By Reuters
Thursday, January 10, 2008 1:46:04 PM ET
NEW YORK (Reuters)—The crude oil options market is booming, driven as much by sophisticated new trading strategies as by speculators trying to duplicate the dazzling profits earned by the lucky few who bet early last year that oil would nearly double from its lows near $50 a barrel.
As of Jan. 9, open interest in NYMEX crude oil options stood at 3.93 million contracts, up 27 percent from January 2007 and 82 percent higher than January 2006, according to the New York Mercantile Exchange.
Some investors have been paying rich prices for contracts that cannot be exercised for years. December 2010 $100 call options—which give holders the right to buy a December 2010 oil futures contract for $100 a barrel—have traded as high as $7 a barrel in recent weeks.
The high prices being paid for some options have led some veteran oil futures traders to dismiss the options boom as the latest sign of hot money chasing easy profits.
But other market watchers note that the stomach-churning price swings that have become commonplace in the oil market make options part of a more sensible investing strategy for both speculators and commercial traders.
"The flat price is a very difficult situation to deal with because of the volatility," said John Kilduff, senior vice president at MF Global in New York.
"If you trade the flat price you are either a hero or a goat from day one. With the options, you give yourself the latitude to have the position grow into being right or wrong."
Options also offer a cheap and less risky way to place bets on dramatic moves in the price of oil.
As of Jan. 9, oil investors held 5,533 $200 December 2008 call options , which have traded between 20 and 55 cents per barrel. Options strategists note that oil does not have to rise to $200 a barrel for these positions to be profitable.
"From the option traders' perspective, all that is needed to profit in this position is some more people to think the same way. It would not take much to boost the value of that contract, which is an efficient way to go long crude oil futures for the end of the year," said Andrew Wilkinson, senior market analyst at Interactive Brokers Group in Greenwich, Conn.
Growing liquidity in the options market has also allowed oil investors to take more sophisticated positions on the direction of the longer-term price of oil.
Long-term prices have risen sharply, but remain far below the levels seen in today's market. December 2010 oil futures settled at $86.42 a barrel on Wednesday, almost $10 a barrel below the front-month February 2008 contract , which settled at $95.67 a barrel.
Options investors are betting heavily that the long-term price will continue to rise. Over 27,000 December 2010 $100 call contracts were outstanding as of Jan. 9 when they settled at $6.18 a barrel.
The heavy bets are not only going into call options that give investors exposure to another dramatic increase in oil prices. Contracts that protect investors against a fall in oil prices are also attracting considerable interest.
According to Reuters data, over 60% of the outstanding oil options on the New York Mercantile Exchange are "put" options, which give the holder the right to sell an oil futures contract at a set price.
For instance, June 2009 $70 put contracts settled at $2.37 a barrel on Jan. 9 even though the underlying June 2009 futures contract settled at $87.45 that day.
Analysts say these prices reflect the growing demand from investors for insurance against volatility in the oil market. Nontraditional investors, such as pension funds, are starting to use oil options to cut the overall volatility of their entire investment portfolio, analysts said.
"You could own a portfolio of oil producers and when you crunch the numbers on an earnings metric, buying that oil put option all of a sudden insulates your equity portfolio from a fall in world prices," said MF Global's Mr. Kilduff.
By Robert Campbell
Robert.Campbell@Reuters.com
NEWS - Commodites, Agriculture, Green Investment - NEWS
1/09/2008
Metals: Possible Peak for Copper in '08, but Gold Still Rising
By Jacob Bunge, Financial Correspondent
Wednesday, January 09, 2008 3:40:50 PM ET
CHICAGO (HedgeWorld.com)—In a long-running bull market for metals, some CTAs said 2008 could bring a peak for copper, while gold will continue its climb.
"We see opportunities across the board," said Mike Dever, chief executive of West Chester, Pa.-based Brandywine Asset Management LLC, which manages approximately $100 million and trades both base and precious metals. Although 2007 was a wild year, he said, the bull market for metals ran on, sometimes to his surprise: "It appeared at times that it may be peaking, especially [in] precious metals, but at year-end it rallied back strongly."
This year, Mr. Dever said, he sees metals peaking in the first half, possibly the first quarter, as the themes driving prices higher begin to lose steam. He added that he was a bit surprised that metals demand held up as well as it did despite the onset of the housing meltdown, and there still hasn't been the impact that he expected. But in the coming year, that may change as investor interest in commodities begins to level off.
"I feel like we've had over the last few years this rush of commodity funds, especially with long biases," Mr. Dever said. "I do think they provided some support and some impetus for up-moves in some of these markets … but I see that pressure abating this year."
Copper and China
There is disagreement among metals traders as to whether upward pressure on copper will abate as well in the new year. Mr. Dever said he expects copper to crest in the next few months, and is positioning for a possible trend change in that market.
That change may be driven in part by China, which has been a major consumer of metals in recent years. A report from the International Copper Group found that in 2008, China is set to become a net exporter of the metal, while its demand is forecast to rise 5% to 7%, compared with 12% in 2007. Meanwhile, copper demand was expected to slow in the United States and Europe, as well.
Mr. Dever said he's looking for China's demand for metals in general to shift in the first few months of 2008, and investors eventually will realize that growth will not continue to be as exponential as it has been. "I think this year people will come off that high, this sort of psychological high of unlimited strong growth out of China," Mr. Dever said. "They're not going to sustain the prices where they are." Meanwhile, he said he didn't anticipate demand from other economies would pick up.
Michael J. Clarke, president of Hinsdale, Ill.-based Clarke Capital Management Inc., said that copper has done quite well by his programs, which also trade gold and silver. "Early on we were on the long side, and then on the short side we did even a little bit better," he said. "We were short going into December … we're basically flat now."
As to the possibility of dwindling demand from China, Mr. Clarke was doubtful. "China sends out dubious information … they're notorious for manipulating the media," he said. "When they're that big a player, it's to their advantage to try and spook people, and accumulate more." This sort of thing contributes to the choppiness of the metals market, he added, which makes it more difficult for his programs to make money.
Although Mr. Clarke said his firm's trading programs had a difficult year in 2006, 2007 was much better. The Millennium flagship program was up 14.8%; the Jupiter program, which he identified as a "developing flagship," was up 28.5%, and the Worldwide program was up 43.8%. All of these programs trade metals, and Mr. Clarke said that they benefited from more cautious positioning that kept them from over-participating in trends in the past year.
Gold Continues to Shine
The gold market, according to Mr. Clarke, has been choppier with some severe corrections, which he attributed to mixed macroeconomic signals coming from the United States. "There's been some indecision about fundamentals in the States—indecision about how bad the subprime mess is, how bad housing is, and the pessimists are winning out," he said. "But it's coming from a long period of bullishness in housing and ‘anything goes' in lending. It's got a long way to unwind."
With the U.S. Federal Reserve "between a rock and a hard place," Mr. Clarke said, he is anticipating an explosion in inflation that will be reflected in the rising prices of physical hedges like gold, and he is positioning his programs to take advantage of this.
