Just a heads up. Soon the BP crisis will end, the headlines will fade and the world will be a happy place again. This will be bad for financial newsletter writers, the popular press and political candidates.
So its time to look for the next crisis to hit the front pages and pump up a stock sector.Jobs and housing are getting boring. Just a bunch of statistics on how much you might lose on your home or how long it takes to get a job flippin burgers at McDonalds after losing your VP slot at GM. The government debt crisis is too esoteric, at least until mortgage rates go to 133% and it costs $5,000 to buy a soda. We have a month to wait for the Cat 5 hurricanes to take aim at another American city. What to do if you are a newsletter writer?
My candidate for the next crisis is food shortages. We can all relate to food. There's been some recent press about problems in Russia with the wheat market. There's been less press about China's problems, which range from drought to floods. China needs to expand and avert civil unrest. It will import.
Food, like gas, is generally in adequate but tight supply, so hoarding will result in shortages, increased prices and headlines. Remember the food riot headlines from a while ago and stories of fearful elderly ladies cracking apartment floors with 100-bags of rice?
The big guys are buying in Ag products early. Reports are that a hedge fund has cornered the cocoa market, pushing up chocolate prices. It has taken delivery of 241,000 tons of beans. A lot of Hershey bars there, 5.3 billion to be exact
Candidates for investment include the farm equipment companies, seed companies and fertilizer companies. I like equipment makers for high betas and leverage.
In the equipment area, Deere has outpaced the S&P 500 by a wide margin over the last year. Agco has lagged the S&P, but it had about a 30% pop in value in the last month. Agco is an international play, scoring some recent successes in South America. Agco is also a play on any Euro recovery. CNH also operates in this sector under the Case, International Harvester and New Holland brands.
I don't know when, but food shortage headlines will hit the popular press again. Invest ahead of them.
Just my opinion.
ANALYSIS - Drought-led food squeeze next worry for emerging mkts
Hedge Fund Manager Cuckoo for Cocoa?
Disclosure: Long AGCO. No position DE, CNH