Since April, the commodity has embarked on an extreme upside move, shooting to highs not seen since sugar hit $0.45 per pound in 1981. The chart below illustrates it perfectly…

Sugar Chart: http://www.investmentu.com/images/sugar_082509.gif

The main reason for such a large jump was news from India, which indicated a potentially low sugar crop.

Over the past couple of weeks, the sugar market has surprised many analysts by trading even higher. I say that because while fundamental news like this often results in impressive-looking moves, its impact has a limited lifespan.

So be warned. Moves like this usually indicate that the news is factored into the price and we’re entering the last phase of the bullish run.

Based on my experience in the commodities markets, where I’ve seen this type of pattern many times, I believe we’re headed for an inevitable turnaround for the sugar market. Here’s what you can do to profit form this, and two other commodities to keep an eye on.

How to Play the Sugar Market to the Downside

If you want to play the sugar market to the downside, I suggest you buy put option contracts, or by selling limited-risk call option spreads. At the moment, the October 2009 and March 2010 option contracts are the most active.

As you can see on the chart of the October 2009 futures contract above, the price surpassed the $0.2300 per pound level twice, moved back to $0.2150 per pound, then trotted past the $0.2300 mark again.

This is what technical analysts call a “triple top” and if sugar doesn’t move above $0.2300 again, we can seriously count on the market having a big retracement lower – most likely between $0.1900 and $0.2000 per pound.

So if you play the downside and it does make that retracement, I’d suggest taking profits at that $0.1900 to $0.2000 level.

Oil Heading For $80… And Beyond: Three Ways to Play the Move

Given the historic rise and fall of the oil market and the current state of the global economy, you’d never think that it could even consider the idea of moving higher again.

But the market continues to amaze everyone with its resilience and strength, with the current price hovering around the $74.50 per barrel area.

And with conflicting reports on the global demand for oil over both the near term and long term – plus weekly inventory reports that show a strong buildup of supplies one week, followed by draw-downs the next week – it’s easy to see how this can be a very treacherous market.

Here’s the deal: Regardless of what statistics are released and how Congressional attempts curtail oil trading limits, it’s clear that the oil market continues to bring in speculators from all levels – and will most likely keep trekking higher.

Check out the oil chart below. The price is currently trading above all three main moving averages (20-day, 50-day, 200-day) and is now looking to pop above the recent high of $75.27 from June 11. If that happens, we could easily see oil shoot to $80 from there – with $90 probably right behind.

Oil Chart: http://www.investmentu.com/images/oil_082509.gif

There are a couple ways to play the oil market – be it on the long or short side…

• The futures and futures options that trade on the floor of the NYMEX. This is usually best for experienced commodities investors.
• Through an ETF like United States Oil (NYSE: USO), which tracks the price performance. This gives you broad exposure to the market through one investment, rather than playing individual companies. It’s also a less expensive way to play the market and doesn’t require a commodity trading account.

You can either play the USO shares directly, or the options on the ETF. No matter whether you’re bullish or bearish, pick an option expiration period at least three to six months in the future, as that will give your directional call ample time to mature.

The Grain Markets: Summertime Means We’re on “Grain Watch”

Finally, let’s hit the grain markets (corn, wheat, soybeans)…

During summer, these markets can really turn to the upside, as the growing season can be extremely volatile, particularly if the weather is less than ideal.

The June-October period typically sees more speculation in the grain markets than any other time of year, purely because of the prospect of more volatility. Regardless of what any fundamental data may show, nothing can compare to the sheer panic-buying when we receive weather reports that show how a drought could wipe out a year’s worth of crop.

And some of it doesn’t even need to necessarily happen… it’s merely the potential for it happening, based on previous history. Fortunes can be made or lost in just those few summer months.

Buy Corn Commodities Low… And Ride the Bullish Move Higher

This year, for example, we’ve seen corn and wheat prices shuffle around their annual lows, due to government reports that show ample planting, high carry-over levels from last year and crop production that is ahead of schedule.