Another gold trader expecting a runup in the yellow metal is Mark Mahaffey, director and co-founder of the $10 million Hinde Gold Fund, which is based in London and launched in October 2007 Previous HedgeWorld Story. He said that he perceives gold as being "completely wrongly priced," and that there will be a massive re-rating of the metal higher in the coming year.
According to Mr. Mahaffey, people will begin moving back toward a "1980s scenario," where more personal wealth will be allocated into commodities as opposed to property, bonds or equities. "Gold is relatively cheap against all of those asset classes, and ridiculously cheap against a lot of worldwide property," he said.
With negative real rates in the United States even on an official basis, Mr. Mahaffey said, bonds offer no return at all after inflation, and equities are "obviously struggling" in most sectors as the credit crunch plays out. "But relative to all of those, gold remains relatively cheap," he said, and the proliferation of ETFs offer investors an easier way to own gold in their portfolios.
From a macro viewpoint, Mr. Mahaffey said new buyers of potential gold reserves could become the new central banks. "The sovereign wealth funds, China, the Middle East … they are all worried about having huge reserves in dollars, they're worried about [currency] debasement," he said.
On the sell side, Mr. Mahaffey identified declining production as another factor contributing to gold's rise. South Africa, he noted, saw gold production down approximately 7.5% in 2007, approaching its lowest level since the 1920s. A total of about 2,480 tons of gold were extracted from the earth last year, he said, which added to the above-ground supply by only about 1.5%.
Moreover, Mr. Mahaffey said, the cost of mining is going up—energy, labor, permits, even rubber tires are becoming more expensive. In some countries the cost of opening and operating a mine has risen around 25% over the last few years, and it can be a struggle to produce gold at less than $500 per ounce. "In 1980, gold spiked to around 10 times the production cost," he said, and noted that at 10 times current production costs, gold would approach $5,000 per ounce; the lowest fair value estimate for gold is the inflation-adjusted price, which is closer to $2,000 per ounce.
While Mr. Mahaffey said that he didn't expect the uptrend in gold to be without regular pullbacks typical in commodity bull markets, especially considering the market's small size compared to bonds and equities, he said the biggest risk to the price of gold was the prospect of a new U.S. Federal Reserve chairman in the mold of Paul Volcker turning up and confronting the issue of inflation, as Mr. Volcker did in 1980.
"It would seem quite clear that we would get $1,000 per ounce sometime in 2008," said Mr. Mahaffey. "People find it hard to understand why it's gone up so much in the last five years… in reality, it's that production costs have gone up the same amount," and the macro backdrop of currency debasement and inflation have made gold as cheap now as it was in 2000–2001, despite a 350% increase in price.
Mr. Clarke said it was "almost a lead-pipe cinch" that gold would hit $1,000 per ounce this year, and predicted a continued up-move for the yellow metal. "There will be wiggles here and there, but it's a great long-term play."
JBunge@HedgeWorld.com
Wednesday, January 09, 2008 3:40:50 PM ET
CHICAGO (HedgeWorld.com)—In a long-running bull market for metals, some CTAs said 2008 could bring a peak for copper, while gold will continue its climb.
"We see opportunities across the board," said Mike Dever, chief executive of West Chester, Pa.-based Brandywine Asset Management LLC, which manages approximately $100 million and trades both base and precious metals. Although 2007 was a wild year, he said, the bull market for metals ran on, sometimes to his surprise: "It appeared at times that it may be peaking, especially [in] precious metals, but at year-end it rallied back strongly."
This year, Mr. Dever said, he sees metals peaking in the first half, possibly the first quarter, as the themes driving prices higher begin to lose steam. He added that he was a bit surprised that metals demand held up as well as it did despite the onset of the housing meltdown, and there still hasn't been the impact that he expected. But in the coming year, that may change as investor interest in commodities begins to level off.
"I feel like we've had over the last few years this rush of commodity funds, especially with long biases," Mr. Dever said. "I do think they provided some support and some impetus for up-moves in some of these markets … but I see that pressure abating this year."
Copper and China
There is disagreement among metals traders as to whether upward pressure on copper will abate as well in the new year. Mr. Dever said he expects copper to crest in the next few months, and is positioning for a possible trend change in that market.
That change may be driven in part by China, which has been a major consumer of metals in recent years. A report from the International Copper Group found that in 2008, China is set to become a net exporter of the metal, while its demand is forecast to rise 5% to 7%, compared with 12% in 2007. Meanwhile, copper demand was expected to slow in the United States and Europe, as well.
Mr. Dever said he's looking for China's demand for metals in general to shift in the first few months of 2008, and investors eventually will realize that growth will not continue to be as exponential as it has been. "I think this year people will come off that high, this sort of psychological high of unlimited strong growth out of China," Mr. Dever said. "They're not going to sustain the prices where they are." Meanwhile, he said he didn't anticipate demand from other economies would pick up.
Michael J. Clarke, president of Hinsdale, Ill.-based Clarke Capital Management Inc., said that copper has done quite well by his programs, which also trade gold and silver. "Early on we were on the long side, and then on the short side we did even a little bit better," he said. "We were short going into December … we're basically flat now."
As to the possibility of dwindling demand from China, Mr. Clarke was doubtful. "China sends out dubious information … they're notorious for manipulating the media," he said. "When they're that big a player, it's to their advantage to try and spook people, and accumulate more." This sort of thing contributes to the choppiness of the metals market, he added, which makes it more difficult for his programs to make money.
Although Mr. Clarke said his firm's trading programs had a difficult year in 2006, 2007 was much better. The Millennium flagship program was up 14.8%; the Jupiter program, which he identified as a "developing flagship," was up 28.5%, and the Worldwide program was up 43.8%. All of these programs trade metals, and Mr. Clarke said that they benefited from more cautious positioning that kept them from over-participating in trends in the past year.
Gold Continues to Shine
The gold market, according to Mr. Clarke, has been choppier with some severe corrections, which he attributed to mixed macroeconomic signals coming from the United States. "There's been some indecision about fundamentals in the States—indecision about how bad the subprime mess is, how bad housing is, and the pessimists are winning out," he said. "But it's coming from a long period of bullishness in housing and ‘anything goes' in lending. It's got a long way to unwind."
With the U.S. Federal Reserve "between a rock and a hard place," Mr. Clarke said, he is anticipating an explosion in inflation that will be reflected in the rising prices of physical hedges like gold, and he is positioning his programs to take advantage of this.
Another gold trader expecting a runup in the yellow metal is Mark Mahaffey, director and co-founder of the $10 million Hinde Gold Fund, which is based in London and launched in October 2007 Previous HedgeWorld Story. He said that he perceives gold as being "completely wrongly priced," and that there will be a massive re-rating of the metal higher in the coming year.
According to Mr. Mahaffey, people will begin moving back toward a "1980s scenario," where more personal wealth will be allocated into commodities as opposed to property, bonds or equities. "Gold is relatively cheap against all of those asset classes, and ridiculously cheap against a lot of worldwide property," he said.
With negative real rates in the United States even on an official basis, Mr. Mahaffey said, bonds offer no return at all after inflation, and equities are "obviously struggling" in most sectors as the credit crunch plays out. "But relative to all of those, gold remains relatively cheap," he said, and the proliferation of ETFs offer investors an easier way to own gold in their portfolios.
