All About Commodities (All About Series) - Softcover

Taulli, Tom

Softcover

ISBN 10: 0071769986 ISBN 13: 9780071769983

Verlag: McGraw-Hill, 2011

Inhaltsangabe

GENERATE BIG PROFITS WITH TODAY'S HOT TEST COMMODITIES!

During the average trading day, trillions of dollars' worth of commodities change hands. If you want to snatch some profits from this booming market, you fi rst need to understand all the fundamentals-and All About Commodities is the place to go.

Without the confusing jargon and complex language of other investing guides, this book uses simple language to explain what drives price fluctuations of commodities-from energy, industrial metals, and mines to livestock, agriculture, and precious metals-and how to design a powerful, reliable strategy for profi ting from them. Learn everything there is to know about:

• Using futures and options to enter the commodities market
• Risks unique to commodities trading-and how to manage them
• Ways to identify important patterns to steer your investing decisions
• The benefits and disadvantages of commodity funds

Über diesen Titel

Über die Autorin bzw. den Autor

Tom Taulli (Ventura, CA) is founder of the online investment company WebIPO and is the author of The Streetsmart Guide to Short Selling. 10 Illustrations

Auszug. © Genehmigter Nachdruck. Alle Rechte vorbehalten.

All About COMMODITIES

By TOM TAULLI

The McGraw-Hill Companies, Inc.

Copyright © 2011 The McGraw-Hill Companies, Inc.
All rights reserved.

ISBN: 978-0-07-176998-3

Contents

Chapter 1 Introduction to Commodities Investing
Chapter 2 The Futures Markets
Chapter 3 Understanding Futures Prices
Chapter 4 Futures Trading Strategies
Chapter 5 Options on Futures
Chapter 6 Fundamental Analysis
Chapter 7 Technical Analysis
Chapter 8 Precious Metals
Chapter 9 Energy
Chapter 10 Agriculture
Chapter 11 Industrial Metals
Chapter 12 Livestock and Dairy
Chapter 13 Investing in Miners
Chapter 14 Global Commodities Investing
Chapter 15 Buying Physical Commodities
Chapter 16 Funds
Futures Contracts Reference
Glossary
Web Resources
Index

Excerpt

CHAPTER 1

Introduction to Commodities Investing

Key Concepts

• Look at the main drivers of commodities prices

• Understand the benefits of investing in commodities

• Discuss the risks

Commodities are pervasive throughout the world economy. Every day we buy foodand energy. We drive our cars, which are made out of an assortment of metals andother materials. We live in homes and apartments, which are also made out ofvarious commodities. Without these valuable materials, civilization wouldvanish. It's that simple.

On a global basis, commodities markets are massive and trade in trillions ofdollars on a daily basis. There is also much diversity. For example, investorscan invest in the following categories:

• Agriculture: Includes corn, wheat, soybeans, cotton, sugar, cocoa,orange juice, coffee, and oats.

• Livestock: Includes live cattle, feeder cattle, pork bellies, and leanhogs.

• Precious metals: Includes gold, silver, and platinum.

• Industrial metals: Includes copper, palladium, aluminum, tin, nickel,zinc, lead, and cobalt.

• Energy: Includes crude oil, unleaded gasoline, natural gas, coal,heating oil, uranium, ethanol, and electric power.

There are also a variety of ways for investors to participate in these markets.For example, these include buying and selling futures and options. There arealso exchange-traded funds (ETFs), mutual funds, hedge funds, and managedfutures. And yes, you can even buy the physical commodity, such as gold orsilver, and put the metals in a vault.

COMMODITY MANIA?

Over the past decade, there has been a major bull market in commodities. Infact, it has become a popular topic on cable business channels like CNBC andeven mainstream websites. Perhaps one of the most interesting signs of thefervor is that even criminals are focusing on stealing commodities. For example,copper has seen a spike in thefts. After all, the high prices could meansubstantial profits. It also helps that you cannot trace copper back to thesource.

