Category — Commodities
We were greeted in the office this morning by Dan Denning telling us that the best performing commodity in 2012 was…wait for it…lead. That’s right, good old lead. And the best performing equity index last year? Venezuela.
Have a think about that when you read all the expert investment predictions for 2013 over the next few weeks.
The truth is no one has any clue or special insight into which investment class will make money this year. That’s especially true in a global environment characterised by constant central bank intervention and the resultant currency wars.
As far as investment predictions go, we’ll stick our neck out and say that 2013 will either be a very good year, or a very bad one. We don’t mean to be facetious in saying that. The point is, the global credit bubble will either go on expanding, encouraging speculation and leading to the outperformance of risk assets (a ‘very good’ year) or it will collapse (a ‘very bad’ year). [Read more →]
January 3, 2013 Comments Off
The Best Investment of 2012 to Repeat in 2013?
Toward the end of last year, the editors here at Port Phillip Publishing got up on stage at our Doomers’ Ball, to give our ‘Big prediction for 2012?.
To paint the picture, at the end of 2011 the market had been well and truly beaten up.
The Metals and Mining index (XMM), Small Ords (XSO) and Emerging Companies indices (XEC) all fell more than 22% over the year. So it was a bit challenging to find a sunny patch in the market to get excited about for a ‘big call for 2012?.
Admittedly, when I made my call, there was a fair bit of heckling!
I even caught a few folks checking their eyelids for holes, and catching the odd fly for good measure.
But thankfully, twelve months on – so far – my big call has turned out to be the best performer of 2012… [Read more →]
December 17, 2012 Comments Off
Since I took over writing Money Morning every Wednesday I have focused on giving you an insight into my technical approach to trading markets.
But today I’d like to start by having a squiz at some interesting developments in the commodity markets.
I’ve noticed a distinct rise in articles referring to speculative commodity stockpiling in China and elsewhere.
An ANZ commodity research report from this week focused on something called ‘contango financing’ in the aluminium market. In a moment I’ll explain why you should take notice of this obscure term, and what it means for commodity markets…
According to the report:
‘The aluminium market is facing a supply shock in 2014 when prices could drop by 20% or more in a very short period. We expect around 70% of on-warrant and off-warrant stocks, or about 8 million tonnes of metal tied up in financing deals, to come to the market around the middle of 2014. The trigger will be rising interest rates, which will make contango financing unprofitable. [Read more →]
November 22, 2012 Comments Off
Now I enjoy Christmas as much as the next bloke.
But isn’t it a bit early for the shops to have all their Christmas stuff out already?
And do we really have to listen to Christmas jingles for the next five weeks?!
Of course this also means you can expect the annual end-of-year market reflection – and the big market forecasts for 2013.
Most of this will be entertaining…but totally delusional. The cold fact is that no one has any idea what will happen next year.
Last century, the famous American author, Peter Drucker, explained the limitations of market forecasting better than anyone I’ve heard since:
‘Trying to predict the future is like trying to drive down a country road at night, with no lights…while looking out the back window.’
But we’re simple mammals, with instincts honed by evolution to take risks. [Read more →]
November 20, 2012 Comments Off
In a world where central banks regularly enter the market to weaken their currency, it’s easy to forget that a currency can fall for old fashioned reasons like trade deficits, foreign liabilities and bad sentiment.
That goes some way to explaining why the South African rand is falling at the moment. But that’s only part of a wider story that resource investors should be watching. It’s the task of today’s Money Weekend to find out if all this might lead to a profit opportunity…
One of the big miners in South Africa, Anglo American Platinum Limited (LON: AAL) fired 12,000 workers, then reinstated them! But none of them have returned to work yet.
November 19, 2012 Comments Off
Right now, the market is urgently trying to tell us something. In fact it’s been trying to tell us something for the last few years.
In the last decade or so we’ve seen regular bouts of record-busting food prices. This is the market’s way of warning us that our supply of the stuff is running low.
And as the global population grows and also becomes wealthier, demand for food will only keep rising.
Clearly, rising food prices are bad news for consumers, and particularly for the world’s poor. But these food price spikes aren’t entirely bad. In the long run, higher prices encourage farmers and food processors around the world to raise food production.
In turn, that’s going to mean a lot more money will be invested in boosting farm productivity. One region in particular looks likely to capture the lion’s share of the extra investment – Latin America. [Read more →]
November 15, 2012 Comments Off
What have iPhones, laptop computers, electric toothbrushes, and power-tools all got in common?
They’re all powered by a ‘magical’ element that’s on the British Geological Survey’s Risk List of strategic minerals.
You may have heard of rare earths and tungsten. Both are key ingredients in modern technology. And both are dominated by China.
But there’s another element that’s just as strategic to modern technology. And unlike rare earths and tungsten, this one isn’t dominated by China. In fact, this strategic element is a key Australian export. And it’s now in play as resources companies scramble to get a cut of the action.
What element am I talking about? Lithium.
And specifically, the market for lithium ion batteries.
The once humble lithium ion battery sector is taking off like a stung cat. And if the market moves as I expect, early-mover investors stand to make some very tidy profits indeed. [Read more →]
November 15, 2012 Comments Off
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With the US election now behind us and Obama locked in for another 4 years, it is time to evaluate our portfolios and the economic issues that will impact returns.
The debt ceiling will be raised, as it always has. This issue alone will have little impact on the value of
When the USD goes down, gold and all commodities go up. Inflation is the only option for the US as a prolonged deflationary recession could bring the country to its knees.
The Fed is well-aware of this possible outcome if it doesn’t continue to intervene. The debt has been piled too high and in a deflationary scenario, America could lose its standing as the creator of the world’s reserve currency, which would likely lead to a default or bankruptcy. [Read more →]
November 14, 2012 Comments Off
Here’s a good statistic for you: there are more obese people in the world than there are malnourished people – 1.5 billion versus 925 million according to the International Federation of Red Cross and Red Crescent Societies (IFRC).
Why is it good? It is interesting in itself but it also tells us that malnutrition isn’t necessary – the world produces enough food for everyone to have the calories they need to get by.
The problem is just that we haven’t got the political and logistical skills to distribute it properly.
November 2, 2012 Comments Off
I started writing about the ‘commodities supercycle’ back in 2002 or so. It was a pretty easy call at the time – prices had been in a bear market for 20 years, but the numbers coming out of China made it clear that it wasn’t going to last.
You didn’t need to know anything about mining or the mechanics of it to invest. All you needed to know was that the demand for most metals was greater than the new supply of them.
This was the age of the Chinese killer stat. Even by 2004, China was the largest consumer of zinc, tin, copper, wool and cotton. More than 20 Chinese cities were installing subway systems.
The country was in the process of building 50,000 miles of three-lane highway (about the same length as the entire US interstate network). There were a mere six cars per thousand people in China, versus 400 per thousand in the US.
By 2025, 70% of China’s population was to be urban – and they were to be living in 219 cities, each with more than a million inhabitants. And so on. [Read more →]
October 24, 2012 Comments Off