From a macro viewpoint, Mr. Mahaffey said new buyers of potential gold reserves could become the new central banks. "The sovereign wealth funds, China, the Middle East … they are all worried about having huge reserves in dollars, they're worried about [currency] debasement," he said.
On the sell side, Mr. Mahaffey identified declining production as another factor contributing to gold's rise. South Africa, he noted, saw gold production down approximately 7.5% in 2007, approaching its lowest level since the 1920s. A total of about 2,480 tons of gold were extracted from the earth last year, he said, which added to the above-ground supply by only about 1.5%.
Moreover, Mr. Mahaffey said, the cost of mining is going up—energy, labor, permits, even rubber tires are becoming more expensive. In some countries the cost of opening and operating a mine has risen around 25% over the last few years, and it can be a struggle to produce gold at less than $500 per ounce. "In 1980, gold spiked to around 10 times the production cost," he said, and noted that at 10 times current production costs, gold would approach $5,000 per ounce; the lowest fair value estimate for gold is the inflation-adjusted price, which is closer to $2,000 per ounce.
While Mr. Mahaffey said that he didn't expect the uptrend in gold to be without regular pullbacks typical in commodity bull markets, especially considering the market's small size compared to bonds and equities, he said the biggest risk to the price of gold was the prospect of a new U.S. Federal Reserve chairman in the mold of Paul Volcker turning up and confronting the issue of inflation, as Mr. Volcker did in 1980.
"It would seem quite clear that we would get $1,000 per ounce sometime in 2008," said Mr. Mahaffey. "People find it hard to understand why it's gone up so much in the last five years… in reality, it's that production costs have gone up the same amount," and the macro backdrop of currency debasement and inflation have made gold as cheap now as it was in 2000–2001, despite a 350% increase in price.
Mr. Clarke said it was "almost a lead-pipe cinch" that gold would hit $1,000 per ounce this year, and predicted a continued up-move for the yellow metal. "There will be wiggles here and there, but it's a great long-term play."
JBunge@HedgeWorld.com
People Moves
Brad Barton, former director of commercialization and deployment at the U.S. Department of Energy, has joined NGP Energy Technology Partners as principal.
Energy HFs Power Up In ‘07
01-09-2008 | Source: Hedge Fund Daily
Energy hedge funds took advantage of unexpected moves in oil prices to become the No. 2 performer in 2007, according to HedgeFund.net. Early results indicate that the strategy gained +3.81% in December, bringing the HFN Energy Sector Average to +17.53%, second behind the leader emerging markets, which ended the year at +20.83%. Energy funds, which capitalized on oil prices heading toward $100 a barrel despite predictions last year that they would fall and remain flat, also proved to be the second-best performer over the past five years, with the average energy HF aggregating +166.92% since 2001. That’s still only about half as good as emerging markets during that period, which saw the average energy hedge fund record an explosive +320.76%. According to HFN, distressed hedge funds experienced their worst performance since 2000, inching up +0.25% in December and finishing the year at +6.25%. HFN notes, however, that funds in that specialty can be hopeful, if history repeats itself: Bad years in distressed HFs often are followed by good ones. HFN cites the -4.53% distressed funds notched in 1998, followed by +19.83% in 1999. It happened again in 2002,when distressed funds gained barely 7%, but followed that up with +32.22% a year later. Indeed, as reported here earlier this week, hedge fund managers predict distressed hedge funds to be the top performer in 2008.
Energy hedge funds took advantage of unexpected moves in oil prices to become the No. 2 performer in 2007, according to HedgeFund.net. Early results indicate that the strategy gained +3.81% in December, bringing the HFN Energy Sector Average to +17.53%, second behind the leader emerging markets, which ended the year at +20.83%. Energy funds, which capitalized on oil prices heading toward $100 a barrel despite predictions last year that they would fall and remain flat, also proved to be the second-best performer over the past five years, with the average energy HF aggregating +166.92% since 2001. That’s still only about half as good as emerging markets during that period, which saw the average energy hedge fund record an explosive +320.76%. According to HFN, distressed hedge funds experienced their worst performance since 2000, inching up +0.25% in December and finishing the year at +6.25%. HFN notes, however, that funds in that specialty can be hopeful, if history repeats itself: Bad years in distressed HFs often are followed by good ones. HFN cites the -4.53% distressed funds notched in 1998, followed by +19.83% in 1999. It happened again in 2002,when distressed funds gained barely 7%, but followed that up with +32.22% a year later. Indeed, as reported here earlier this week, hedge fund managers predict distressed hedge funds to be the top performer in 2008.
DAXglobal(R) Nuclear Energy Index Up 1.07 Percent in 2007
NEW YORK, Jan 08, 2008 (BUSINESS WIRE) -- The DAXglobal(R) Nuclear Energy Index (Bloomberg ticker: DXNE) returned -2.58 percent in December and gained 1.07 percent in the year ending December 31, 2007.* +
The Index is comprised of a basket of the securities of 35 companies from around the world that are engaged in various sectors of the nuclear industry including uranium mining, nuclear plant infrastructure, uranium enrichment, uranium storage, nuclear generation, nuclear equipment and nuclear fuel transportation. The Index, launched on July 16, 2007, includes many companies of global prominence including Mitsubishi Heavy Industries, Hitachi and Cameco (representing 7.9%, 1.8% and 8.4% of the Index as of December 31, 2007).
The Market Vectors-Nuclear Energy ETF (Amex: NLR) is an exchange-traded fund that seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Index. NLR generally holds all of the securities that comprise the Index in proportion to their weighting in the Index.
*Past performance does not guarantee future results. The Index's return does not represent the performance of any fund. The Index charges no fees, including management fees or brokerage expenses, and no such fees or expenses were deducted from the performance shown. Investors cannot invest directly in the Index.
Please call 1.888.MKT.VCTR or visit www.vaneck.com/nlr for the most recent month-end performance of Market Vectors-Nuclear Energy ETF. This information will be available no later than seven business days after the most recent month end.
+About the DAXglobal(R) Nuclear Energy Index
Performance information presented for the Index covering the period prior to July 16, 2007 is based on hypothetical, back-tested data. Prior to July 16, 2007, the Index was not calculated in real time by an independent calculation agent. Hypothetical, back-tested performance has inherent limitations and is not indicative of future results. No representation is being made that any investment will achieve performance similar to that shown.
The Index is intended to give investors an efficient way to track the performance of equity securities of selected companies engaged in the nuclear energy industry. It is calculated using a modified market capitalization weighting methodology. The Index is weighted based on the market capitalization of each of the component stocks, modified to conform to various asset diversification requirements, which are applied in conjunction with the scheduled quarterly adjustments to the Index. The value of the Index is disseminated every 15 seconds between the hours of approximately 9:30 a.m. and 4:15 p.m. Eastern Time. The Index is a total return index.
