Posts Tagged ‘Commodity’
Canada a step closer to hiking rates from record low?
Tuesday, March 2nd, 2010
By Peter Bookvar, via Big Picture
After Australia raised rates to 4% as expected, the other major commodity country, Canada, decided to leave rates unchanged at their record low of .25%, as expected. They also repeated that policy won’t change before the end of Q2 but they hinted that they could go up soon after as they said “core inflation has been slightly firmer than projected, the result of both transitory factors and the higher level of economic activity.” They also said “the level of economic activity in Canada has been slightly higher than the bank had projected” in its Jan report. Rates have been at record lows because of the BoC’s concern with economic growth in the US, Canada’s biggest trading partner, and due to the strength in the Canadian $ which today is rallying to a 6 week high vs the US$ but the time has passed for record low interest rates in Canada considering their more positive outlook and bubbly housing market.
Tags: 6 Week, Australia, Big Picture, Boc, Canada, Commodity, Core Inflation, Country Canada, Economic Activity, Economic Growth, Hiking, Housing Market, Low Interest Rates, Partner, Positive Outlook, Q2, Record Lows
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Bespoke’s Commodity Snapshot: Year-to-Date Change
Monday, March 1st, 2010
Friday, February 26, 2010 at 12:54PMBelow we highlight the year-to-date change for ten key commodities. As shown, orange juice has gotten off to a nice start (+13.15%), while natural gas has once again resumed its seemingly perpetual decline (-13.75%). Platinum is the second best performing commodity shown with a gain of 5.34%, followed by gold at +1.59%, and oil at +0.34%. While gold and platinum are up in 2010, silver is down 2.69%.
Below we provide our trading range charts for the ten commodities highlighted above. For each chart, the green area represents between 2 standard deviations above and below the commodity’s 50-day moving average. As shown, oil has been trading sideways between about $85 and $70 for a few months now, and it is currently closer to overbought levels than oversold levels. Natural Gas is once again in extreme oversold territory, and the same goes for coffee. After reaching oversold territory, gold, silver, copper, wheat, and corn have all seen nice bounces. Platinum remains in a nice uptrend. Along with the the recent outperformance of stocks like Ford (F), Sirius XM (SIRI), and Johnson Controls (JCI), is the solid performance of platinum (used in catalytic converters) another sign of an auto recovery?
Tags: 2 Standard Deviations, Auto Recovery, Bounces, Catalytic Converters, Commodities, Commodity, Gold Silver, Jci, Johnson Controls, Moving Average, Natural Gas, Orange Juice, Outperformance, Range Charts, Silver Copper, Siri, Sirius, Uptrend, Xm, Year To Date
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A Decade of Hot Commodities
Sunday, January 24th, 2010
A Decade of Hot Commodities
By Frank Holmes, CEO, US Global Funds, January 19, 2010
We’ve updated our popular Periodic Table of Commodity Returns, and the headline news should come as no surprise – 2009 was a complete turnaround for the sector’s 2008 performance.
Commodities (as measured by the Reuters-Jefferies CRB Index) rose 24 percent in 2009, the largest single-year increase since the early 1970s.
In 2008, only one of the 14 commodities in the table finished positive – gold, up a scant 5.8 percent – while five finished with losses exceeding 50 percent, led by lead at a negative 63.5 percent.
Last year, only three of the 14 ended up underwater for the year, with coal coming in at rock bottom at minus 13 percent. Four of the industrial metals – copper, lead, zinc and palladium – each rose more than 100 percent in 2009.
Just to get into the top half of 2009’s performers, a commodity needed gains of about 57 percent, as you can see with platinum in the 10-year chart above. In fact, while gold received tonnes of attention last year, its 24 percent returns were only good enough for 10th place.
There are many ways to analyze the data in the periodic table – I’ll share just a few basic observations.
- Of the 140 squares in the table (14 commodities times 10 years), 92 of them contain positive returns – that’s just under two-thirds success covering a range from the spectacular 320 percent up year for natural gas in 2000 down to the microscopic 0.02 percent gain by crude oil in 2006.
- Gold had the most positive years – its streak now stands at nine straight years after a 5.5 percent loss in 2000, when the bullion price dipped below $265, roughly a quarter of the current price. Oil, platinum and silver all had eight positive years during the decade, while nickel had six down years.
