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Benefit at the Pump, and in the Market, from Low Oil Prices

oil prices

Crashing oil prices are certainly one of the biggest stories of the past six months.

Indeed, as the price of crude continues to drop, currently hovering just under a once-unthinkable $50 per barrel price, the issue is sure to be in the news well into the foreseeable future.

But the issue goes beyond simply lower prices, and it spawns some even bigger questions: 

Are supply and demand really the drivers at work? Is it political warfare above all? How will global markets react when prices rebound?

One way or another, the implications of much lower oil prices are huge, and will impact markets, industries, and sectors across the board throughout the coming year.

All of which leaves investors wondering what to do next, and how to play this changing-by-the-day industry.

There's no time like the present to take a look at the potential pitfalls, and the emerging opportunities, that this disruption brings... and to let you know about a medium-risk way to play it for near-term profits.

Make (Big) Money in Any Market

So what if the market drops a little from time to time? That's inevitable, and in the long term, healthy.

The fact remains we're in a bull market. We have been since March 2009.

But now, especially with some early 2014 swings, investors may be wondering.

How long does this bull have to run and what should we do next?

I don't have a crystal ball... but I do have 30 years' experience - starting in 1982 on the floor of the Chicago Board Options Exchange, then running a big bank's hedge trading, then a Wall Street trading desk, and finally managing my own hedge funds.

I know many investors stick to a buy-and-hold strategy or more actively trade. There's a place for both to maximize this market.

But before you can start making money in the market, you need to know what's really happening...

How to Invest in Agriculture After the Potash Price Crash

New tractor on white background

Global commodity woes increased again on Tuesday after Russia's Uralkali broke up one of the world's largest potash partnerships and ended a marketing venture agreement with producers in Belarus.

This development changes how to invest in agriculture- as it has already sent investors fleeing from nutrient and fertilizer stocks this week.

In addition, the impact will likely crash global potash prices by 25% to 30%, as the collapse of an international duopoly will end a price-fixing agreement that benefited other producers of the key commodity by artificially inflating prices and keeping supply off the market.

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How to Play Q4 Defense: Hedge Your Bets, Up Your Stops and Sell Your Gold

So far fourth quarter earnings have made a mockery of things.

Of the 20 S&P 500 companies that have provided Q4 guidance so far, 18 of them have guided lower, "slashing" their forecasts, according to Goldman Sachs and CNBC (as of Monday afternoon).

What's more, roughly one quarter of the reported earnings have come in flat to middling. According to Capital IQ, overall revenues are up only slightly at 0.34%.

Yet, for some reason the S&P 500 is only 3.89% off of its highs and is up 12.01% year-to-date through Wednesday afternoon.

Under the circumstances this suggests two things to me:

  • There's a lot of volatility waiting in the wings; and,
  • The near-term risk is to the downside.
First, let's tackle the volatility that's still in store; then we'll move on to what you can do to prepare for it.

The Q4 Earnings Story

So far this earnings season, roughly one quarter of the S&P 500 has already reported. That leaves the market with nearly 375 companies that have yet to spit out their numbers, roughly 150 alone this week.

Assuming the balance follows the pattern set so far, companies like Caterpillar Inc. (NYSE: CAT), Philip Morris International (NYSE: PM), and 3M Co. (NYSE: MMM) are going to show "respectable" (under the circumstances) numbers while talking about the "challenges" they see ahead.

Meanwhile, a few others, like DuPont (NYSE: DD) and United Technologies (NYSE: UTX), are going to reflect weakening earnings and revenue pressures leading to further cost-cutting as a means of protecting profits. These will include job cuts.

I also expect the bulk of the remaining companies will take the opportunity to lower their expectations -- especially when you consider that 61% of the companies as of Monday afternoon missed revenue expectations.

The irony here is that 61% of the companies that have reported over the same period have also exceeded analysts' expectations.

Naturally the markets will punish those who missed even when what they should recognize is that the analysts were wrong yet again. But that's another story for another time.

What's important to understand is that top-tier company management is using this earnings season to accomplish three things.



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