Here in London the heat has been glorious this week. In fact, we read that it is hotter than the Bahamas right now. Tragically though, we don’t have the benefit of a nearby beach to make the best of it.
We have definitely got the weather on our mind right now. But unlike the happy sun worshippers outside our window our thoughts are focused on another part of the planet... and a huge profit opportunity.
You see, weather conditions in the southern hemisphere are now rapidly shaping-up to deliver a stunning return on the right agricultural investments. I am working on a new report that will show you the best way to play it.
Why the coming El Niño could lead to an easy profit
In India, the crucial monsoon rains have been far weaker than expected. That is hitting agricultural production hard. And weather services around the world have sharply stepped-up their warnings of an El Niño this year. As you will see in a moment, the implications of this for our agricultural investment have got us rubbing our hands with glee. So let’s get right to it…
You may already be familiar with the El Niño weather phenomenon. But let me just explain it very briefly. You see, every few years the waters of the southern Pacific Ocean begin to heat-up. This, in turn, produces a sharp change in the weather patterns in the Southern Hemisphere while it lasts.
El Niño is often accompanied by floods, droughts, and other disturbances in a range of locations around the world. But it hits hardest in the Southern Hemisphere. And particularly in a number of crop-exporting areas like Australia, South and South East Asia and Latin America. So the prices of crops like soybean, sugar, palm oil, wheat and coffee all look set to get a boost.
The evidence of an El Niño event happening this year is rising fast. On Wednesday, the Australian Weather Bureau warned that “more evidence of a developing El Niño has emerged during the past fortnight, and computer forecasts show there’s very little chance of the development stalling or reversing.”
The arrival of the El Niño weather phenomenon could lead to a sharp rise in temperatures and a sharp drop in rainfall in the southern hemisphere in the later part of this year. The impact of that on crop production could be devastating. The profits for investors positioned in the right investments could be phenomenal.
It is not just the Australians who are warning of an El Niño either. Three weeks ago, the Japan Weather Agency warned that there is a “high chance” of an El Niño developing over the summer. And America’s National Oceanic and Atmospheric Administration is now formally on “El Niño watch.”
The Aussie weathermen go on to say that all international climate models now predict that the tropical Pacific will continue to warm and to be above El Niño thresholds throughout most of the second-half of 2009. That is music to our ears…
Just over a decade ago, in 1997-98, a particularly strong El Niño wreaked havoc on agricultural production across the Asia-Pacific, driving-up global prices. There have been weaker El Niño events since then. And even a repeat of the milder El Niño conditions of 2002-03 could damage agricultural output across the region. But analysts are now warning of a much stronger El Niño this year. We are overdue for a big one.
Waiting for the green light
I caught-on to this incredible opportunity in early April. That’s when the Indonesian weather bureau warned that it had detected the first weak signs of a possible El Niño forming. And I immediately started looking for a way to profit from it.
Shares and ETFS that track agricultural prices look set to rise sharply if El Niño strikes. The crop that I have zoomed-in on is particularly sensitive to weather. So if the expected El Niño phenomenon does happen this year, its price could go through the roof. In fact, this crop has already been a smashingly good investment. Its price hit a three-year high this week. We continue to bet that it is going to go a lot higher because weather conditions are rapidly developing in our favour.
The next major report on the chances of an El Niño is due from the Aussie weathermen next Wednesday. I expect that report to confirm the coming weather disruption. And that will give us the green light to get into this investment. I’ll report back to you with all the details next week.
Good investing,
Manraaj Singh
For The Right Side
Editor’s Note: Manraaj Singh is the Chief Investment Strategist of Profit Hunter. Whilst you’re awaiting details of his way to play the coming El Niño weather phenomenon, check out his latest investment recommendation here.
MARKET NOTES
Small-caps are running ahead of the blue-chips
BY SHIVVY ARORA
Small-caps have been a good place to be this year. But some of these stocks have yet to fully take off. Find some of the many diamonds in the rough – and you could take home a neat profit when they make it big.
