Underground investor Jim Rogers is also bullish on agriculture. He says Asian demand and low inventories will lead to a long secular bull market in corn, soybeans and fertilizer.

As Brian Hunt wrote in yesterday’s DailyWealth:

DBA “is one of the largest and most liquid ways to trade agriculture through the stock market. It divides its holdings evenly between corn, soybeans, wheat, and sugar.”

From this chart, you can see that DBA is has been showing some strongly bullish action lately. And it has the Jim Roger’s seal of approval.

Brazil is certainly in this basket of falling markets. Fortunately for you, it shouldn’t be.

Sure, more than half of Brazil’s exports are commodities like soybeans and iron ore. But there’s a very good reason why Brazil is a safer investment than most — stability. Before you get started, let me explain…

Over the past two decades, Brazil has gone through many crises. Each one taught the country how to handle poor economic situations. But it was the most recent one that puts us in a tremendous advantage.

After so many years of falling on its face, Brazil elected President Luiz Inacio Lula da Silva. Leaving our opinions aside, Lula has done something to put the country in the driver’s seat this time around.

At the beginning of this decade, the world punished Brazil for its high debt levels. Its market crashed, erasing years of growth. Since this pseudo crisis, the Lula administration has stabilized the country’s economy and paid down debt. On top of these moves, it’s also put tough regulations in place across many industries. Most investors thought these regulations limited growth, which they did. But now investors – or, at least, smart ones – see the regulations as necessary evils.

By regulating industries like energy and finance, Brazil kept a steady, stable growth rate of about 4% in recent boom years. The rest of the emerging nations of the world were getting used to a 7% rate. These other “emergers” were funding their growth by leveraging their assets and creating massive debts. Brazil was paying its down, while accruing next to no new debt.

The overall stock market hasn’t noted this major difference, however. Brazil’s major index, the Bovespa, is down 40% over the last 12 months – alongside the rest of the world.

While others struggle with “bad assets” and massive debts, Brazil will be ready to strike.

Energy is our favorite way to play Brazil. Without energy, you can’t expand. Just look at what China is doing these days. As it continues to come online, it burns through more coal and oil than anyone could have imagined. Brazil, while it’s no China, is still demanding an enormous amount of energy.

The largest difference between Brazil and China is the regulations. There are many more aggressive mandates in the Brazilian energy industry than most Chinese, or Americans for that matter, can even fathom.

For instance, there’s been a lot of talk in recent years here in the U.S. about switching regular gasoline for ethanol to power our light vehicles. Brazil has been doing this since 1975. That’s over 30 years of mandates, which require all light vehicles to use at least 25% ethanol blends. The country is the world leader in ethanol efficiency. That came from strategic mandates.

The rest of the Brazil’s energy situation is no different. In recent years, hydroelectricity became the country’s energy solution. Now 80% of Brazil’s electricity comes from hydropower. This energy revolution places Brazil 42nd in CO2 emissions worldwide. It produces less CO2 than countries like Israel and the Philippines, which are just fractions of Brazil’s size and population.

Early investors in Brazil’s booming hydropower industry stand to make massive gains, while the rest of the world’s nations are trying to put their own economies back together. That’s where you need to be looking.

Source: Brazil’s Hydropower Advantage

Last time I checked, the price of soybeans, cocoa or orange juice had absolutely no relationship to whether Microsoft (Nasdaq: MSFT), Disney (NYSE: DIS), or Google (Nasdaq: GOOG) declined in price.

But these days, we’ve got a serious blurring of the lines between global marketplaces. In addition, the prevalence and ease of electronic trading, coupled with well-capitalized hedge funds, means we’re seeing all kinds of different markets having an affect on one another.

Not so long ago, it used to be that money typically flowed from one asset class to another – for example, from stocks to commodities. But that isn’t happening now as most players have either bailed out of everything completely, or are selling assets to meet margin calls.

For commodity-watchers like me, I’ve looked on in surprise (as well as a little frustration) as commodities head the same way as stocks and pickings are slim. All the different commodities have suffered a hammering over the past few months, as the stock market’s mess spills over.

