Archives for May 2011

May 2011 - Page 4 of 9 - Money Morning - Only the News You Can Profit From

Deere & Co. (NYSE: DE) Reaps Benefit From Rising Commodity Prices

Surging demand for farm equipment, fueled by rising commodity prices, lifted by 65% second-quarter profits at Deere & Company (NYSE: DE).

The world's largest maker of agricultural equipment said yesterday (Wednesday) that its net income for the quarter ended April 30 rose to $904.3 million on revenue of $8.9 billion. That compares to a profit of $547.5 million on revenue of $7.1 billion in the same quarter last year.

The steep rise of the price of such commodities as corn and wheat in the past year has enriched farmers around the world, allowing them to buy more farm equipment. Deere's farm machinery sales rose 24%.

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Jeremy Grantham: In the Face of Finite Resources, It's Time to Think About "Peak Everything"

If you are a true long-term investor, the time has come to change your entire frame of reference – to recognize that we now live in a different, more-constrained world in which the prices of our finite resources will rise and shortages will be common.

Accelerated demand from developing countries, especially China, has caused an unprecedented shift in the price structure of raw materials and finite resources: After 100 years or more of price declines, resource prices are now rising, and in the last eight years have undone, remarkably, the effects of the last 100-year decline!

The world is facing an unsustainable surge in demand. In fact, it's no longer just a question of "peak oil" – we're now facing a future of "peak everything." How we deal with this unsustainable surge is going to be the greatest challenge facing our species.

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Middle Class Growth in Emerging Markets Remains Key Commodities Price Driver

Commodities have surged in the past year as investors sought inflation protection, economic recovery picked up, and middle class growth from emerging economies pushed industrial demand.

But when commodities like silver, copper and oil slipped at the beginning of May, many investors panicked.

The Standard & Poor's GSCI Index that follows 24 raw materials fell 11.4% in five days, from May 2 to May 6, the most since December 2008.

Investors who had piled money into precious metals and raw materials feared their safe haven investments had reached a bull-market peak. Some said the commodities bubble had burst and the great rally was over.

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Is the Glencore IPO Signaling a Crash in Commodity Prices?

Super-secretive Swiss-based commodities trading giant Glencore International AG is going public. The Glencore IPO shares will be priced today (Wednesday) and could begin "conditional trading" in London tomorrow (Thursday).

As currently planned, unconditional trading will begin in London on May 24 and in Hong Kong on May 25.

In spite of all the pre-IPO hoopla, there's actually probably quite a lot that you don't know about Glencore.

If that's the case, don't worry – you're not alone: Columnists and market pundits alike routinely describe the company as "mysterious." To be sure, the Glencore story is a colorful one, and is one of those tales that seems to raise at least as many questions as it answers (For instance, billionaire founder Marc Rich once owned 50% of 20th Century Fox, spent years as a "wanted" man, and was actually pardoned by a U.S. president).

So it's no surprise at all that the Glencore IPO deal raises a whole host of new questions – these two key among them:

  • Why is Glencore going public right now?
  • And precisely what does the largest IPO in the history of the United Kingdom means for global commodity prices?

On that last question, at least, I can spare you the suspense: Global commodity prices are going to crash before they rally to new highs.

Now I want to show you why…

To understand what this deal is telling us about commodity prices, please read on...

Are You Worried About the Future of the U.S. Job Market?

The U.S. job market has improved since the unemployment rate's 10.1% high in 2009, but the sluggish pace of economic recovery has kept many workers jobless and discouraged.

The U.S. Department of Labor reported earlier this month that the country's unemployment rate in April rose to 9.0% from 8.8%. Employment in more than a dozen sectors hit four-year lows in April, and another 10 have gained little since hitting lows in the beginning of this year.

But it's not just a slow economic recovery that is leaving people unemployed. The U.S. job market is changing, as companies find ways to function with fewer workers and some shift operations overseas.

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Global Commodity Prices: Soaring Worldwide Population Growth and a Can't-Miss Profit Play

If you read the newly released United Nations report on global population trends, you can reach only one conclusion about the long-term outlook for global commodity prices.

They're going higher.

Much higher.

In its report, "2010 Revision of World Population Prospects," published May 3, the UN now estimates that the global population will reach 9.3 billion in 2050, which is an increase of 150 million from the 9.15 billion it projected in its 2008 forecast.

Nor is that the only revision the UN made to its 2008 forecast. Instead of peaking in 2070, as it had previously predicted, the UN now says the world population won't peak until after 2100, when it will reach 10.1 billion – 44% higher than it is today.

The key takeaway: Given this expectation for worldwide population growth, it's clear that the rise in global resources prices we've seen since 2002 is for real, and is likely to continue for the long term.

The effect on global commodity prices will be clear – and dramatic. Oil prices, metals prices and – above all – food prices are likely to be much higher in 2050 (in terms of that era's overall purchasing power) than they are today.

For insights on four population-growth profit plays, please read on…

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Russian Small-Cap Investing: Three Reasons to "Think Small"

It is the world's largest landmass by a vast margin with 6.6 million square miles. At the other end of the spectrum is Vatican City at only 0.17 square miles.

With Russia you think of giant companies like Gazprom OAO or Lukoil (PINK: LUKOY), controlled by oligarchs in Moscow. The country provides a shining example of the challenge facing investors trying to tap into its potential opportunities.

It has provided limited investment choices, until now…

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Consumers Continue to Struggle as U.S. Inflation Rate Hits Fastest Pace Since 2008

The accelerating U.S. inflation rate reached its fastest pace in two and a half years last month as consumers continue dealing with higher food and energy prices.

The consumer price index (CPI) in April rose 3.2% over the last 12 months, the biggest yearly jump since October 2008. That's up from a yearly jump of 2.7% in March and 2.1% in February. The CPI in April increased 0.4% from the previous month.

The U.S. Labor Department reported Friday that rising energy prices contributed to more than half of the increase. Gasoline prices soared 3.3% in April and 33.1% over the past year.

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Market Slick with Pomaid

Facing $72 billion in new Treasury debts settling Monday, and with a little less help than usual from the Fed's to grease the skids, the market got a haircut on Friday, and could get shave on Monday. These two days will be an interesting preview of a future without POMO aid. After Monday, the POMO will continue to flow, but the obstacle of Treasury supply will recede for awhile, so the market could sport a pretty slick looking do for the rest of the week. I'd look for an upturn on Tuesday or Wednesday heading into the end of the week. But I'd be alert for wave distortions on the news noise front, driven by any debt ceiling bowl ploppers.

The new POMO schedule is slightly reduced, running at about $22 billion a week through June 9. They'll need to continue at roughly that rate through the end of June to complete the program. That's when we'll enter a brave new world. The markets need these cash pumps just to give the appearance of stability. Their absence will allow the markets' structural instability to show itself. Instead of being delicately balanced on streams of POMO applied at just the right times, they should just topple over. But first we have 6 more weeks of the balancing act.

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