These under-investigated companies can be big on growth potential. Often, they’re ‘too small’ for the big City boys to take notice. So with research and good timing, there are some solid gains to be made when these stocks finally surface on the City radar.
Today’s chart shows the FTSE Small Cap Index (red line) versus the FTSE100 (green line) for the past six months. Both started the year on a downtrend, but come March (circled), small-caps took off and have gained nearly 40% since. The blue-chips on the other hand made only half of this for the same period.
The blue-chip barometer is looking weak…
For a larger version of this graph please click here
Source: Financial Times
Small-caps tend to perform well during an economic recovery. For example, when the market bottomed in 2003 following the bursting of the technology bubble, these ‘tiddlers’ had a bumper year.
And right now, many small-caps are undervalued on the basis of expected earnings. This is a positive sign for future strong performance. Look for small-caps in the sectors that show good potential for future expansion – technology and healthcare for instance.
There is no clear direction in markets at the moment, with most indices trading in a tight range. But if investors start piling back in, well chosen small-caps will continue to outdo the blue chips. Keep your eyes open. If you select the right companies, this area of the market is a great place to put some of your “risk happy” money.
Editor’s note: Tom Bulford, our resident small-cap expert, writes an exciting twice-weekly free e-letter called Penny Sleuth. For some great small-cap ideas, read his latest issue. Click here: How to profit from increasing City deal flow.
The Daily Reckoning - Stay out of the water
BY BILL BONNER
London, England
Friday, 3 July 2009
Big news yesterday:
“Jobs report dashes hopes on recovery,” says the International Herald Tribune this morning.
Oh?
Yes, dear reader... once again, we’re right and they’re wrong!
You’ll recall from yesterday, the feds said that their monster stimulus program would hold unemployment below 8% in 2009. The year’s not half over and the rate is already 9.5%.
Then, they said the numbers were getting better each month – inevitably leading to a recovery by the end of the year. They predicted a loss of 365,000 jobs in June – considerably fewer than in May. Instead, the figures – even after they had beaten them up – said 467,000 jobs had gone, which was considerably more than May’s figure. The important thing is that the trend economists thought they were watching – which led to a recovery – has been broken. Instead of fewer job losses, we have more.
Ha ha... we laugh at them. We mock them. We turn up our noses to show our contempt. We turn our backs and point to our... oh, never mind...
But wait a minute. What are we saying? Hold the self-satisfied congratulations, please. As Yu Faz put it: ‘Bury pride; or it will bury you.’
Yes, we were right: there ain’t no green shoots. But we’re not vain and stupid enough to think we know what is actually going on. Only morons think they know what is going on. And the more sure they are – the bigger dopes they are.
Where, exactly, is this economy headed? How is it going to get there? When?
Damned if we know. (And damned if we don’t!)
Okay... now... shush... now that we’ve thrown the jealous gods off our case... we whisper to you: well, we actually DO have an idea of where this economy is going, which we will reveal to you, dear reader, in hushed tones, little by little.
For starters, you have to realize: this is a depression. It is not a recession. In a recession, an economy gets a cold and has to take a little bed-rest. In a depression, an economy drops dead. Businesses go broke. The whole structure of the economy changes as the corpses are dragged away and new enterprises take their places.
Economists were 100,000 off on their jobless predictions because they still don’t really understand what is going on. We knew the predictions of a recovery were dumb. This is a depression – meaning, it is a major change of direction... not merely a pause in an otherwise healthy economy. After more than half a century of debt expansion, debt is contracting. Businesses, households, investors and the government need to adjust. And that takes time – a lot more than the 20 months of recession we’ve had so far.
It would happen a lot faster of course, if the feds weren’t fighting it every step of the way.
“Rise of the Zombies,” is a headline in today’s Financial Times. It tells a familiar and predictable story: the feds have propped up businesses coast to coast. Instead of being allowed to fail, they are kept alive by the government... and continue to take resources that could be redirected to more promising competitors.
But don’t bother telling the feds that. They don’t care. The old, worn out Zombie businesses still make campaign contributions and employ voters. The businesses of tomorrow don’t. The present votes. The future does not…
To read the Daily Reckoning in full, click here.
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