The selling wave has taken all the major commodities to new lows for the year, with most markets giving back all their gains for 2008 and more. Let’s see if we can pinpoint the next moves…

Oil’s Slippery Downward Slope… Have We Hit Support?

There’s no question that the oil has dominated the commodity headlines this year, topping out at $147 a barrel back in July.

But somewhat quietly amid the financial crisis, stock market slump, and bailout talk, oil has bounced down to around $60 a barrel. In turn, this has resulted in gasoline prices declining to the $2 a gallon level.

Although there might be more downside to come, it seems we may have hit a temporary support area here.

Natural Gas Could Be Nearing A Bottom… But We Need More Evidence

Oil’s partner in crime – natural gas – has also endured a vicious selloff. Having topped out in July, it’s given up just as much ground as crude oil, with the December 2008 futures contract dropping a solid 8100 points from top-to-bottom. That’s a whopping $81,000 change in equity.

Like crude oil, natural gas seems to have found a temporary support level as prices have consolidated a bit over the past two weeks and remained in the same area. In order to feel confident about a support level, prices have to tread water for a while without giving up more ground. We’re going to watch the price action for a while, but we could be getting near a bottom here.

Even The Safe Havens Are On Shaky Foundations

Ask most folks to name which markets are usually the beneficiaries of an unstable financial market… and you’ll likely get the resounding answer: “Gold and silver.”

Nine times out of ten, they’d be right. But not today. Even amid the economic turmoil, the safe haven hard asset metals can’t muster up any bullish action.

Sure, they got caught up in the bullish frenzy over the summer, just like the other markets. But when the music stopped, investors decided to bail out of the metals, too.

However, take a look at the charts and you can see that they’ve joined oil and natural gas in trying to establish some support. We can see evidence of this in the fact that neither metal has made a new low over the past two weeks. If the stock markets can find their footing here, then the metals may move up just the same.

As you can see, the December silver futures currently sit at $10.40 an ounce, while the December gold futures are trading around $753 an ounce – a far cry from their highs this year of $19.70 an ounce and $1,000 an ounce respectively.

If the market feels confident that the Federal Reserve’s bailout plan will work, investors could start dipping their toes into the long side of the market. If so, that could result in gold and silver moving higher. Until that happens, however, remain cautious, as it doesn’t take much for widespread selling to rear its ugly head again.

It seems that “support” is the word of the moment for the commodities sector. The rest of the markets (corn, wheat, soybeans, coffee, cocoa, sugar, orange juice, and cotton) are all trying to find a foothold and establish some support.

Having been torn apart in the nasty selloff over the past few months, though, it may take some time.

Source:The Commodities Buzzword Of The Moment: Support

And that forecast was put together before the biblical drenching the Midwest suffered in the past week, when another 12 inches of rain flooded already saturated fields.

All this is sending corn futures soaring. Looking at the chart, you can see how corn has gone ballistic. Also, on the bottom of the chart, RSI (a momentum oscillator) has just given a bullish buy signal.

After this latest rainout, many corn farmers will switch to soybeans, which can be planted until the end of June with less impact on yields. And that means the corn that does grow will be much more valuable.

Jurojin already recommended our subscribers go long corn last week — after it bounced higher off of its 50-day moving average. Now, they’re racking up nice open gains, and our first profit target looms dead ahead.

Is it too late to get in on corn? Not by a long shot. We’ve seen this kind of horrible start to the crop year before — in 1993. Then, traders were slow to react to massive flooding.

The best way to play this is corn futures or options on corn futures. If you aren’t in the futures market, you could try the PowerShares DB Agriculture ETF (DBA), which tracks a basket of corn, wheat, soybeans and sugar.
This analysis is brought to you by the Secret Order of Jurojin.

Source: King Corn Retakes the Throne

Q: Any new comments on the refiners? – C.

Record high oil prices are brutalizing refiners. They can’t pass along the rising costs to consumers, so the companies’ margins are down to whiskers.

In April, I thought things couldn’t get worse. The price of a barrel of oil cost more than the amount of gasoline you can make from it. It didn’t make sense… It was like a bushel of wheat becoming more expensive than the bread you could make from it.