The DAXglobal(R) Nuclear Energy Index, a trademark of Deutsche Borse AG, is licensed for use by Van Eck Associates Corporation in connection with NLR. Deutsche Borse AG does not sponsor or endorse NLR and makes no warranty or representation as to the accuracy and/or completeness of the Index or results to be obtained by any person from use of the Index in connection with trading NLR.
Fund shares are not individually redeemable and will be issued and redeemed at their NAV only through certain authorized broker-dealers in large, specified blocks of shares called "creation units" and otherwise can be bought and sold only through exchange trading. Creation units are issued and redeemed principally in kind.
NLR is subject to risks associated with the stock market, index tracking, sector investing, investing in small- or mid-cap companies, replication management, non-diversified investments, absence of prior active market, trading issues, fluctuation of net asset value and risks of investing in nuclear energy investments. Because of their narrow focus, sector investments tend to be more volatile than investments that diversify across many sectors and companies.
Investors may call 1.888.MKT.VCTR or visit www.vaneck.com/nlr for a free prospectus. They should consider the investment objective, risks, and charges and expenses of Market Vectors-Nuclear Energy ETF carefully before investing. The prospectus contains this and other information about NLR. Please read the prospectus carefully before investing.
About Deutsche Borse AG
Deutsche Borse Group offers more than a marketplace for trading shares and other securities. It is a transaction services provider with advanced technology to afford companies and investors access to global capital markets.
Deutsche Borse has a broader basis than any of its competitors. Its product and services mix cover the entire process chain: securities and derivatives trading, transaction settlement, provision of market information as well as the development and operation of electronic trading systems. With its process-oriented business model, Deutsche Borse increases capital markets efficiency. Issuers benefit from low capital costs and investors enjoy the advantages of high liquidity and low transaction costs.
About Van Eck Global
Founded in 1955, Van Eck Associates Corporation was among the first U.S. money managers helping investors achieve greater diversification through global investing. Today, the firm continues the 50+ year tradition by offering global investment choices in hard assets, emerging markets, precious metals including gold, and other specialized asset classes.
Van Eck mutual funds are sold nationwide through retail brokers, financial planners and investment advisors. Designed for investors seeking innovative choices for portfolio diversification, they are often categorized in asset classes having returns with low correlations to those of more traditional U.S. equity and fixed income investments.
Van Eck also offers exchange-traded funds, separate accounts and alternative investments. In addition, it offers the Worldwide Insurance Trust Funds, a series of investment choices within the variable annuity contracts and variable life policies of widely known and highly regarded insurers.
Van Eck Securities Corporation, Distributor, 99 Park Avenue, New York, NY 10016
SOURCE: Van Eck Global
The Index is comprised of a basket of the securities of 35 companies from around the world that are engaged in various sectors of the nuclear industry including uranium mining, nuclear plant infrastructure, uranium enrichment, uranium storage, nuclear generation, nuclear equipment and nuclear fuel transportation. The Index, launched on July 16, 2007, includes many companies of global prominence including Mitsubishi Heavy Industries, Hitachi and Cameco (representing 7.9%, 1.8% and 8.4% of the Index as of December 31, 2007).
The Market Vectors-Nuclear Energy ETF (Amex: NLR) is an exchange-traded fund that seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Index. NLR generally holds all of the securities that comprise the Index in proportion to their weighting in the Index.
*Past performance does not guarantee future results. The Index's return does not represent the performance of any fund. The Index charges no fees, including management fees or brokerage expenses, and no such fees or expenses were deducted from the performance shown. Investors cannot invest directly in the Index.
Please call 1.888.MKT.VCTR or visit www.vaneck.com/nlr for the most recent month-end performance of Market Vectors-Nuclear Energy ETF. This information will be available no later than seven business days after the most recent month end.
+About the DAXglobal(R) Nuclear Energy Index
Performance information presented for the Index covering the period prior to July 16, 2007 is based on hypothetical, back-tested data. Prior to July 16, 2007, the Index was not calculated in real time by an independent calculation agent. Hypothetical, back-tested performance has inherent limitations and is not indicative of future results. No representation is being made that any investment will achieve performance similar to that shown.
The Index is intended to give investors an efficient way to track the performance of equity securities of selected companies engaged in the nuclear energy industry. It is calculated using a modified market capitalization weighting methodology. The Index is weighted based on the market capitalization of each of the component stocks, modified to conform to various asset diversification requirements, which are applied in conjunction with the scheduled quarterly adjustments to the Index. The value of the Index is disseminated every 15 seconds between the hours of approximately 9:30 a.m. and 4:15 p.m. Eastern Time. The Index is a total return index.
The DAXglobal(R) Nuclear Energy Index, a trademark of Deutsche Borse AG, is licensed for use by Van Eck Associates Corporation in connection with NLR. Deutsche Borse AG does not sponsor or endorse NLR and makes no warranty or representation as to the accuracy and/or completeness of the Index or results to be obtained by any person from use of the Index in connection with trading NLR.
Fund shares are not individually redeemable and will be issued and redeemed at their NAV only through certain authorized broker-dealers in large, specified blocks of shares called "creation units" and otherwise can be bought and sold only through exchange trading. Creation units are issued and redeemed principally in kind.
NLR is subject to risks associated with the stock market, index tracking, sector investing, investing in small- or mid-cap companies, replication management, non-diversified investments, absence of prior active market, trading issues, fluctuation of net asset value and risks of investing in nuclear energy investments. Because of their narrow focus, sector investments tend to be more volatile than investments that diversify across many sectors and companies.
Investors may call 1.888.MKT.VCTR or visit www.vaneck.com/nlr for a free prospectus. They should consider the investment objective, risks, and charges and expenses of Market Vectors-Nuclear Energy ETF carefully before investing. The prospectus contains this and other information about NLR. Please read the prospectus carefully before investing.
About Deutsche Borse AG
Deutsche Borse Group offers more than a marketplace for trading shares and other securities. It is a transaction services provider with advanced technology to afford companies and investors access to global capital markets.
Deutsche Borse has a broader basis than any of its competitors. Its product and services mix cover the entire process chain: securities and derivatives trading, transaction settlement, provision of market information as well as the development and operation of electronic trading systems. With its process-oriented business model, Deutsche Borse increases capital markets efficiency. Issuers benefit from low capital costs and investors enjoy the advantages of high liquidity and low transaction costs.
About Van Eck Global
Founded in 1955, Van Eck Associates Corporation was among the first U.S. money managers helping investors achieve greater diversification through global investing. Today, the firm continues the 50+ year tradition by offering global investment choices in hard assets, emerging markets, precious metals including gold, and other specialized asset classes.
Van Eck mutual funds are sold nationwide through retail brokers, financial planners and investment advisors. Designed for investors seeking innovative choices for portfolio diversification, they are often categorized in asset classes having returns with low correlations to those of more traditional U.S. equity and fixed income investments.
Van Eck also offers exchange-traded funds, separate accounts and alternative investments. In addition, it offers the Worldwide Insurance Trust Funds, a series of investment choices within the variable annuity contracts and variable life policies of widely known and highly regarded insurers.