Corn Chart: http://www.investmentu.com/images/corn_082509.gif

With corn currently at its lows, if any potential weather disruption does occur over the next few months, taking a bullish position here could be a low-risk way to get involved.

Like with the sugar market, the best way to play corn is through limited-risk option strategies. Stick with expiration months of December 2009 or March 2010, so that you give the market plenty of time to mount a bullish move.

Good trading,

Lee Lowell

Source: These Three Commodities Are Set to Move… Are You Ready to Profit?

I suspect that these defensive recommendations are worthwhile. They may, in fact, protect investors from the worst of this downturn. I don’t believe, however, that they are in any way trades “of the decade.”

First, we happen to be living through a radical acceleration of the medical sciences. This acceleration has not only left laypeople in the dust. Scientists are unable to keep up with research outside their own areas. As a result, the companies that own these breakthrough technologies are not widely understood or properly valued.

It is also true that health care stocks are traditionally countercyclical. This isn’t surprising since consumers tend to cut back on everything else before sacrificing medical care. It’s no accident that biotechs in our portfolio have done well.

There is, however, another aspect of companies that control these new medical technologies that makes them immune to downturns. Their initial customers include extremely wealthy early adopters.

One of the most notable economic developments of the last decades is the remarkable growth of “high net worth individuals” (HNWI). As defined by the U.S. Securities and Exchange Commission, HNWIs are people with at least $750,000 managed by the reporting investment adviser or whose net worth the investment adviser reasonably believes exceeds $1,500,000. Others define HNWIs as people controlling at least $1 million in assets excluding primary residence.

Regardless, the number of these people has been growing dramatically for decades, far outpacing inflation. If you pay attention to politics, you know how upset this makes people who worry about the big increases in income or wealth “disparity.” While the biggest concentrations of HNWIs are still in North America and Europe, the fastest growth, by far, is in China and India.

This category of people controls so much wealth that, even after the financial meltdown, they remain relatively unscathed. If you loose a third of a portfolio worth $2 million, which is below the average for many HNWIs, you still have lots of options.

The total wealth at the disposal of HNWIs is immense. Though it is difficult to know exactly, it is probably around US$40 trillion, along with the associated annual income it generates. Today, according to Merrill Lynch and Capgemini, there are more than 8.5 million of these people in the world. They and their immediate families comprise a population that may exceed 25 million people. Spending on luxury items by HNWIs and family members remains strong.

According to Bertrand Lavayssière, managing director of global financial services Capgemini, “Even as financial market turmoil impacted the United States during the second half of the year, luxury goods makers, high-end services providers and auction houses all found ready clients in the emerging markets of the world — most notably, China, India, Russia and the Middle East — thereby sustaining their own growth.”

Nothing better describes the market for emerging breakthrough health care. The market segment that continues to buy Ferraris, yachts and private jets will also buy regenerative therapies for themselves and their loved ones. I don’t doubt that certain metals will do OK in the years to come. Even they, however, are subject to the vagaries of the overall economy. HNWIs, however, are largely immune to the big economic fluctuations. When stem cell therapies bestow the power to rejuvenate hearts, livers, skin and cartilage, even at sky-high prices, there will be millions and millions of happy buyers.

I mention stem cell therapies specifically, by the way, because most of the important patents are concentrated in a few companies. We own, I am convinced, the key companies now. I will, however, be adding more in the future as new enterprises spin off and develop alternative approaches.

Incidentally, two major news magazines have had prominent stem cell-related stories in the last week or so. Both of these stories, in Newsweek and U.S. News & World Report, were marked by bias and error. That, however, is not the point. Nor is it new.

They do reflect the growing public awareness of stem cell technologies. One of the most interesting aspects of these articles is their limited, even insular, perspective. Both focus on the U.S. market.

HNWIs, however, are an international group, and they are used to traveling to get the best health care. As I’ve been saying since I started with Breakthrough Technology Alert, the U.S. market is overregulated and overtaxed. We are, unfortunately going to see these technologies come online elsewhere first.