But that’s exactly what happened two months ago. So I figured gas prices had to rise, increasing the refiners’ margins, and jacking up their share prices. But since then, the price of oil has risen faster than the price of gasoline. The “crack spread” – the difference between the cost of oil and the price of gas or diesel – has worsened, and refining stocks have fallen further.

I was too early, but the situation still looks good for big gains… when and if the price of oil declines. If you own refiners, keep holding with an eye on your stops.

Q: I hear the same argument for natural resources as for agriculture – short-term peaks and long-term demand. What’s a short-term versus long-term strategy? – R.A.

I look at the long-term argument for agriculture investment as a function of population and modernization. The world has more people living better, and many of those people want to live like Westerners. That means eating more beef, chicken, and pork, which in turn takes a whole lot more soybeans and corn. So agriculture will continue to rise in the long run.

In the short term, agricultural stocks will face the same ebbs and flows of any market. And right now, I think we’re seeing a short-term peak.

Look at the current situation in fertilizer stocks, for example. Intrepid Potash (IPI) trades for more than 100 times earnings. Potash Corp (POT) trades for more than 40 times earnings.

These are mining companies… They usually trade at a discount to the overall market (which has a P/E of 18). How do you expect to make money as in investor when you are buying a depleting asset at 40 times its current earnings?

My inclination is to stay away from these stocks at these valuations. I’m sure you can find a few gems out there, but the big, easy money in most ag stocks has been made.

Q: What’s going on with copper? Is it too late to buy copper producers? – L.M.

Copper is a critical component of housing, cars, air conditioners, plumbing, and electricity transmission. If you don’t have copper, you don’t have modern civilization. So copper prices, much more so than gold and silver, reflect the health of the global economy…

From 2000 to 2007, the world’s copper production grew 14%. Global demand has risen at a steady 4% a year for the last 100 years, but Chinese demand for copper doubled between 2001 and 2007.

In fact, from 2000 to today, China’s growing demand for copper has accounted for 99% of the global growth in copper consumption.

China holds 16% of the world’s copper-smelting capacity, so turning copper ores into copper pipe is clearly a major industry in China. But very little of that finished copper leaves the country. Of all the raw copper China imported in 2006, it exported about 26% of it as finished goods. In 2007, that number dropped to 9%. This year (through March), China only exported about 3% of that copper. That means domestic demand for finished copper is growing.

In other words, China is solely responsible for the rising copper price. At $3.75 per pound, copper is trading near all-time highs… up roughly 400% in the last five years.

I know you don’t read Growth Stock Wire for my analysis of China’s economy… And I’m not going to try to guess what the suits at Goldman Sachs have trouble guessing. I’ll just say I believe copper prices are going to remain high enough for us to make terrific gains in base-metal producers.

Good investing,

Matt

Editor’s note: Natural-resource expert Matt Badiali answers reader questions every Wednesday in Growth Stock Wire. If you’ve got a question for the Commodity Investor, drop us a line.

Source: The Commodity Investor Q&A

But, weirdly, it’s created a unique profit opportunity in an area where hardly anyone expects to find one.

Where is this unlikely profit play?

Shipping.

Let me explain. To get goods from the county of their origin to your local supermarket shelf, they need to be shipped over.

It’s not just food – everything from building materials to oil to clothes to manufacturing equipment has to be transported from one side of the world to the other.

And as more and more countries demand more and more resources, the world needs more and more ships to get them there.

It’s helped fuel the biggest ship-building boom in recent history.

But then the credit crunch comes along and ruins the party!

You see, in order to build these vessels, ship builders need to raise the cash to pay for them. For the majority of ship builders this is paid for on credit. So anticipating more future demand for ships… they ordered more to be built!

Trouble is, banks are now too afraid to lend money. Tightening credit markets mean lenders demand bigger deposits and shorter terms for financing.

It means a lot of these new orders are being cancelled…

One Hong Kong-based shipper recently cancelled an order for two ships even though they had to pay $4 million to get out of the contract.