Van Eck Securities Corporation, Distributor, 99 Park Avenue, New York, NY 10016
SOURCE: Van Eck Global
DAXglobal(R) Agribusiness Index up 90.02 Percent in 2007
2008-01-08 20:37:44 -
www.vaneck.com - The DAXglobal(R) Agribusiness Index (Bloomberg ticker: DXAG) returned +14.42 percent in December and gained 90.02 percent for the year ending December 31, 2007.* +
The Index comprises a basket of the securities of 37 companies from around the world that are engaged in various sectors of the agribusiness industry including agriproduct operations, agricultural chemicals, livestock operations, agricultural equipment and ethanol/biodiesel. These sectors represent 27.7%, 44.5%, 4.8%, 20.3% and 2.7% of the Index as of December 31, 2007. The Index, launched on July 16, 2007, includes many companies of global prominence including Potash Corp., Deere Co., Komatsu Ltd. and Monsanto Co., (representing 8.5%, 7.9%, 4.4% and 7.9% of the Index as of December 31, 2007).
The Market Vectors-Agribusiness ETF (Amex: MOO) is an exchange-traded fund that seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Index. MOO generally holds all of the securities that comprise the Index in proportion to their weighting in the Index.
*Past performance does not guarantee future results. The Index's return does not represent the performance of any fund. The Index charges no fees, including management fees or brokerage expenses, and no such fees or expenses were deducted from the performance shown. Investors cannot invest directly in the Index.
Please call 1.888.MKT.VCTR or visit www.vaneck.com/moo for the most recent month-end performance of Market Vectors-Agribusiness ETF. This information will be available no later than seven business days after the most recent month end.
+About the DAXglobal(R) Agribusiness Index
Performance information presented for the Index covering the period prior to July 16, 2007 is based on hypothetical, back-tested data. Prior to July 16, the Index was not calculated in real time by an independent calculation agent. Hypothetical, back-tested performance has inherent limitations and is not indicative of future results. No representation is being made that any investment will achieve performance similar to that shown.
The Index is intended to give investors an efficient way to track the performance of equity securities of selected companies engaged in the agriculture business that are traded on leading global exchanges.
It is calculated using a modified market capitalization weighting methodology. The Index is weighted based on the market capitalization of each of the component securities, modified to conform to various asset diversification requirements, which are applied in conjunction with the scheduled quarterly adjustments to the Index. The value of the Index is disseminated every 15 seconds between the hours of approximately 9:30 a.m. and 4:15 p.m. Eastern Time. The Index is a total return index.
The DAXglobal(R) Agribusiness Index (DXAG), a trademark of Deutsche Borse AG, is licensed for use by Van Eck Associates Corporation in connection with MOO. Deutsche Borse AG does not sponsor or endorse MOO and makes no warranty or representation as to the accuracy and/or completeness of DXAG or results to be obtained by any person from use of DXAG in connection with trading MOO.
Fund shares are not individually redeemable and will be issued and redeemed at their NAV only through certain authorized broker-dealers in large, specified blocks of shares called "creation units" and otherwise can be bought and sold only through exchange trading. Creation units are issued and redeemed principally in kind.
MOO is subject to various risks including those associated with making investments in companies engaged in the agriculture business such as economic forces, energy and financial markets, government policies and regulations, and environmental laws and regulations.
Investors may call 1.888.MKT.VCTR or visit www.vaneck.com/moo for a free prospectus. They should consider the investment objective, risks, and charges and expenses of Market Vectors-Agribusiness ETF carefully before investing. The prospectus contains this and other information about MOO. Please read the prospectus carefully before investing.
About Deutsche Borse AG
Deutsche Borse Group offers more than a marketplace for trading shares and other securities. It is a transaction services provider with advanced technology to afford companies and investors access to global capital markets.
Deutsche Borse has a broader basis than any of its competitors. Its product and services mix cover the entire process chain: securities and derivatives trading, transaction settlement, provision of market information as well as the development and operation of electronic trading systems. With its process-oriented business model, Deutsche Borse increases capital markets efficiency. Issuers benefit from low capital costs and investors enjoy the advantages of high liquidity and low transaction costs.
About Van Eck Global
Founded in 1955, Van Eck Associates Corporation was among the first U.S. money managers helping investors achieve greater diversification through global investing. Today, the firm continues the 50+ year tradition by offering global investment choices in hard assets, emerging markets, precious metals including gold, and other specialized asset classes.
Van Eck mutual funds are sold nationwide through retail brokers, financial planners and investment advisors. Designed for investors seeking innovative choices for portfolio diversification, they are often categorized in asset classes having returns with low correlations to those of more traditional U.S. equity and fixed income investments.
Van Eck also offers exchange-traded funds, separate accounts and alternative investments. In addition, it offers the Worldwide Insurance Trust Funds, a series of investment choices within the variable annuity contracts and variable life policies of widely known and highly regarded insurers.
Van Eck Securities Corporation, Distributor, 99 Park Avenue, New York, NY 10016
MacMillan Communications
Mike MacMillan/Andrew Schiff, 212-473-4442
mike@macmillancom.com
www.vaneck.com - The DAXglobal(R) Agribusiness Index (Bloomberg ticker: DXAG) returned +14.42 percent in December and gained 90.02 percent for the year ending December 31, 2007.* +
The Index comprises a basket of the securities of 37 companies from around the world that are engaged in various sectors of the agribusiness industry including agriproduct operations, agricultural chemicals, livestock operations, agricultural equipment and ethanol/biodiesel. These sectors represent 27.7%, 44.5%, 4.8%, 20.3% and 2.7% of the Index as of December 31, 2007. The Index, launched on July 16, 2007, includes many companies of global prominence including Potash Corp., Deere Co., Komatsu Ltd. and Monsanto Co., (representing 8.5%, 7.9%, 4.4% and 7.9% of the Index as of December 31, 2007).
The Market Vectors-Agribusiness ETF (Amex: MOO) is an exchange-traded fund that seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Index. MOO generally holds all of the securities that comprise the Index in proportion to their weighting in the Index.
*Past performance does not guarantee future results. The Index's return does not represent the performance of any fund. The Index charges no fees, including management fees or brokerage expenses, and no such fees or expenses were deducted from the performance shown. Investors cannot invest directly in the Index.
Please call 1.888.MKT.VCTR or visit www.vaneck.com/moo for the most recent month-end performance of Market Vectors-Agribusiness ETF. This information will be available no later than seven business days after the most recent month end.
+About the DAXglobal(R) Agribusiness Index
Performance information presented for the Index covering the period prior to July 16, 2007 is based on hypothetical, back-tested data. Prior to July 16, the Index was not calculated in real time by an independent calculation agent. Hypothetical, back-tested performance has inherent limitations and is not indicative of future results. No representation is being made that any investment will achieve performance similar to that shown.
The Index is intended to give investors an efficient way to track the performance of equity securities of selected companies engaged in the agriculture business that are traded on leading global exchanges.
It is calculated using a modified market capitalization weighting methodology. The Index is weighted based on the market capitalization of each of the component securities, modified to conform to various asset diversification requirements, which are applied in conjunction with the scheduled quarterly adjustments to the Index. The value of the Index is disseminated every 15 seconds between the hours of approximately 9:30 a.m. and 4:15 p.m. Eastern Time. The Index is a total return index.