Regardless, I believe regenerative medicine is the play of the decade. No, I take it back. It’s the play of the century. Go ahead and invest in resources. I believe in a diversified portfolio. However, I remain convinced that the surest way to join the ranks of HNWIs yourself is to bet on the willingness of the very rich to buy the ultimate resource: longer, healthier lives, i.e. “time.”

For transformational profits,
Patrick Cox

Source: Regenerative Medicine Is the ‘Play of the Century’

Inflation is up significantly from the 1.7% increase reported in April, Statistics Canada reported yesterday (Thursday). And high gas prices are to blame as fuel costs rose 15.0% in May compared with the same month last year – that’s considerably faster than the 12-month change of 11.6% posted in April.

Excluding gasoline prices, 12-month inflation grew 1.6% in May.

Last week, the central bank voted to keep its overnight interest rate at 3%, warning that inflation risks have “shifted slightly to the upside.” But the bank quickly followed that up by saying global demand for Canadian goods and services remains strong despite a U.S. slowdown.

“This report will not push the bank to raise rates in 2008, but we do see 100 basis points of hikes coming in 2009 as Canada’s inflation problem heats up,” Meny Grauman, an economist with CIBC World Markets Inc. in Toronto, said in a note to clients, Bloomberg News reported.

With an end to the rate cuts, the Canadian dollar is on the rise. The loonie has gained 1% since the June 10 decision to hold rates steady, Bloomberg reported.

Recession Protection?

Earlier this month, Canada announced its gross domestic product (GDP) shrank 0.1% in the first quarter, marking the country’s first decline since the second quarter of 2003.

But this is where inflation could actually be a friend.

In today’s world, where interest rates are low and commodity prices are high, Canada’s in a very strong position for two reasons:

• It has oil reserves – somewhat larger than the Middle East – in the form of the Athabasca oil sands.

• And it’s the world’s largest producer of uranium, with 25% of the world market. (Australia is a close second, with about 23%.)

Since Canada is a chief oil exporter, its oil companies are on the receiving end of soaring prices. And in turn, that helps pad the economy’s pocket, becoming an unlikely protective barrier to another quarter of negative GDP growth.

Also working in the economy’s favor, month-to-month wholesale sales jumped 1.4% in April, more than doubling forecasts of 0.6%, Reuters reported. This suggests that domestic demand is able to wade through inflationary waters and lends credence to justifying a future interest rate hike.

The Bank of Canada’s next scheduled date for announcing the overnight rate target is July 15.

Source: Can Inflation Save Canada from Recession?

I am not the only guy who knows that it is impossible for the vast majority of people to make a long-term profit in the stock market, and in fact the majority of people must show a loss, which I infer from Howard S. Katz of thegoldbug.net, who handily calculates the proof, in that “From 1966 to 1982, the DJI dropped 22% in nominal terms, but correcting for the depreciation of the currency, this was a drop of 74%.” Yikes!

In fact, he says that “if you took the establishment’s advice and bought ‘good, sound stocks for the long pull’ in February 1966, then you had to wait until 1995 to get back even in real terms, and today you have a miniscule average annual profit.” Hahaha!

It took 29 years, and all that inflation, before you broke even? And this does not even account for the expenses or taxes you have to pay? Hahaha! So, tell me: How many people financed their retirement on that that kind of gain? Hahahaha!

Mr. Katz’s title was, “Why I Am a GoldBug”, and towards that he writes, “The 10 year commodity upswing of the 1970s was preceded by a (much milder) easing of money and credit from 1963 to 1971″, which comes out to 8 years, but now “the current commodity pendulum was preceded by a 20+ year easing of money and credit”!

He concludes that the new commodity bull market “therefore has the power to go twice as long. If we date it from 2001, then we can be looking for the ultimate commodity top around 2021.” That’s 13 years from now! A 13-year bull market! Whee!

