breath before deciding where to go. After all, the rally was hardly punctuated by setbacks.
The future direction of July cotton could well be foretold by its past. Over the past 10- and 20-year periods, the contract has exhibited a strong tendency for bull moves in the first two weeks of May. Based upon these trends, there's a possibility of an up move equal to the rally we've just seen. If cotton trades to its trend line, the milepost just planted by the market marks only a halfway point."
The full article's available here: http://www.hardassetsinvestor.com/component/content/article/3/1540-cotton-the-not-so-hard-asset.html?Itemid=39
Recent crack spreads show ETF investors still profitable
Be an Oil Refiner In Your Spare Time
by Brad Zigler
Crack spreads (a measure of oil refining) improved last week, but what does that really mean? And why are ETF investors doing so much better than futures traders?
From Hard Assets Investor (excerpt):
"Upon reading that crack spreads (if you're not familiar with the terminology, see "Time For Crack Spreads") improved this week, one reader lambasted oil companies, saying: "If you can't squeeze consumers on crude, squeeze them at the pump."
Well, consumers and investors can squeeze right back thanks to the exchange-traded fund market. ETF investors, in fact, are now doing better than refiners in the old crack game.
Crack spreads simply represent the proceeds of refining: Crude oil is an input and distillates are the outputs. Refinery profit margins can be roughly approximated by tracking the prices of crude oil, gasoline and heating oil futures. A "3-2-1" crack spread describes the profits obtained by refining three barrels of oil into two barrels of gasoline and one barrel of heating oil. The refining of lighter, sweet crudes such as West Texas Intermediate (WTI) are best proxied by a 3-2-1 spread."
Read the full article here: http://www.hardassetsinvestor.com/component/content/article/3/1536-be-an-oil-refiner-in-your-spare-time.html?Itemid=39
You bring up a really good point. Unlike, say, gold, platinum and palladium are both extremely useful industrial metals; if their value starts being arbitrarily defined by investors with no sense of their supply/demand characteristics, it could be very bad for everyone involved.
If these two take off in the states, I wonder if we'll start to see more precious metal ETFs emerge. Can you imagine a Rhodium ETF? Yeesh.
Thanks for the tip about Anooraq! And glad you enjoyed the article. :)
I actually just wrote about this for today's Hard Assets Investor: http://www.hardassetsinvestor.com/features-and-interviews/1/1531-playing-platinum-a-palladium-ahead-of-the-etf-launch.html
Love to hear your thoughts on the new ETFs.
Steel Yourself For Earnings Season
By Brad Zigler
Zigler discusses the earnings reports for steel and agricultural companies coming out later this week, and what they could mean for SLX, MOO and both industries as a whole.
From Hard Assets Investor (excerpt):
"It's going to be a busy week for earnings watchers. Especially those tracking the agricultural and steel sectors. Iowa's Terra Industries Inc. (NYSE: TRA), a producer of fertilizers and agrichemicals, is expected to announce first-quarter earnings of 43 cents a share Tuesday – about half its year-ago profit.
Analysts have also forecast a 75-cents-per-share loss for Ohio-based AK Steel Holding Corp. (NYSE: AKS) to be announced that same day, a negative 191% year-over-year turnaround.
On Wednesday, Steel Dynamics, Inc. (Nasdaq: STLD)'s numbers are due, followed by a slate of Thursday releases by Potash Corp. of Saskatchewan (NYSE: POT), Bunge Ltd. (NYSE: BG), Reliance Steel & Aluminum Co. (NYSE: RS) and Nucor Corp. (NYSE: NUE).
The late-week reports are expected to show an average 93% decline in year-over-year results, with the steel companies getting the worst of it. The deterioration forecast for the four steel companies noted averages 126%; aggregate earnings for the three agribusinesses are expected to drop 62%.
Year-over-year stock performance pretty much mirrors the earnings disparity. Since April 2008, the Market Vectors Steel ETF (NYSE Arca: SLX), an exchange-traded portfolio tracking the NYSE Arca Steel Index, has swooned 63%; the 44 issues proxied by the Market Vectors Agribusiness ETF (NYSE Arca: MOO) dipped 51%."
Read the full article here: http://www.hardassetsinvestor.com/component/content/article/3/1526-steel-yourself-for-earnings-season.html?Itemid=39
Great! Glad you found it useful! While I'm at it, Brad actually wrote a follow-up to this article on Friday, looking at how Bunge Ltd in particular may have boosted MOO. That article's at http://www.hardassetsinvestor.com/component/content/article/3/1524-bunge-leads-agribusiness-breakout-.html?Itemid=39. May be worth checking out, too!