The DAXglobal(R) Agribusiness Index (DXAG), a trademark of Deutsche Borse AG, is licensed for use by Van Eck Associates Corporation in connection with MOO. Deutsche Borse AG does not sponsor or endorse MOO and makes no warranty or representation as to the accuracy and/or completeness of DXAG or results to be obtained by any person from use of DXAG in connection with trading MOO.
Fund shares are not individually redeemable and will be issued and redeemed at their NAV only through certain authorized broker-dealers in large, specified blocks of shares called "creation units" and otherwise can be bought and sold only through exchange trading. Creation units are issued and redeemed principally in kind.
MOO is subject to various risks including those associated with making investments in companies engaged in the agriculture business such as economic forces, energy and financial markets, government policies and regulations, and environmental laws and regulations.
Investors may call 1.888.MKT.VCTR or visit www.vaneck.com/moo for a free prospectus. They should consider the investment objective, risks, and charges and expenses of Market Vectors-Agribusiness ETF carefully before investing. The prospectus contains this and other information about MOO. Please read the prospectus carefully before investing.
About Deutsche Borse AG
Deutsche Borse Group offers more than a marketplace for trading shares and other securities. It is a transaction services provider with advanced technology to afford companies and investors access to global capital markets.
Deutsche Borse has a broader basis than any of its competitors. Its product and services mix cover the entire process chain: securities and derivatives trading, transaction settlement, provision of market information as well as the development and operation of electronic trading systems. With its process-oriented business model, Deutsche Borse increases capital markets efficiency. Issuers benefit from low capital costs and investors enjoy the advantages of high liquidity and low transaction costs.
About Van Eck Global
Founded in 1955, Van Eck Associates Corporation was among the first U.S. money managers helping investors achieve greater diversification through global investing. Today, the firm continues the 50+ year tradition by offering global investment choices in hard assets, emerging markets, precious metals including gold, and other specialized asset classes.
Van Eck mutual funds are sold nationwide through retail brokers, financial planners and investment advisors. Designed for investors seeking innovative choices for portfolio diversification, they are often categorized in asset classes having returns with low correlations to those of more traditional U.S. equity and fixed income investments.
Van Eck also offers exchange-traded funds, separate accounts and alternative investments. In addition, it offers the Worldwide Insurance Trust Funds, a series of investment choices within the variable annuity contracts and variable life policies of widely known and highly regarded insurers.
Van Eck Securities Corporation, Distributor, 99 Park Avenue, New York, NY 10016
MacMillan Communications
Mike MacMillan/Andrew Schiff, 212-473-4442
mike@macmillancom.com
Carbon-Trading Hedge Fund Shuts on Lack of Money
By Saijel Kishan
Jan. 8 (Bloomberg) -- Carbon Trading Fund Ltd., a London- based hedge fund, shut down because of lack of money less than two years after it was started.
Cash in the fund, which was introduced in June 2006 and managed by David Bates, was returned to investors at the end of last year, according to Sam Morse, marketing associate at PCE Investors Ltd., which provided administrative support.
``The fund didn't attain the targeted assets,'' Morse said in a telephone interview today. He declined to say how much was invested.
The fund had planned to raise as much as 125 million euros ($184 million) to trade European Union carbon-dioxide emission- allowance contracts and alternative-energy stocks, Bates said in a May 2006 interview. He said he sought to return more than 25 percent annually.
Bates couldn't immediately be reached on his mobile phone. He was a director at Dresdner Kleinwort Wasserstein in 2000 and 2001 and was an investment manager at the Kuwait Investment Office from 1984 to 1987, according to the fund's proposal document.
EU carbon dioxide permits for December 2008 have risen 64 percent in the past year to 23.75 euros a metric ton, according to prices from the European Climate Exchange in London.
Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets and participate substantially in profits from money invested.
To contact the reporter on this story: Saijel Kishan in London at skishan@bloomberg.net
Jan. 8 (Bloomberg) -- Carbon Trading Fund Ltd., a London- based hedge fund, shut down because of lack of money less than two years after it was started.
Cash in the fund, which was introduced in June 2006 and managed by David Bates, was returned to investors at the end of last year, according to Sam Morse, marketing associate at PCE Investors Ltd., which provided administrative support.
``The fund didn't attain the targeted assets,'' Morse said in a telephone interview today. He declined to say how much was invested.
The fund had planned to raise as much as 125 million euros ($184 million) to trade European Union carbon-dioxide emission- allowance contracts and alternative-energy stocks, Bates said in a May 2006 interview. He said he sought to return more than 25 percent annually.
Bates couldn't immediately be reached on his mobile phone. He was a director at Dresdner Kleinwort Wasserstein in 2000 and 2001 and was an investment manager at the Kuwait Investment Office from 1984 to 1987, according to the fund's proposal document.
EU carbon dioxide permits for December 2008 have risen 64 percent in the past year to 23.75 euros a metric ton, according to prices from the European Climate Exchange in London.
Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets and participate substantially in profits from money invested.
To contact the reporter on this story: Saijel Kishan in London at skishan@bloomberg.net
Energy Capital Plans French, U.K. Power Trading
By Lars Paulsson
Jan. 8 (Bloomberg) -- Energy Capital Management BV, an Amsterdam-based energy hedge-fund manager, plans to start trading French power this quarter and expand into the U.K. in the middle of the year as prices climb to records.
``Moving into the French and U.K. power markets will give us a complete picture of European energy commodities,'' Chief Executive Officer Marcel Melis said yesterday by telephone. Energy Capital Management trades for the MMT Energy Fund, which was launched in October 2006 after raising 42.5 million euros ($62.4 million).
Widening the fund's geographical coverage will provide more opportunities to trade price spreads between European markets, Melis said. Investors are attracted to energy because there is little correlation with asset classes such as stocks or bonds.
Melis and the four other members of his team trade German, Nordic, Dutch and Belgian Power, along with U.K. and Dutch natural gas, carbon emission allowances and coal derivatives. The fund started trading Brent and gasoil last quarter.
Energy Capital Management will have ``several vacancies'' early this year, according to its Web Site. Melis declined to provide further details on hiring plans.
``We had a good year,'' Melis said, without commenting further on last year's returns. The fund is targeting annual returns of 25 percent to 30 percent.
Growing Markets
European power prices are continuing a rally that began in 2005 amid rising fuel prices and the introduction of the European Union's emissions-trading program, designed to make electricity production from fossil fuels more expensive to reduce carbon dioxide emissions from generation.
Electricity for next year in France, Europe's second- biggest market after Germany, pared a record 64.30 euros a megawatt-hour today. U.K. power for delivery this summer rose to a record 53.65 pounds ($106) a megawatt-hour.
Trading of U.K. power contracts rose 52 percent in the year through July, according to the country's financial services authority. The value of the market was 31 billion pounds ($69 billion) in the period.
European continental power trading doubled in volumes, taking the value of the market to 285 billion euros, the authority said.