We’ve already seen as much as $14 billion in ship orders threatened by cancellations and delays.

That’s equal to 94% of annual revenue at the world’s biggest shipbuilder, Hyundai Heavy Industries Co. And that number could be about to rise too.

Today there are 2,561 new cargo ships on the order books. So, with a loss or delay of 10%, there are going to be about 250 fewer cargo ships available then predicted.

Fewer ships at a time when global demand for everything from soybeans to coal are at record levels.

I think you know what I’m getting at…

Why this is a massive profit opportunity…

Last Friday the futures markets showed shipping rates were expected to fall 56% during the next three years.

But I’m betting that that ISN’T going to happen. Instead, cancelled ship orders will support shipping rates.

It means that some of the most exciting shipping companies globally are trading at valuations that don’t reflect their true potential.

I believe this will be realised by the market very soon… and investors who own one particular stock before they do could make a serious amount of money.

But if investors are going to profit from this, you’ll have to move fast because the impact of those cancellations is already becoming apparent.

The Baltic Dry Index, which measures freight rates, has risen 58% in the last year while an index tracking the number of cargo ships under construction has fallen 21% over the same period.

And that’s been fantastic news for shipping companies.

But as the impact of the credit crunch on the shipping industry become clearer, we’re betting that there are still huge profits to be made here.

Just yesterday, Japan’s second-biggest shipping line, Mitsui O.S.K. Lines Ltd, announced that its first-half operating profit will beat forecasts by “several billion yen” as it raises rates to transport coal and iron ore.

We at Profit Hunter are going right to the heart of this trend. Growing demand from Asia is at the heart of the current shipping boom – and that’s where we see the biggest profits to be made from it.

Right now we’re looking at one Asian shipping company that we believe is still trading for well below its potential… and they could make substantial returns for quick thinking investors.

If you’d like to take a no obligation trial of our service, you can expect to hear from us with all the specific details on this very shortly.

Regards,

Manraaj Singh

Editor
Profit Hunter

Source: A Profit Play The Credit Crunch Created

But from a technical analysis point of view, there is no longer any overhead resistance – nothing to stand in the way – and the price can go anywhere. But where?

We saw exactly the same thing with uranium last year, we saw it with wheat, corn and soybeans this year; we saw it with copper, lead, zinc and nickel, we’ve just seen it with rice; we saw it with UK housing; we saw it to an extent with gold, though that one didn’t run wild; we’re seeing it with coal and iron ore; and we’re starting to see it with food.

In these inflationary times, it’s going to be a recurring vision, so better get used to it. But just how far is the oil price going to go?

Why this won’t be the highest point for oil in the long term

Oil is now well and truly at unheard-of levels, even adjusting for inflation. However, to those bears who are calling the top, I’m not saying that looking for a short-term shorting opportunity is unwise. But you shouldn’t expect this to be the highest point that oil hits in the longer term.

I accept that there are a lot of people, especially bankrupt and unpopular Western governments, who have a major vested interest in getting the oil price down, so you can rest assured there will be all sorts of shenanigans behind the scenes applying downward pressure. However, the power of these institutions both at home and abroad is waning.

Another bear point is that there seems to be a bit of resistance here at $125, and it’s a nice round number for an intermediate top. Then there’s the fact that oil often tops out in March and, if it doesn’t do that, then May will be the month of choice.

But, as we saw in my article a few weeks back (see here: Will oil hit $160 a barrel next week?, there is a supply squeeze. Hats off to ‘Zapata’ George for calling it. We are on course for his $160 a barrel. Yes, there are lots of speculators in this market, but much of this price is genuine demand in the face of decreasing or unchanging supply.

What’s more, all these speculators are doing in real terms is hedging their cash against inflation. Is that so bad?

The price may decrease, but Peak Oil is yet to strike

As soon as people say, ‘it’s different this time’, you can be sure the top will be in within a few weeks. But, when Peak Oil – the point at which we are getting as much oil out of the ground as we ever will – strikes, it really will be different this time. Is Peak Oil kicking in now? I would say fears of Peak Oil have certainly been pushing the price up for some five years or more.