- Natural gas had the most extreme swings, finishing at #1 three times and at the bottom twice. One year after recording the biggest yearly gain in 2000, natural gas had the worst single-year loss – minus 74 percent.
- Aluminum and silver had the least relative volatility and the most years hovering around the middle. Even in their best performance year (2009), both were in the bottom half – silver at #8 and aluminum at #9.
We believe that the secular bull market for commodities and natural resources stocks that began in 2000 is far from over. The International Monetary Fund believes that commodity prices will rise further in 2010 as a result of global economic recovery and escalating demand from fast-growing emerging markets.
The expanding middle class in China, Brazil and the other biggest emerging economies want more of the material goods taken for granted in the developed world. They are laying claim to a bigger share of the world’s commodities, many of which could face future supply constraints.
History shows that commodity supercycles typically last 20 to 25 years, though not without periods of volatility. If the current cycle follows the historic pattern, we could be just starting the second half of a prolonged upward trend.
View the Complete Interactive Table
Tags: Bullion Price, China, Commodities, Commodity, Crb Index, Crude Oil, Emerging Markets, Frank Holmes, Global Funds, Gold, Headline News, Hot Commodities, Industrial Metals, January 19, Jefferies, Natural Gas, nickel, oil, Palladium, Periodic Table, Price Oil, Reuters, Rock Bottom, Squares, Zinc
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A Yen for Canada?
Monday, January 18th, 2010
Back in September I wrote Canada on the Cusp of Something Big outlining my case about the Canadian economy, markets, and loonie. My central argument then, and now, was that Canadians need to get in front of the “invest in Canada,” theme before foreigners do. Sound fiscal policy, strong, well capitalized banks, a productive commodity complex, and our good-old-fashioned brand of conservatism, continue to make Canada the leading destination for investors, both on the domestic front, and internationally, in the G7.
There is more to the Canada story than meets the eye. The fundamentals, are only half the story, and relevant, particularly for the longer term outlook . What matters equally in the near and long term, however, is what is going on behind the scenes in the proprietary institutional and hedge fund trading rooms.
Pierre Daillie (AdvisorAnalyst.com), GlobeAdvisor.com, January 18, 2009
Tags: Advertisement, Banks, Canada, Canada Story, Canadian Economy, Canadians, Central Argument, Commodities, Commodity, Conservatism, Cusp, Foreigners, G7, Globeadvisor, Half The Story, Hedge Fund, Investors, Sound Fiscal Policy, Term Outlook, Yen
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China Keeps Moving Forward
Saturday, January 16th, 2010
China Keeps Moving Forward
By Frank Holmes
U.S. Global Investors
CEO and Chief Investment Officer
We’ve updated our popular Periodic Table of Commodity Returns, and the headline news should come as no surprise - 2009 was a complete turnaround for the sector’s 2008 performance.
Commodities (as measured by the Reuters-Jefferies CRB Index) rose 24 percent in 2009, the largest single-year increase since the early 1970s.
In 2008, only one of the 14 commodities in the table finished positive - gold, up a scant 5.8 percent - while five finished with losses exceeding 50 percent, led by lead at a negative 63.5 percent.
Last year, only three of the 14 ended up underwater for the year, with coal coming in at rock bottom at minus 13 percent. Four of the industrial metals - copper, lead, zinc and palladium - each rose more than 100 percent in 2009.
Just to get into the top half of 2009’s performers, a commodity needed gains of about 57 percent, as you can see with platinum in the 10-year chart above. In fact, while gold received tonnes of attention last year, its 24 percent returns were only good enough for 10th place.
There are many ways to analyze the data in the periodic table - I’ll share just a few basic observations.
- Of the 140 squares in the table (14 commodities times 10 years), 92 of them contain positive returns - that’s just under two-thirds success covering a range from the spectacular 320 percent up year for natural gas in 2000 down to the microscopic 0.02 percent gain by crude oil in 2006.
- Gold had the most positive years - its streak now stands at nine straight years after a 5.5 percent loss in 2000, when the bullion price dipped below $265, roughly a quarter of the current price. Oil, platinum and silver all had eight positive years during the decade, while nickel had six down years.
- Natural gas had the most extreme swings, finishing at #1 three times and at the bottom twice. One year after recording the biggest yearly gain in 2000, natural gas had the worst single-year loss - minus 74 percent.
- Aluminum and silver had the least relative volatility and the most years hovering around the middle. Even in their best performance year (2009), both were in the bottom half - silver at #8 and aluminum at #9.