To contact the reporter on this story: Lars Paulsson in London at lpaulsson@bloomberg.net
Jan. 8 (Bloomberg) -- Energy Capital Management BV, an Amsterdam-based energy hedge-fund manager, plans to start trading French power this quarter and expand into the U.K. in the middle of the year as prices climb to records.
``Moving into the French and U.K. power markets will give us a complete picture of European energy commodities,'' Chief Executive Officer Marcel Melis said yesterday by telephone. Energy Capital Management trades for the MMT Energy Fund, which was launched in October 2006 after raising 42.5 million euros ($62.4 million).
Widening the fund's geographical coverage will provide more opportunities to trade price spreads between European markets, Melis said. Investors are attracted to energy because there is little correlation with asset classes such as stocks or bonds.
Melis and the four other members of his team trade German, Nordic, Dutch and Belgian Power, along with U.K. and Dutch natural gas, carbon emission allowances and coal derivatives. The fund started trading Brent and gasoil last quarter.
Energy Capital Management will have ``several vacancies'' early this year, according to its Web Site. Melis declined to provide further details on hiring plans.
``We had a good year,'' Melis said, without commenting further on last year's returns. The fund is targeting annual returns of 25 percent to 30 percent.
Growing Markets
European power prices are continuing a rally that began in 2005 amid rising fuel prices and the introduction of the European Union's emissions-trading program, designed to make electricity production from fossil fuels more expensive to reduce carbon dioxide emissions from generation.
Electricity for next year in France, Europe's second- biggest market after Germany, pared a record 64.30 euros a megawatt-hour today. U.K. power for delivery this summer rose to a record 53.65 pounds ($106) a megawatt-hour.
Trading of U.K. power contracts rose 52 percent in the year through July, according to the country's financial services authority. The value of the market was 31 billion pounds ($69 billion) in the period.
European continental power trading doubled in volumes, taking the value of the market to 285 billion euros, the authority said.
To contact the reporter on this story: Lars Paulsson in London at lpaulsson@bloomberg.net
Oil, metals were hot, but down on the farm is where market growth is headed
Headshot of Rob Carrick
ROB CARRICK
rcarrick@globeandmail.com
January 8, 2008
Don't let the heated action in oil stocks this year fake you out.
Oil, along with base metals, is yesterday's story in the great multiyear commodity boom we're experiencing. Today, it's all about agricultural commodities like grain, livestock, coffee, sugar and cotton.
Energy and metal stocks have soared over the past four years or so thanks to demand for raw materials in the emerging economies of China, India, Brazil and elsewhere. The price of crude oil last week hit the psychologically important level of $100 (U.S.) a barrel after a year-long runup, and Canada's big energy stocks have responded with impressive gains of around 25 to 35 per cent in the past 12 months.
Agricultural stocks have been even more fertile, though. Take Canada's big two names in the sector, Potash Corp. of Saskatchewan and Agrium, which have at least doubled in the past year or so.
Print Edition - Section Front
Section B Front Enlarge Image
More Report on Business Stories
* Nortel taps telecom veteran to take on global sales job
* Fired by Alliance, CEO stages comeback
* The battle for the dashboard
* The flipside of gold's record rise
* Canadarm maker fetches $1.3-billion
* When a top investor makes a big bet, you sit up and take notice
* Go to the Report on Business section
The Globe and Mail
These stocks, and others that are focused directly or indirectly on agriculture, are benefiting from the same factors propelling demand for natural resources. A rising level of affluence in countries like China and India is increasing demand for food products, and that in turn is boosting food prices and demand for anything that helps increase food production, including fertilizer (that's Potash and Agrium), seeds and tractors. Demand for agricultural products has been heightened by a trend in which farmers are growing crops for biofuels like ethanol rather than food.
Increases in demand for food are outpacing supply, which in turn has resulted in high levels of food inflation. A U.S. government inflation report issued last month showed that the rate of increase in food prices had more than doubled over the previous 12 months and reached a 25-year high. Wheat and soybean prices rose close to 80 per cent last year, and corn hit an 11-year high.
If you're heavily invested in commodities of any kind, the question you have to ask yourself is how much more upside there is. Prices for base metals like copper and zinc have been in a down trend for the past several months as expectations of a global economic slowdown grow. Oil prices would also be affected if economic activity slackens, but there's a geopolitical component to energy prices that makes forecasting difficult.
This brings us to agricultural commodities, which are more immune to economic cycles because of basic supply-and-demand factors like global population growth and declines in the amount of cultivated land. It's true that agricultural stocks are like food commodity prices in that they've soared in the past year, but one expert in the field says retail investors should not be scared to jump in.
"This is not a situation that has been overhyped," Don Coxe, global portfolio strategist for Bank of Montreal, said from his Chicago office yesterday. "Quite the contrary, and it's still in the early stages."
Mr. Coxe said the agricultural story at its simplest level can be explained as another 600 million people, minimum, being added over the next 10 years to the list of those who have a diet something like what we in the West enjoy. Companies that help satisfy this demand for food have already benefited, and will continue to do so. "This isn't like saying you should buy this company because they have a really hot product that is going to be a big fad for the next two or three years."
The flip side of soaring demand for agricultural commodities is higher prices for food producers like the chocolate maker Hershey Co. The firm recently reported a 66-per-cent plunge in third-quarter profit that was linked in part to higher prices for milk.
But for every Hershey, there's a Deere & Co., which makes John Deere tractors and other agricultural machinery. "Deere is well positioned to continue benefiting from powerful global economic trends such as growing affluence and increasing demand for food, feed and biofuels," the company said recently in announcing a 57-per-cent rise in share profit for the fourth quarter of fiscal 2007.
Stocks like Deere, Potash Corp., Agrium, Monsanto, Mosaic Co., Terra Nitrogen and CNH Global are one way to play the agricultural commodity boom. Investors who appreciate the diversification benefits of owning a variety of stocks in a sector have at least three exchange-traded funds to choose from, including the new TSX-listed Claymore Global Agriculture ETF. The mutual fund world hasn't yet jumped on the trend, but the Criterion Diversified Commodities Fund is one option. It has about 40 per cent of its assets exposed to agricultural commodities and the rest to energy and metals.
There may yet be some juice in energy and metals, but don't get faked out. Agricultural commodities are where the real growth is.
Big growth in agricultural stocks
Agricultural commodities are hot right now, and so are stocks and exchange-traded funds
Stocks Ticker 12-Month return
AG Growth Income Fund AFN.UN-T 144.8%
Agrium AGU-T 97.7%
CNH Global CNH-N 144.9%
Deere & Co. DE-N 97.3%
Monsanto MON-N 137.0%
Mosaic MOS-N 361.3%
Potash Corp. POT-T 163.2%
Saskatchewan Wheat Pool VT-T 49.4%
Terra Nitrogen TNH-N 399.4%
ETFs Ticker 12-Month return
Claymore Global Agriculture ETF COW-T 8.6%
PowerShares DB Agriculture Fund DBA-A 38.3%
Market Vectors Agribusiness ETF MOO-A 39.6%
ROB CARRICK
rcarrick@globeandmail.com
January 8, 2008
Don't let the heated action in oil stocks this year fake you out.