I do expect something will happen over the coming few weeks, some piece of news that will serve to knock the price down. Some deal might be agreed in Iraq; an index might be re-jigged again or a technological breakthrough be announced; perhaps a week will go buy without an attack on a pipeline in Nigeria.

But it won’t knock the price down far.

Oil demand will not decrease by anything significant, nor will supply increase. Oil is in a long-term bull market. The best way to play it has been to buy and hold. Most of those who have tried to be clever and trade it could have better spent their time playing Frisbee on the beach.

The secret has been finding the right entry points and that, my friends, has been when oil retreats to the 52-week moving average – its average price over the last year. That average is at around $90 now. Will we ever get back down there? At the moment it feels like we’ll never see double-digit oil again.

We are a long way above that average now. So much so, that you could say oil was a sell – in the short-term at least.

But in the long-term, oil will go a lot higher. So high you are going to think twice about driving every time you get in your Maserati (the one you bought with the proceeds of your oil investments). In the intermediate term we need to consolidate these higher prices. If it goes much higher from here, it will be on a spike and most likely come back down again.

How to put some oil in your portfolio

When I pointed out last week how oil has dramatically outperformed oil stocks, a lot of people wrote in and asked how to buy oil. Well, you need a broker who sells futures; you can spreadbet it; or you can buy CFDs. I would not recommend any of these if you are not experienced. A simpler option is the US-listed US Oil Fund ETF (USO). ETF Securities also has various oil ETFs listed here.

Turning to the wider markets…

The FTSE 100 fell 8 points at 6,211 as surging inflation – which rose to 3% (see here for more: UK inflation – why interest rates will stay frozen for now) hit hopes for a rate cut.

Across the Channel yesterday, the Paris CAC-40 gained 22 points to end the day at 4,998. And in Frankfurt, the DAX-30 rose 24 points to 7,060.

On Wall Street, US stocks fell back. The Dow Jones shed 44 points to end at 12,832. The broader S&P 500 was flat at 1,403, while the tech-heavy Nasdaq rose 6 point to close at 2,495 on rumours that activist investor Carl Icahn had bought a significant stake in Yahoo.

In Asia this morning, Japanese stocks made gains, as the country’s largest telephone operator, Nippon Telegraph & Telephone Co, raised its dividend by more than 20%, and Astellas Pharma announced a $381m share buyback. The Nikkei 225 rose 161 points to 14,115.

Crude oil was trading at $125.58 in New York. Meanwhile Brent spot was trading at $122.63.

Spot gold was trading at around $863 an ounce this morning, while silver was trading at $16.58. Platinum traded around $2,037.

Turning to forex, sterling was trading at 1.9411 against the dollar, and at 1.2591 against the euro. The dollar was last trading at 0.6488 against the euro and 105.10 against the Japanese yen.

This morning, Bradford & Bingley has announced an emergency rights issue. The group will sell another £300m in shares to shore up its capital base. It’s a major U-turn for the bank, which just three weeks ago angrily denied reports it was planning such an issue. Of course, it’s not the first UK bank to deny problems, then raise capital later – both HBoS and Royal Bank of Scotland have taken a broadly similar approach to fund raising. We wonder who’ll be next.

Source:Oil: Why It’s Different this Time 

I am racking up the frequent flyer miles this year. My travels in 2008 have taken me to exotic locales like Singapore, Hong Kong and Dubai, as well as somewhat less exotic locales like the American Midwest. But guess what, the Midwest is the place that’s making the headlines in Singapore, Hong Kong and Dubai. The soaring price of agricultural commodities like wheat, corn and soybeans is one of the biggest news stories on the planet right now.

But ag commodities aren’t just a huge news story, they are also one of the most exciting trading opportunities of 2008 and beyond.

Whether my travels take me to the Middle East or the Midwest of the U.S., the stories are very similar. Most people are concerned about the rising costs of agricultural commodities. And they should be. The commodity boom is real. It is not a bubble, no matter how many folks wish that it were.