I can sense that you are wondering “What does this have to do with gold and how I can make a lot of money in gold?”, which is what I was wondering, too. It turns out to be easy; since gold is expected to again be the numero uno commodity in a commodity bull market of 13 more years, he says, “So I plan to be a gold bug until approximately that date”!

Junior Mogambo Ranger (JMR) Jeffrey M. says that since we are talking about gold, in a manner of speaking, the U.S. economy has been in a recession since 2002, since “GDP as measured in gold has dropped from 33.8 billion ounces of gold in 2002 to 19.9 billion ounces of gold in 2007,” which is about a 41% decline! Yikes! That’s a big drop in GDP!

But this makes perfect sense if you are unlucky enough to listen to The Loudly Irritating Mogambo (TLIM) droning on and on, relentlessly pounding, pounding, pounding the same belabored point, which is that “gold rises in value to the extent of the devaluation of the currency in which it is priced,” which has a big, fat QED at the end because this rise in gold that produced the 41% drop in GDP when measured in gold, is perfectly reflected by the 40% drop in the exchange value of the dollar (as measured by the dollar index), which has recently broken below the 72 level, down a similar 40% from about 120 in 2002!

It’s almost magical! I waited and waited for the applause that never, alas, came, and everyone else in class was looking at me with this look of ill-concealed contempt on their stupid faces, which is distinguished from their usual disrespect for me and my Fabulous Mogambo Ideas (FMI), which in turn explains my self-righteous vengeful hostility to them all, which is another, more disturbing, subject entirely, so let’s not go there

I soon learned why they were so unusually antagonistic to me; I had not read the homework assignment like I was supposed to, and they had. Big deal! They did not know that I had to spend a lot of time last night arguing with the wife and kids about the financial benefits of them eating what appears to be a really, really cheap canned dog food imported from some weird country, with a label written in a language nobody even recognizes, thus generating real savings in the food budget! It seemed like a no-brainer to me!

Their ears were, unfortunately, rudely deaf to my helpfully translating the label to prove to them that it will provide adequate nutrition to their stupid lives, especially considering that they don’t need a whole lot of energy to just sit around on their fat butts all day, watching TV and playing video games, talking on the phone with their stupid friends, yak yak yak, about (I suspect) what a horrible father I am, and how much they hate me, and how they are going to kill me by putting poison in my food. You know – the usual.

But I did not have to read the stupid assignment to know that BEA.gov says that in 2002, GDP was $10.5 trillion, while in 2007 it was $13.8 trillion, for an economic gain of 31%, but the punch line is “But you’re a big fat loser (BFL) because the dollar’s buying power went down by 40%! Hahahaha! Loser!”

The class is quiet, too stunned and bewildered to respond. Seizing the initiative, I explain, “Okay. Putting your petty little Earthling grievances and stupid ideas aside for one moment, if you can, imagine that you invested one hundred dollars in the stock market in 2002.”

Most of the class was already bored and confused, and I hated them all the more for it, but I relentlessly droned on, “Now, fast forward 5 years, and I laugh when I notice that the passage of time has not been kind to you! Hahahaha!

“But I laugh even harder to see that you are still stupid, as you happily drool on your brokerage account statement when you notice that you ‘made’ a $32 gain on that original $100 investment, notwithstanding all the money which you had to pay in expenses (of at least 2% a year on ALL the money you have invested, in order to have your account ‘managed’), for a total of about 3.2% of your money, but you also have to pay 15% of the long-term capital gain as a deduction from the $32 ‘gain’, or $4.80!”

By this time, even I was getting pretty confused, but I managed to bluff my way through a little more by saying, “And it doesn’t take a smart-mouth accountant rudely telling you that your records are a ‘mess’, because you are an incompetent boob about accounting, to make you realize that you netted, after all is said and done, a lousy $27.20 on the original $100 investment after five years!”