We believe that the secular bull market for commodities and natural resources stocks that began in 2000 is far from over. The International Monetary Fund believes that commodity prices will rise further in 2010 as a result of global economic recovery and escalating demand from fast-growing emerging markets.
The expanding middle class in China, Brazil and the other biggest emerging economies want more of the material goods taken for granted in the developed world. They are laying claim to a bigger share of the world’s commodities, many of which could face future supply constraints.
History shows that commodity supercycles typically last 20 to 25 years, though not without periods of volatility. If the current cycle follows the historic pattern, we could be just starting the second half of a prolonged upward trend.
[View the Complete Interactive Table]
Tags: Bullion Price, Chief Investment Officer, China, Commodities, Commodity, Crb Index, Crude Oil, Emerging Markets, Frank Holmes, Gold, Headline News, Industrial Metals, Jefferies, Natural Gas, nickel, oil, Palladium, Periodic Table, Price Oil, Reuters, Rock Bottom, Squares, U S Global Investors, Zinc
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SocGen’s Investment Strategy For 2010
Wednesday, January 13th, 2010
Société Générale (SocGen), France’s second-biggest bank, has told its clients to be bullish on commodities, stay with stocks and “anything but cash” in 2010. SocGen’s Chief Strategist Alain Bokobza spoke to CNBC on Jan. 11, 2010 about the investment strategy.
Fear of Double Dip to Prevent Bond Crash
Bokobza sees an ongoing momentum for growth in the U.S. with higher employment, as well as the emerging economies. The consensus seems to be we are heading towards a bond market crash in 2010; nevertheless, fear of a double-dip will prevent a bond market crash.
The U.S. Federal Reserve and G4 countries are expected to stay on a near-zero interest rate for much longer than expected, which makes yield curve play attractive.
Yen - The Carry Trade Currency
Bokobza expects the U.S. Federal Reserve and the ECB to announce this summer that the monetary tightening process will start at the end of 2010 or in Q1 of 2011. At the time of the announcement, i.e., this summer, carry trade will begin to switch from Dollar to Yen.
Overall, the Dollar is expected to be fairly flat against the Euro by the end of this year; however, Yen, as the new major carry trade currency, would fall ”massively”.
SocGen’s Main Advice For 2010
With near-zero interest rates, getting out of cash and into other riskier assets such as equities or commodities should be the strategy this year.
- Anything but cash
- Stay in equities
- Expect rising M&A cycles
- No bond market crash
- Yen carry-trade
- Be a commodity bull
Refer to SocGen’s Cross Asset Research Report dated Jan. 4, 2010 from Scribd.com HERE, and below, for full commentary and recommendations.
Video Source: CNBC
Tags: Alain Bokobza, Bond Market, Chief Strategist, Cnbc, Commodities, Commodity, Dollar To Yen, Double Dip, ECB, Emerging Economies, ETF, Federal Reserve, G4 Countries, Investment Strategy, Market Crash, Q1, SocGen, Societe Generale, Video Source, Yen Carry Trade, Yen Dollar, Zero Interest
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Japan’s Misfortune Good News for Canadian Market
Sunday, January 10th, 2010
Commodities and the Canadian dollar have continued to strengthen despite the rally in the U.S. dollar. That’s odd, because for nine months, the U.S. dollar was involved in an inverse relationship with commodities, the Canadian dollar, equities, and emerging markets.
That relationship ended in late November as the dollar began its now, six-week old recovery.
It was often reported, from March to November 2009, that commodities prices were rising as a by-product of the falling U.S. dollar. That, indeed was doubly so. Speculative interest in commodities was driving prices higher, while rising short interest in the U.S. dollar, and record deployments of institutional cash were sending the currency lower, against the yen, and euro…
Find out why its possible Canadian stocks, bonds, the loonie, the commodity complex could remain relatively stable, and possibly go higher, though modestly.