Bunge Leads Agribusiness Breakout
Written by Brad Zigler
From Hard Assets Investor (excerpt):
"Thursday's equity market rally provided confirmation of the commodity stock breakout discussed in yesterday's Desktop piece "The MOOve Toward Commodity Stocks". (link: http://www.hardassetsinvestor.com/component/content/article/3/1521-the-moove-towards-commodity-stocks.html?Itemid=39)
The Market Vectors Agribusiness ETF (NYSE Arca: MOO) gained 22 cents to close at $30.95, while the GreenHaven Continuous Commodity Index ETF (NYSE Arca: GCC) finished at $22.20, a loss of 29 cents. The disparate closes ratcheted the MOO/GCC ratio to a new year-to-date high of 1.39.
One of the stocks leading the agribusiness sector higher was giant Bunge Ltd. (NYSE: BG), a New York-based outfit that makes up 3.9% of the Market Vectors portfolio. Thursday, Bunge climbed $1.71, or 3.1%, higher to finish at $57.63."
Read the full article here: http://www.hardassetsinvestor.com/component/content/article/3/1524-bunge-leads-agribusiness-breakout-.html?Itemid=39
The MOOve Toward Commodity Stocks--by Brad Zigler
Just wanted to point out Brad Zigler's latest on MOO, "The MOOve Toward Commodity Stocks", from www.HardAssetsInvestor.com (excerpt):
"There's been tension building between commodity investors for some time now. One camp figures the futures market is the best place to trade, while the other advocates commodity stocks.
The equity players' position has been bolstered by recent buoyancy in stock prices as commodities have slowly simmered. The boiling point may well be nigh, though.
Wednesday, the Market Vectors Agribusiness ETF (NYSE Arca: MOO), an exchange-traded portfolio tracking the 44-member DAXglobal Agribusiness Index, scored its highest close since the retracement of last year's commodity tumble began. Ending the day at $30.73, the Market Vectors ETF punched through a critical resistance level that could lead to a run-up to the $40 level."
Rest of the article and charts available here: http://www.hardassetsinvestor.com/component/content/article/3/1521-the-moove-towards-commodity-stocks.html?Itemid=39
Will Ashland Channel Ben Graham?
From Hard Assets Investor (excerpt):
"Benjamin Graham, were he still alive, would likely be having a field day picking through today's market wreckage for bargains. Graham, the granddad of value investing and mentor to Warren Buffett, earned a reputation for deep-discount investing in the wake of the 1929 stock market crash.
Just as there were valuable bargains to be struck in the aftermath of the '29 collapse, there are enticing buys to be made now...
Take the stocks in the Basic Materials sector as examples. This segment, made up of companies in the chemical, mining, industrial metals and forestry/paper industries, was brutalized after a five-year bull run. In just five months, between June and November 2008, the Dow Jones US Basic Materials Sector Index lost nearly 59% of its value. Only recently has the benchmark started to show signs of stabilizing.
Among the stocks contributing to the index's decline was that of Ashland, Inc. (NYSE: ASH), a company Ben Graham would no doubt recognize. Well, old Ben would recognize part of the company, anyway. Originally founded in 1918 as Ashland Oil, the Kentucky-based company is now a diversified chemicals enterprise operating in four divisions.
What Ben Graham would see now if he were looking at Ashland is a company with surprisingly good fundamentals that's been chucked into the bargain basement along with a lot of sector dross."
Read the full article at http://www.hardassetsinvestor.com/features-and-interviews/1/1513-will-ashland-channel-ben-graham.html
Gazprom, Shell Announce Deal to Export LNG to USA
From Hard Assets Investor (excerpt):
"In a deal we expected to get a bit more press, Gazprom (OTC: OGZPY) and Shell (NYSE: RDS) announced a deal on Thursday that will allow Gazprom to export liquefied natural gas (LNG) to Shell's terminal in Baja California. The gas will then be transported via pipeline to Southern California. From Russia with love.
In this time of depressed U.S. natural gas prices - down 74% to around $3.50 per MMBtu from last July's high of $13.31 per MMBtu - why in the world would Gazprom be making a deal to bring in more supply?
It's all about plans for world domination, eventually."
Read the rest of the article here: http://www.hardassetsinvestor.com/features-and-interviews/1/1514-gazprom-a-russian-invasion.html