There were a few impatient calls from the audience to “Shut the hell up! A 27% gain is pretty good!” and “Is there a point to any of this, you Revolting Mogambo Halfwit (RMH)?” To this kind of rude audience response I rudely say, “I laugh uproariously, ‘Hahahahaha!’, at you and your stupidity! But I already knew you were all stupid, or else you would have realized what a warm, charming, and perfectly delightful person I am, a real peach of a guy, a ‘darling’ some would say, but none of you did! Proving that you are all stupid, stupid, stupid! Hahahaha! Stupid!”

Judging by an onslaught of spit and obscenities hurled at me, I knew I had hit a nerve with them, so I helpfully went on, “And to show you the price of your stupidity, the buying power of the whole $127.20 wad, including both the original $100 investment and the $27.20 net gain, has lost 40% of it’s buying power! This leaves you, the idiot ‘investor’, with a measly, pathetic $76.32 in real, inflation-adjusted 2002 buying power! Less than you invested!”

They all inexplicably shut up, obviously confused, which made me laugh all the louder. I patiently explained, “You invested $100 in 2002 buying power to get back, after five years, $76 in 2002 buying power! Hahaha! Your ‘fabulous’ investment made a paper gain, but produced a real, inflation-adjusted loss of 25% of your money! Hahaha!”

My voice dripping with acid and sarcasm, I smile and say, “Nice investing there, Mister and Ms. America! You can fund a REALLY nice retirement by losing 25% of your buying power every 5 years! Hahaha!”

Well, JMR Jeffrey was apparently not ready for my scathing criticism, biting humor, witty asides, clever rejoinder, or Raw, Seething Mogambo Hatred (RSMH). Trying to quickly defuse the situation, he adds that “The situation is even worse in terms of silver”, in that GDP measured in ounces of silver went from 2276.5 in 2002 to 1034.2 in 2007. A 54% fall in GDP in 5 years! GDP declined by over half!

I howl in fear! I howl in dismay! I howl in outrage! OwwwWWWWWwwww!

P.S. To get The Daily Reckoning sent directly to your inbox, sign up for our free email newsletter, or if you prefer to use RSS, subscribe to the Daily Reckoning RSS feed.

Source: Howling at the Moon

It’s an acronym for the emerging economies of Brazil, Russia, India, and China. Goldman rightly believes these populous nations will be far more prosperous and powerful in 2050 than they are today.

A long-term commodity bull might say, “Forget the BRICs… Give me the ABCs.”

The ABCs in this case are the ultimate destinations for resource investors… Australia, Brazil, and Canada. Each is blessed with awesome energy, metals, and agricultural wealth… and each ABC currency is soaring right now. Our chart of the week is the “A” currency of the group, the Aussie dollar.

Due to the soaring prices of coal, gold, copper, uranium, oil, iron ore, and natural gas, the Aussie dollar has climbed 50% since 2002. This is a huge move for the currency of a stable nation… and another sign the age of the ABCs is here.

Source: Forget the BRICs, It´s the Age of the ABCs

The Federal Reserve said that headline inflation, as measured by the personal consumption index, will likely spike to a range of 3.1% to 3.4% this year, up sharply from a previous forecast for 2.1% to 2.4%, made in January.

The release of the Fed’s summary notes from its last meeting revealed that there were two dissenters to the rate cut that was implemented. Dallas Fed President Richard Fisher argued that the rate cuts were pushing down the dollar’s exchange rate, thereby contributing to higher commodity and import prices, cutting consumer spending and hurting the economy.

The dissenters “believed that another reduction in the funds rate at this meeting could prove costly over the longer run,” the summary said.

Since then, various policymakers have indicated that the reductions are at an end. Fed Vice Chairman Donald Kohn says that policy is “appropriately calibrated,” San Francisco Fed President Janet Yellen calls current policy appropriate, Governor Kevin Warsh says that the Fed will resist bringing out “the hammer” again.

Most observers are expecting the Fed to begin raising rates by year’s end, but the damage has already been done, as inflation that is raging far beyond official numbers demonstrates.

Source: Dollar In Tailspin