Seeking Alpha

User 341510's  Instablog

User 341510
Send Message
John Thomas graduated with a bachelor’s degree in biochemistry with honors and a minor in mathematics from the University of California at Los Angeles (U.C.L.A.) in 1974. He moved to Tokyo, Japan where he was employed by a medium-sized Japanese securities house. Thomas became fluent in Japanese... More
My company:
The Mad Hedge Fund Trader
My blog:
Mad Hedge Fund Trader
  • Don't Buy Anything that Can be Made With a Printing Press 0 comments
    Jan 27, 2010 12:41 PM | about stocks: MOO, DBA, MOS, MON, POT, PHO, FIW
    This is my favorite asset class for the next decade, as investors increasingly catch on to the secular move out of paper assets into hard ones. Don’t buy anything that can be manufactured with a printing press.

    Focus instead on assets that are in short supply, are enjoying an exponential growth in demand, and take five years to bring new supply online. The Malthusian argument on population growth also applies to commodities; hyperbolic demand inevitably overwhelms linear supply growth. Consumers want to buy stuff tomorrow, but many commodities take five year to bring new production online, plus the 18 months we lost to the credit crisis.

    Of course, we’re already eight years into what is probably a 20 year secular bull market for commodities and these things are no longer as cheap as they once were. There is no doubt the hot money is here in size, so bring on the volatility. You are going to have to allow these things to breathe.

    Ultimately this is a demographic play that cashes in on rising standards of living in the biggest and highest growth emerging markets. Some one billion people are expected to join the middle class over the next decade, and all of them are going to want to buy “things” made out of natural resources.

    You can start with the traditional base commodities of copper and iron ore. The derivative equity plays here are Freeport McMoRan (NYSE:FCX) and
    Companhia Vale do Rio Doce (VALE).

    Add the energies of oil, coal, uranium, and the equities Transocean (NYSE:RIG), Joy Global (NYSE:JOY), and Cameco (NYSE:CCJ). Crude (NYSEARCA:USO) has in fact become the new global de facto currency (along with gold), and probably $30 of the current $78 price reflects monetary demand, on top of $48 worth of actual demand from consumers. That will help it spike over $100 sometime in 2010.

    Don’t forget alternative energy, which will see stocks dragged up by the impending spike in energy prices. My favorite here is First Solar (NASDAQ:FSLR). Skip natural gas (NYSEARCA:UNG), because the discovery of a new 100 year supply from fracting and horizontal drilling in shale formations is going to overhang this subsector for a long time.

    The food commodities are probably among the cheapest resources around, with corn, wheat, and soybeans coming off the back of bumper crops in 2009 that absolutely killed prices. But growing emerging market appetites for more and better food will send demand soaring, just as the benefits of the “green revolution” peter out. These can be played through the futures or the ETF’s (NYSEARCA:MOO) and (NYSEARCA:DBA), and the stocks Mosaic (NYSE:MOS), Monsanto (NYSE:MON), Potash (NYSE:POT), and Agrium (NYSE:AGU).

    Through an unconventional commodity play, the impending shortage of water will make the energy crisis look like a cake walk. Who will need new fresh water supplies the most? China. You can participate in this most liquid of assets with the ETF’s (NYSEARCA:PHO) and (NYSEARCA:FIW).



    For more iconoclastic, out of consensus analysis, visit www.madhedgefundtrader.com, where conventional wisdom is drawn and quartered daily. You can also hear me in person weekly by listening to Hedge Fund Radio by clicking here at http://www.madhedgefundtrader.com/Hedge_Fund_Radio.html


    Stocks: MOO, DBA, MOS, MON, POT, PHO, FIW
Back To User 341510's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.