Pierre Daillie (AdvisorAnalyst.com), GlobeAdvisor.com, January 11, 2009
Tags: Canada, Canadian Bonds, Canadian Dollar, Canadian Stocks, Commodities, Commodities Prices, Commodity, Currency, Deployments, Emerging Markets, Globeadvisor, Inverse Relationship, Japan News, Late November, Market Commodities, Misfortune, Nine Months, Rally, Short Interest, Speculative Interest, Stocks Bonds, Yen
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Canada on the Cusp of Something Big - Forget about inflation for now
Friday, September 25th, 2009
Canada is on the cusp of something big. A boom in commodities means Canada will outperform the US over the next decade. Our recovery and upward trajectory is tied to global demand coming from China and India, and the rest of the developing world. And with attractive risk/reward fundamentals, sound fiscal position, and strong banking sector, Canada is destined to become a darling of global investors. At this time, Canada resides in a sweet spot of long term investing opportunity, but not for the one reason - inflation - that gets cited most often. Not yet anyway.
Mark Carney says Canada’s economic recovery is merely a ‘consequence’ of unconventional measures. And, his report cites that prices are still falling in Canada.
This flies in the face of all the hoopla surrounding the inflation-motivated theme of investing in commodities and/or commodities producers. Investing in commodities producers is by no means a bad idea; its the rationale for doing so, by way of inflation, that may be flawed. Investing in commodities falls under the aegis of inflation protection, because if indeed we find ourselves in inflationary times again, we will be happy to own real things, such as commodities and real estate.
In the U.S. however, is it really a big surprise that the G20 meeting is yielding a “strong dollar” consensus? China, and other dollar reservists, Brazil, Russia and India, have been squawking about the faltering greenback, threatening to take measures to reduce its appetite/dependency on the US dollar since before the crisis began. If you listen to the Michael Pettis interview regarding China, you’ll get the idea very clearly that China is in no position to undo its marriage to the US. At least not anytime soon. Un-pegging from the greenback would have destabilizing consequences for China, not too mention the global economy, if not because of its effect on China, then due to its effect on the US economy. The US/China relationship is a symbiotic one. In the meantime, we will watch the U.S./China economic ballet continue.
Therefore, as the G20 has reached a strong dollar consensus, the Canadian, Aussie and NZ dollars have all pulled back. It preserves balance for the dollar, yen and euro economies, and more importantly it keeps everyone happy politically. As for the Canadian dollar rising in value, it’s not a good development for the Canadian economy, but rather a by-product of the demand for what we produce. Its terrible for our non-commodity exports. So, balance works for us too, in the long run.
Kathy Lien: The Canadian Dollar tumbled against the greenback as investors took profits ahead of G20 meeting. Oil prices also fell more than 4 percent while gold prices closed below $1000, providing no support for the commodity currencies. The Canadian government returned to easier monetary policy after Canadian Finance Minister Jim Flaherty proposed an expansion of mortgage buy-backs to C$125 Billion or $116.4 Billion. The proposal comes on the midst of yesterday’s comments by Governor Mark Carney who claims the recovery is not “self-sustainable” and is a mere consequence of unconventional measures. If they proceed further with this, we could see a turnaround in the Canadian dollar.
In What is Gold to China?, we discussed the idea that gold is a safer long term bet as a result of the “Beijing put,” the notion that whenever gold falls to lower levels, the Chinese come in as strong buyers, bidding gold back up, as they are continually out to diversify their reserves into other currencies. Its all part of a symphony of intervention that is choreographed between the US, Europe, the IMF, Japan, and China to keep the dollar in a fundamentally stable range. Having said that, this too, benefits Canada as one of the world’s biggest gold producers, despite the fact the price of gold is subject to the manipulation of central bankers.
In that vein, Canada, as important as it is in today’s world, is along for the ride. Our recovery will depend upon a stable global recovery determined by steady interest rate policy and coordinated currency balancing.
Herein lies the opportunity; we just need to recognize it, and get our (long-term) peas lined up.
Canada really is the best thing going in the G7. We’ve written about this in the last two weeks in Canada: There’s no place like home, and Canada’s Universal Appeal and Advantage.
The long-term rationale for investing in Canada
Canada has what the world needs (resources), a sound fiscal position, and a strong banking system - So why haven’t the dollar reservists chosen to invest in Canada bonds, as an ultra-safe alternative to US Treasuries? Simple.
Canada has so much of what the reservists (BRICs and other emerging economies) need and want in order to build out their own economies, that investing in our debt would raise the price of the very things they want to buy from us, such as wheat, oil and gas, metals, and minerals. They are not just interested in importing commodities from us; more important, they have their eyes on buying the companies that produce the commodities, as well. Despite this, Canada’s bond market may perform well in the near term, as a by-product of today’s continued price weaknesses. And, the time will come, though not in the near future, when foreign investors will alternatively opt to buy Canada bonds.