Criminals are stealing power lines and cooling pipes. Unfortunately, this posesserious problems to communities. Because of this, law enforcement agencies havebeen putting more resources into combating this new crime wave. Consider that acriminal was able to extract the copper from an irrigation system in PinalCounty, Arizona. There was about $10 million in damages. The theft even ruined aharvest. In 2008, a report from Electrical Safety Foundation International(ESFI) listed over 50,000 incidents of copper theft in the United States. Thetotal damages were $60 million.

But for investors, is this a classic sign that the commodities market is in abubble and will peak soon? Perhaps, but the fact is that bull markets can easilylast 15 to 20 years, and some commodities experts believe that the commoditiesmarkets are in a bullish "super cycle" that could last for several decades. Ifyou don't believe this is possible just take a look at Table 1-1. Itdetails the bull markets in commodities that have taken place since thebeginning of the twentieth century.

During the first three periods, the biggest commodities bull market was actuallyduring the Great Depression. Even during bad times, people still buycommodities. Also, because of the difficulties in raising capital, there werecontinued difficulties with entrepreneurs to find new sources of commodities(this also happened during the 2008–2009 global recession). In otherwords, a drop in supply could have a huge impact on prices.

Why consider the long trends? A key reason is the difficulty of extractingcommodities. To understand this, let's take a look at an example. Suppose thatcopper prices have surged and are likely to increase for some time. Tocapitalize on this, you decide to start up a copper mine. To do so you willfirst need to explore for a large deposit. This requires sophisticatedscientific equipment. It also probably means you will need to focus on areas ofthe world that are treacherous, in terms of the geography and politics. Theexploration process can easily take several years. Assuming you find a richdeposit, you will then need to negotiate the copper rights and get the necessarygovernmental permits. To do this, you will likely need to raise a substantialamount of capital from investors. This process can take several years. After youlock up everything, you will then need to hire miners and purchase expensiveequipment to extract the copper. It can take a year or two to get anysubstantial amount of the commodity.

As you can see, it takes a great deal of time to find new sources ofcommodities. Thus, price increases can last a long time because the supply willlag. But, when the supply hits the market, there can quickly be anoverabundance. The excess could also last 10 to 20 years. But over this time,there will eventually be an underinvestment in the commodity and the supply willslowly contract, which will set the stage for the next bull market.

In the case of the current bull market, there are some major demand forces thatare likely to keep prices robust. The main one includes the growth in emergingmarkets.

COMMODITIES IN BRIC COUNTRIES

The main players in emerging markets—Brazil, Russia, India, andChina—are known collectively as the BRIC countries. Combined, thesecountries have 42 percent of the world's population and are responsible forabout 23 percent of the world's output.

Brazil

Brazil is a country that has had its share of turmoil. Until the mid-1980s, thegovernment had military dictatorships and populist leaders. The country alsoexperienced severe bouts of inflation and economic slumps. But over the pastdecade, Brazil has made great strides. Then again, the country has rich naturalresources and a large workforce.

Because of its tropical climate, it is possible to grow crops year-round inBrazil. Some of the key crops include coffee and sugarcane.

Oil is another big commodity. Over the years, there have been major discoveriesoff its shores. Brazil also has the second-largest mining company in the world,which is Vale. It produces nickel, coal, aluminum, and other commodities.

The gross domestic product (GDP) of Brazil is...

Details zur Ausgabe

• Verlag: McGraw-Hill
• Erscheinungsdatum: 2011
• Sprache: Englisch
• ISBN 10: 0071769986
• ISBN 13: 9780071769983
• Einband: Taschenbuch
• Anzahl der Seiten: 304
• Kontakt zum Hersteller: Nicht verfügbar
• Verantwortliche Person: GPSR Kontakt; gpsr@libri.de; ; Europaallee 1; Bad Hersfeld; 36244; Deutschland