In fact, now you have all of these dollar bulls coming out and saying that the worst is over for the dollar and that the commodity bubble will soon burst. They say that the commodities markets are simply speculator-driven. I disagree. Do you remember as a child wishing for something, wishing so hard, yet it didn’t come true? Wishing for something to happen does not mean it will be so. (I never did get that red bike.)

The dollar will probably bounce a little higher, but the same problems that drove the dollar into the basement will persist, and even worsen. The Fed can’t just snap its fingers and wipe away a credit crisis with some stimulus checks. Too many folks are subscribing to the idea that the consumer will somehow come to the rescue and spend our way out of recession. That’s pure fantasy.

The hope that the commodity bubble will burst is also a fantasy. The fact of the matter is that we are in a new paradigm for commodities and the old-school thinking about how commodities used to be traded has to be changed. And this is true of most commodities – none more so than the agricultural ones. Sure, speculation is a part of this puzzle, but to say it’s all speculators and hedge funds that are causing the run-up is a sad mistake.

As I sit here writing this column, I am watching CNN out of the corner of my eye, and on the air is Jonathan Stevens, a baker from a Massachusetts company called Hungry Ghost Bread. He is starting to grow his own wheat and encouraging his customers to do the same. Not a bad idea. For a 50-pound bag of organic flour, he used to pay $25, but now pays around $60. So in back of the store, the bakers are now growing their own wheat. Now, while farming in your backyard may not seem very practical, it’s becoming part of a new reality: If you want to be sure you have the food you need – absolutely sure – you’ll want to grow it where you live.

Most of the world’s inhabitants already understand this essential reality. America’s are just starting to re-discover it. In fact, we’ve even made up a new word to describe this ancient necessity of growing food where you live. The word is “locavore” and it means someone who eats food grown locally. Wow! Very trendy!

Demand for ag commodities is real and it is worldwide. Meanwhile, supplies are stretched thin. So any “supply shock” has the potential to cause prices to soar even higher. A new supply shock might be developing right under our noses. The planting season here in the U.S. is getting off to a very bad start, as the weather has been awful. Torrential rains have flooded many fields, making planting impossible. The U.S. Department of Agriculture reports that only 10% of the corn crop west of the Mississippi has been planted, compared to a five-year average of 35% for this time of year.

Plantings for soybeans, spring-wheat and rice are also trailing behind their five-year averages.

Therefore, this year’s corn crop could be extremely disappointing. Some of the other crops might also disappoint. In my trading service, Resource Trader Alert , we are betting on much higher prices in soybeans and corn, and we are using option spreads to take advantage of this.

My annual meetings with Midwest farmers are always helpful. But my recent meetings with farmers in Minnesota were particularly helpful. Not only did I gain some insights about this year’s crops, I also learned a great deal about the soaring prices of fertilizers and other farming “inputs.” The long and short of it is that input costs are rising about as fast as commodity prices. So many farmers are getting squeezed.

And these rising input costs are here to stay, which probably means that rising grain prices are also here to stay. Yes, prices will fluctuate dramatically. But the bull market in agricultural commodities is very, very real.

Why deny it? Why not trade it?

Regards,

Kevin Kerr
for The Daily Reckoning

Recently, at a party in New York, I mentioned that I had been talking to various groups in the United States and Europe about investment opportunities in the commodities market. Before I could get out one more word, a woman interrupted me. “Commodities!” she exclaimed, with the kind of incredulity in her voice that Manhattanites reserve for people moving to Los Angeles. “But my brother invested in pork bellies and lost his shirt. And he’s an economist!”

Everyone seems to have a relative who took a beating in the commodities market, and this fact (or fiction) is considered sufficient reason that no sane person would ever risk playing around with such dangerous things. That this particular victim was also a professional economist makes the warning seem even more ominous. I, however, couldn’t help laughing.