Among the great inefficiencies that have plagued Canada is our conservatism (or rather the reluctance among Canadians to invest risk capital in the most strategic areas of our economy), and our complacency. Canadian companies have historically faced shortages of domestic investor capital, and that issue has forced them to look first to the US, and now globally for substantial sources of capital. This has meant that Canadians have foregone the ownership of our homegrown companies to foreign interests. Its this inefficiency that makes the opportunity to invest in our own commodities producers, and other companies so attractive.
By the way, every time something creative comes along to make it easy to raise money in Canada, for example, income trusts, someone in government comes along and shuts it down. There’s no doubt that there was some abuse and stretching of the rules which led to the legislation shutting them down, but then again, it was also one of the most successful equity financing periods in Canada’s capital markets history. At times it feels as though the Canadian government would rather help foreign investors take over our industries, rather than police the tax incentives that make raising capital easier, more fairly. Then again, this too, is part of our conservatism as a society, isn’t it?
Foreign investors are more interested in our companies than we are. As a country and as investors we need to realize that our assets are worth far more to foreigners right now than they are to us. We take our greatest assets, our natural resources, water, oil and gas for granted, because we have always lived in a state of surplus and exported most of what we produce, mainly to the US.
Now that the balance of demand is coming increasingly from the large emerging economies who face massive future shortfalls of materials, water, food, and energy we need to prepare for the geometric growth of demand coming in the next several decades. We sincerely owe it to ourselves to exercise our right to own and nurture these precious assets, before they pass into the hands of foreign corporate interests.
David Rosenberg states in his latest report, out today, that Canada is in the sweetest of spots because we are in the midst of a secular commodities boom. He cites Chindia as the key driver of demand over the next decade, but initially 2009 and 2010, where it is shown that China and India will lead the world in GDP growth, and currently command 21.4% share of Global GDP. This is no big surprise to anyone following commodities, but rather, more confirmation.
We believe that commodities are in a secular bull market, and this is where Canadian outperformance relative to the United States comes into play - nearly 45% of the TSX composite index is in resources; almost triple the share in the U.S. Almost 60% of Canada’s exports are linked to the commodity sector, roughly double the U.S. exposure. This explains how it is that the Canadian equity market has managed to outperform the S&P 500 this year by a cool 2,000 basis points (in this sense, Canada is basically a low-beta way to play the emerging markets via commodity exposure).
This by no means indicates that the US and the Western consumer will cease to be the world’s top consumer, but rather that we will have to line up with the new consumers from the developing world, to buy the same stuff. That is ultimately inflationary, but not for some time.
Rosenberg points out very nicely that commodities prices bottomed last year at the highest recession levels ever.
And, that prices bottomed at levels above historical peak prices.
This last chart is remarkable, because it illustrates how strong demand has gotten during the last ten years with the rise of China and India. Even after last year’s blow-off, prices are fundamentally higher because of the surge coming from the developing world’ growing appetite for food, shelter and commerce.
Forget about inflation, at least for now, as a reason to buy commodities. There are two overriding themes, that should be front and centre:
1) demand for commodities - Foreign interests wish to lock up supply which means the commodities themselves will be bid up.
2) demand for producing companies - Foreign interests, particularly China and its rapidly developing and mutually rich peers have their eyes squarely focused on our businesses and our natural resources. Mergers acquisitions and hostile takeovers will bid up the prices of Canada’s most desirable commodities producers, and it won’t be only China which comes knocking, though they will likely turn out to be the most aggressive. The onslaught of foreign-sourced capital markets activity is likely to come well in advance of peak prices for the commodities themselves.
What do policymakers think of, in the now wealthier, fastest growing countries of the world, whose nations are facing shortages of materials, oil, water, and food that would be devastating to their economic progress? “What will we need, and what do we have to do to get it?”
Let’s come back to the notion of complacency. Canadian complacency. We have taken our most valuable assets for granted, because they are abundantly available in our backyard. Also, the last year’s turmoil has also made it more difficult for investors to commit long term capital out of fear.
In the period ahead, it is not so much inflation, but rather pure and simple demand for the future supply of commodities that will take centre stage. Inflation, when it re-appears will be the icing. Canadian investors should view any market corrections as opportunities to accumulate meaningful overweight positions in their portfolios in the commodities complex in some combination of commodities and commodities producers.
This period represents Canada’s big chance to get out in front of foreign interests in our own backyard. We have the right to participate in the growth that will come Canada’s way as a result of the massive global economic transformation that is underway or we can choose to be bystanders.
We will continue to write and drill deeper into this subject in the coming weeks and months.
Sources: Kathy Lien | Bloomberg | Gluskin Sheff
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Tags: Aegis, All The Hoopla, Aussie, Bad Idea, Balance Works, Banking Sector, BRIC, Canada, Canadian Dollar, Canadian Economy, Canadian Finance Minister Jim Flaherty, Canadian Government, Commodities, Commodity, Commodity Exports, Consequence, Currencies, Cusp, Dollar Yen, Economic Recovery, Effec, Emerging Markets, Finance Minister Jim Flaherty, Fiscal Position, Forces At Work, G20 Meeting, Global Demand, Global Economy, Global Investors, Gold, Gold Prices, Greenback, India, Inflation Protection, Investing In Commodities, Investors, Mark Carney, Measures, Michael Pettis, Midst, Monetary Policy, Mortgage, Nz Dollars, oil, Oil Prices, Profits, Proposal, Relatio, Risk Reward, Strong Dollar, Sweet Spot, Term Investing, Time Canada, Turnaround, Upward Trajectory, Usd Cad
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Outlook for the Canadian Dollar
Thursday, July 23rd, 2009
This article is a guest contribution by Kathy Lien, Director, Currency Research, GFT (Global Forex Trading).*
There has been alot of economic data from Canada this week. I have written about the loonie extensively in special reports on FX360. This afternoon I got the opportunity to express my views about the Canadian dollar and other commodity currencies on the Business News Network. Click on the image below to access the video.
Tags: Business Network, Business News, Canada, Canadian Dollar, Commodities, Commodity, Commodity News, Currencies, Currency Research, Economic Data, Express, Global Forex Trading, Image, Loonie, News Network, Opportunity, Outlook, Target
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Global Equity Market P/E Ratios
Friday, June 26th, 2009
Below is a chart showing global equity market valuations, as produced by Bespoke Investment Group. Canadian stocks are currently fetching a P/E of 13X, and given Canada’s relatively stronger economic fundamentals, from a fiscal and banking industry standpoint, and its significant commodity complex, are relatively attractive. It is notable that Canada’s P/E was around 9X back at the beginning of March, so the strong rally since has aided significant P/E multiple expansion off the lows.
Bespoke: As shown, Russia currently has the lowest P/E ratio at 6, followed by Italy (10) and France (11). At 14, the US is more attractive based on its P/E ratio than most countries. Taiwan has the highest P/E at 60, and the UK is surprisingly bad at 34. It’s valuation is worse than China’s. Germany also has a very high P/E ratio at 27.
Tags: 13x, Banking Industry, Canada, Canadian Stocks, China, Commodities, Commodity, Economic Fundamentals, Equity Market, Germany, Global Equity, Investment Group, Italy, Lows, Market Valuations, Rally, Ratios, Russia, Standpoint, Taiwan
Posted in Markets | 3 Comments »
Jim Rogers isn’t buying a US stock recovery (Barron’s)
Sunday, April 26th, 2009
“Legendary investor Jim Rogers is skeptical of the latest rally in equities - as well the health of the global economy. As such, he is scorning stocks and bonds while embracing commodities as his investment vehicle of choice. Barron’s John Kimelman got the chance to interview the CEO of Rogers Holdings, with the following excerpts appearing on the website yesterday:
Q: When you last did a lengthy interview with Barron’s magazine a year ago you were lightening up on emerging markets investments. Well, you called that one right. But now that many of those markets have fallen from their highs of recent years, are you more optimistic?
A: No. I’ve sold all emerging markets stock except the ones in China. I bought more Chinese shares in October and November during the panic, but I have not bought China or any other stock markets including the US since then. I’m not buying anything in China right now because the Chinese market ran up maybe 50% since last November. It’s been the strongest market in the world in the past six months and I don’t like jumping into something that has been that run up. Still, I’m not thinking of selling these stocks either. I think if it goes down I’ll buy more. I think you will find that it’s the single strongest market in the world since last fall.
Q: That being said, you currently think Chinese stocks are bid-up now, so you’re not buying at these levels. So what have you been buying lately?