Billions of dollars are invested in the commodities market every day. Without the commodity futures markets, many of the things that you depend on in life, from that first cup of coffee in the morning to the aluminum in your storm door to the wool in your new suit, would be either scarce or nonexistent, and certainly more expensive.

~~~~~~~~~~~~~Special~~~~~~~~~~~~~

A Millionaire’s Market Opens Up

You haven’t heard about the millionaires market on the evening news, but soon you will. And then, it’ll be too late. This is a powerful market tool that some of the richest and most successful investors have used to build fortunes. Investors like Jim Rogers.

The doors on this market are finally open for the first time, but they’ll be closing on Monday, May 12. Click here to get your foot in the door…

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

There are several other bromides out there for why “ordinary people” should not invest in commodities, and I want to lay these myths to rest, once and for all, so that we can get on with the more interesting business of how you can begin to make some money investing in the next-generation asset class.

About That Relative of Yours Who Got Wiped Out — He was inexperienced. You can learn. Most likely, he was buying on thin margin — the minimum deposit a broker requires to take a position in a particular commodity — and when the market went against him he lost big-time.

Here’s how it happens: Like stocks, commodities can be bought on margin. Unlike stocks, however, where by law you have to put up at least 50 percent of the price of the shares, the margins on commodities can be even lower than 5 percent: You can buy $100 worth of soybeans for $5. If soybeans go up to $105, you’ve doubled your money. Beautiful. But if soybeans go down $5, you’re wiped out. Not so beautiful.

Experienced, smart speculators can make tons of money buying on margin. They also know that they can lose tons, too. But they can usually afford it. Your relative was in over his head. If he had bought $100 worth of soybeans in the same way that he can buy IBM — for $100 (or maybe even $50) — he would be happy when it goes up $5 and a lot less sad should it go down $5.

Whenever I mention commodities in public, someone always points out that we now live in a high-tech world where natural resources will never be as valuable as they were when we had a smokestack economy. But if you read your history you’ll discover that technological advances are as old as history itself: The introduction of the sleek and beautiful Yankee clipper ship dazzled the world in the mid-nineteenth century, loaded with cargo, sailing down the trade winds at 20 knots and more, averaging more than 400 miles in 24 hours and able to make it from U.S. ports around Cape Horn to Hong Kong in 80 days; within a decade, the clippers had been replaced by the steamship, no faster but not dependent on wind power; and before long the next big thing in transport had taken over, the railroad, which, of course, was the original Internet — and prices in the commodities market still went up.

In the twentieth century came electricity, the telephone, and radio (three more Internets) and then television (a fourth Internet). There was also the automobile, the airplane, the semiconductor — and in the midst of all of these truly revolutionary technological breakthroughs came periodic, multiyear commodity bull markets.

~~~~~~~~~~~~~Special~~~~~~~~~~~~~

Hedge Against a Recession — And Make up to 286% Gains

By simply placing your money in some specific companies, you can make impressive gains, even as the economy falls apart. You see, some companies actually do better during a recession. Can you pinpoint which ones?

We’ll help you by clicking here. Don’t be the last one on a sinking ship…

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

When the supply and demand in raw materials is seriously out of whack, the emergence of new technology will not necessarily restore the balance quickly. To be sure, changes in technology, for example, have made the economy less dependent on oil. But we still use plenty of it, and whenever there isn’t enough prices will rise. Computers or robots may do amazing things, but they cannot find oil or copper where there is none or make sugar, cotton, coffee, or livestock grow faster than nature allows. We can put in orders all day long on our computers for lead, but all that Internet technology will be in vain if there are no new lead mines. Technology can neither feed us nor keep us warm, and the demand for commodities will never disappear.

“But My Stock Broker Tells Me That Investing in Commodities Is Risky.”

Tell me again about all those Cisco shares you owned back in 2000. Or JDS Uniphase, or Global Crossing? So many risky stocks made the turning of the new millennium a not so happy time for many, who watched their portfolios evaporate.

If you do your homework and remain rational and responsible, you can invest in commodities with perhaps less risk than playing the stock market. You don’t need me to emphasize that investing in anything is a risky business. But let me point out something that you might not have realized: There has been more volatility in the NASDAQ in recent years than in any commodities index. Cisco, Yahoo! and even Microsoft have been much more volatile than soybeans, sugar, or metals. Compared with the risk record of most tech stocks, commodities look safe enough to be part of any organization’s “widows and orphans fund.”