A: I have been buying commodities through the Rogers commodity indexes I developed because my lawyer won’t let me buy individual commodities. I recently bought all four Rogers indexes - the Elements Rogers International Commodities Index (ticker:RJI) as well as the three specialty indexes, the International Metals (RJZ), the International Energy (RJN), and the International Agriculture (RJA.) That’s how I invest in commodities and that’s what I bought last week. I have been buying these shares since last fall and up to last week.
Q: Now despite the recent stock-market rally that started in March, many US stocks are trading well off their 2007 highs. How come you see no value to this market?
A: I am not buying US companies mainly because I think we may have seen a bottom but I don’t think we have seen the bottom. I am skeptical about the rally, the world economy for the next year or two or three. But if stocks go down, I can make money with commodities. In the 1970s, commodities went through the roof even though stocks were a disaster. In the 1930s, commodities rallied first and went up the most long before stocks pulled it together.
Q: Can you summarize the reasons for your bullishness about commodities?
A: It depends on the supply and demand. And we have had a dearth of supply. Nobody has invested in productive capacity for 25 or 30 years now. The inventories of food are the lowest they have been in 50 years and you have a shortage of farmers even right now because most farmers are old men because it has been such a horrible business for 30 years. And as for metals, nobody can get a loan to open a mine as you know. Who is going to give you money to open a zinc mine? It takes at least 10 years to open a mine so it’s going to be 15 or 20 years before we see new mines come on. Nobody has been opening mines for 30 years and they are not going to. And in the meantime reserves are declining. As for oil, the International Energy Agency came out recently with a study showing that oil reserves worldwide were declining at the rate of 6% or 7% a year.
That does not mean that if suddenly the US goes bankrupt that everything won’t collapse in price. But I would rather be in commodities because it’s the only thing I know where the fundamentals are improving. They are not improving for Citibank or General Motors but the supply situation in commodities is such that when demand comes back, then commodities are going to be the best place to be in my view.”
Click here for the full article.
Source: Barron’s, April 20, 2009.
Hat tip: Investment Postcards
Tags: Array, Barron, Barron S Magazine, Chinese Market, Chinese Stocks, Commodity, Emerging Markets, Global Economy, International Agriculture, International Commodities Index, International Energy, International Metals, Investment Vehicle, Jim Rogers, Last November, Lengthy Interview, Rja, Rjn, Rogers International Commodities Index, Stock Markets, Stock Recovery, Stocks And Bonds, Stocks Bonds
Posted in Bonds, Commodities, Emerging Markets, Markets | No Comments »
Signs The Economy is Stabilizing
Wednesday, April 15th, 2009
The global economy appears to be stabilizing according to a research report by the Goldman Sachs Global Economics team. To monitor whether economic data are indeed improving they have developed a simple diffusion index, recording whether a particular data series has increased or decreased relative to its previous reading. Thirty-four monthly economic data points from the US, Europe, China, Japan, Brazil, Russia, Korea and India are analysed, including manufacturing and non-manufacturing surveys, consumer confidence indices, industrial production, retail sales, jobless claims, housing data and some credit-related data.
After having languished below 50 since the spring of 2007, the Diffusion Index increased above 50 in February and March (March doesn’t yet contain all 34 indicators, though). Any reading between 0 and 50 indicates the data are deteriorating, whereas above 50 implies improvement.
When looking regionally, the economists believe the worst of the cycle has been seen in the US and the UK, but this does nor appear to be the case in Euroland and Japan.
The team concludes: “Some of our other proprietary indices are picking up. Our Global Leading Indicator has improved in March and momentum has been improving for the last three months. Our Financial Stress Indicator also improved. If these signs of improvement really set in we should expect:
• stronger performance from equities;
• cyclical sectors to outperform;
• softer performance from government bonds;
• strong outperformance of equities versus bonds, and
• higher commodity returns, particularly industrial metals (copper).”
Source: Binit Patel and Kamakshya Trivedi, Goldman Sachs - Global Economics Weekly, April 8, 2009.
Tags: China Japan, Commodity, Consumer Confidence, Diffusion Index, Economic Data, Economics Team, Economists, Emerging Markets, Euroland, Financial Stress, Global Economics, Global Economy, Goldman Sachs, Government Bonds, India, Industrial Metals, Jobless Claims, Leading Indicator, Outperformance, Retail Sales, Simple Diffusion, Trivedi
Posted in Bonds, Credit Markets, Economy, Emerging Markets, Gold, India, Markets, Outlook | No Comments »