And let me remind you of one more important difference between commodities and stocks: Commodities cannot go to zero, while shares in Enron can (and did).

Regards,
Jim Rogers

Turn on the printing presses, impose lots of new taxes and regulations, eat the rich. But… America is now the world’s largest debtor nation. What will our foreign creditors and trading partners do if the dollar continues to fall? If the rice market is any indication, we will face dozens of additional export restrictions, as more and more countries refuse to accept the U.S. dollar in trade. I wonder what will happen then? Perhaps a war to gain access to raw materials? Canada, be careful.

You think that sounds crazy, I’m sure. But listen to what U.S. Sen. Chuck Grassley told reporters recently: “If part of our problem is that the Chinese are going to eat meat and you’ve got to have corn and soybeans to feed the Chinese their meat, then why isn’t it just as legitimate for the Chinese to go back and eat rice as it is for us to change our policy on corn to ethanol?”

Here you have a United States senator suggesting our most important foreign creditor should eat rice so we can power our SUVs with corn-based ethanol, the production of which actually consumes more energy than it produces. It’s not often I’m surprised by the stupidity of our government officials. But this one got me. Grassley would be wise to consider that the Chinese can afford to pay higher prices for grains, because their currency continues to rapidly appreciate versus the dollar. Meanwhile, we’re going to have a hard time buying rice if the Chinese don’t lend us their savings.

I wonder what our readers make of these events – of U.S. citizens demanding to keep their homes even though they can’t pay their mortgages; of U.S. senators demanding our trading partners stop buying our corn; of major retailers placing limits on the purchase of rice; of banks blowing up day after day; and of the dollar falling from one new low to the next.

We’ve been advising people to buy gold and silver for at least the last five years as a hedge and protection against the risk of hyperinflation. Now, it has arrived. But how many subscribers, I wonder, have bought gold or silver? My bet? Less than 10%. It’s still not too late, though. And our own Matt Badiali has found a way to buy gold and collect big dividends, too. Click here for the details.

The IRS started mailing the economic stimulus checks this week, and Goldman Sachs already compiled a list of the 10 companies that will benefit most from the extra cash: Cheesecake Factory, Best Buy, Darden Restaurants, Home Depot, JCPenney, Kroger, Kohl’s, Royal Caribbean, Safeway, and, of course, Wal-Mart. Wal-Mart was an easy guess considering that 8% of U.S. retail sales already go there.

From a reader: “Why are your recommended trailing stops always 25%?”

In my newsletter, I frequently adjust the stops of my positions based on the risk of the investment and our desired holding period. But a 25% stop loss is a good place to start. With an initial allocation of 4%, a 25% stop loss puts 1% of your original capital at risk.

If you use a trailing stop loss and the position moves up at all, your principal at risk can quickly fall to zero. Using stop losses and trailing stop losses must be done in conjunction with position sizing. The goal is to minimize the impact of any loss. Once you learn to avoid big losses, you’ll find it’s much easier to make money investing.

Billionaire real estate mogul Sam Zell is buying Brazil, “It has the chance 30 years from now of being a bigger economic power than China,” Zell told the Milken Institute Global Conference. Zell said the country’s 180 million people, skilled work force, and wealth of natural resources has made it largely self-sufficient.

He also mentioned Brazil’s biggest mall operator was seeing retail sales growth of 10% annually. And what’s stopping China? The country’s one-child policy, which Zell believes will decrease the number of workers in China and “come back to bite them big time” in 2020.

International Strategist editor Tom Dyson is also hot on Brazil. He took an agricultural tour of the country earlier this year. In his travels, he found the future of the world’s agricultural production, Protein City. This mega complex will produce the world’s cheapest commodities and make an absolute fortune shipping them all over the world. Tom found the best way to profit from Protein City, and his pick is up 25% in less than two months.

Tom holds three Brazilian stocks in his portfolio, all three are up double digits. And he’s got three more Brazilian stocks on the radar. To learn more about International Strategist, click here…

Regards,
Porter Stansberry and Dan Ferris