Oil, along with base metals, is yesterday's story in the great multiyear commodity boom we're experiencing. Today, it's all about agricultural commodities like grain, livestock, coffee, sugar and cotton.
Energy and metal stocks have soared over the past four years or so thanks to demand for raw materials in the emerging economies of China, India, Brazil and elsewhere. The price of crude oil last week hit the psychologically important level of $100 (U.S.) a barrel after a year-long runup, and Canada's big energy stocks have responded with impressive gains of around 25 to 35 per cent in the past 12 months.
Agricultural stocks have been even more fertile, though. Take Canada's big two names in the sector, Potash Corp. of Saskatchewan and Agrium, which have at least doubled in the past year or so.
Print Edition - Section Front
Section B Front Enlarge Image
More Report on Business Stories
* Nortel taps telecom veteran to take on global sales job
* Fired by Alliance, CEO stages comeback
* The battle for the dashboard
* The flipside of gold's record rise
* Canadarm maker fetches $1.3-billion
* When a top investor makes a big bet, you sit up and take notice
* Go to the Report on Business section
The Globe and Mail
These stocks, and others that are focused directly or indirectly on agriculture, are benefiting from the same factors propelling demand for natural resources. A rising level of affluence in countries like China and India is increasing demand for food products, and that in turn is boosting food prices and demand for anything that helps increase food production, including fertilizer (that's Potash and Agrium), seeds and tractors. Demand for agricultural products has been heightened by a trend in which farmers are growing crops for biofuels like ethanol rather than food.
Increases in demand for food are outpacing supply, which in turn has resulted in high levels of food inflation. A U.S. government inflation report issued last month showed that the rate of increase in food prices had more than doubled over the previous 12 months and reached a 25-year high. Wheat and soybean prices rose close to 80 per cent last year, and corn hit an 11-year high.
If you're heavily invested in commodities of any kind, the question you have to ask yourself is how much more upside there is. Prices for base metals like copper and zinc have been in a down trend for the past several months as expectations of a global economic slowdown grow. Oil prices would also be affected if economic activity slackens, but there's a geopolitical component to energy prices that makes forecasting difficult.
This brings us to agricultural commodities, which are more immune to economic cycles because of basic supply-and-demand factors like global population growth and declines in the amount of cultivated land. It's true that agricultural stocks are like food commodity prices in that they've soared in the past year, but one expert in the field says retail investors should not be scared to jump in.
"This is not a situation that has been overhyped," Don Coxe, global portfolio strategist for Bank of Montreal, said from his Chicago office yesterday. "Quite the contrary, and it's still in the early stages."
Mr. Coxe said the agricultural story at its simplest level can be explained as another 600 million people, minimum, being added over the next 10 years to the list of those who have a diet something like what we in the West enjoy. Companies that help satisfy this demand for food have already benefited, and will continue to do so. "This isn't like saying you should buy this company because they have a really hot product that is going to be a big fad for the next two or three years."
The flip side of soaring demand for agricultural commodities is higher prices for food producers like the chocolate maker Hershey Co. The firm recently reported a 66-per-cent plunge in third-quarter profit that was linked in part to higher prices for milk.
But for every Hershey, there's a Deere & Co., which makes John Deere tractors and other agricultural machinery. "Deere is well positioned to continue benefiting from powerful global economic trends such as growing affluence and increasing demand for food, feed and biofuels," the company said recently in announcing a 57-per-cent rise in share profit for the fourth quarter of fiscal 2007.
Stocks like Deere, Potash Corp., Agrium, Monsanto, Mosaic Co., Terra Nitrogen and CNH Global are one way to play the agricultural commodity boom. Investors who appreciate the diversification benefits of owning a variety of stocks in a sector have at least three exchange-traded funds to choose from, including the new TSX-listed Claymore Global Agriculture ETF. The mutual fund world hasn't yet jumped on the trend, but the Criterion Diversified Commodities Fund is one option. It has about 40 per cent of its assets exposed to agricultural commodities and the rest to energy and metals.
There may yet be some juice in energy and metals, but don't get faked out. Agricultural commodities are where the real growth is.
Big growth in agricultural stocks
Agricultural commodities are hot right now, and so are stocks and exchange-traded funds
Stocks Ticker 12-Month return
AG Growth Income Fund AFN.UN-T 144.8%
Agrium AGU-T 97.7%
CNH Global CNH-N 144.9%
Deere & Co. DE-N 97.3%
Monsanto MON-N 137.0%
Mosaic MOS-N 361.3%
Potash Corp. POT-T 163.2%
Saskatchewan Wheat Pool VT-T 49.4%
Terra Nitrogen TNH-N 399.4%
ETFs Ticker 12-Month return
Claymore Global Agriculture ETF COW-T 8.6%
PowerShares DB Agriculture Fund DBA-A 38.3%
Market Vectors Agribusiness ETF MOO-A 39.6%
Gold hits record above $876 as fund cash pours in
* Reuters
* Tuesday January 8 2008
(changes dateline, byline, adds quotes, updates prices PVS TOKYO)
By Veronica Brown
LONDON, Jan 8 (Reuters) - Gold surged to a record high above $875 per ounce on Tuesday as investors poured into the market, confident of further upside in the metal with support from a weaker dollar and firm oil.
Spot gold sprinted to a record $875.80 an ounce, surpassing the historic high of $869.05 hit last week.
By 1100 GMT, bullion stood at $872.70/873.40 an ounce, up roughly 1.5 percent from $859.70/860.40 quoted late in New York on Monday.
"There's extraordinary investor appetite for gold which seems relentless," SGCIB economist Stephen Briggs said.
"The buying just seems to go on and on and on."
Other bullion markets reflected the move in spot gold. The most active February COMEX gold futures contract was trading up $14.80, or 1.7 percent, at $876.80 from the New York settlement.
In Tokyo, the key December 2008 gold contract on the Tokyo Commodity Exchange (TOCOM) ended at 3,097 yen a gram, up 53 yen or 1.7 percent from Monday's close of 3,044 yen.
Traders said gold and other commodity prices had found support so far in January from fund re-allocation cash, with pension funds and other long-term investors having pumped an estimated more than $100 billion into commodities over the past five years.
But the stakes were being raised for a corrective sell-off as investors are holding large long positions already.
"There will be a correction after such a run...the market is very, very, long," Briggs said.
The Commodity Futures Trading Commission said in its latest Commitments of Traders report that the noncommercial net long position rose to 199,438 lots in the week up to Dec. 31, from 184,375 lots a week earlier..
WIDER INVESTMENT
Broader investment interest in gold remained solid moving into 2008, with gold held in New York-listed StreetTRACKS Gold Shares, the world's largest gold-backed ETF, rising to a record high of 639.35 tonnes by Jan 7.
"The steady influx of money to gold ETFs...and the large volume of shares in the big gold mines being traded are proof that there are still a large number of new investors attracted to this market, which should provide a support line for the price," Commerzbank analyst Eugen Weinberg said in a note to clients.
Fundamentals played in gold's favour with a weaker dollar versus the euro making the metal cheaper for non-U.S. investors, while firm oil highlighted its allure as a hedge against oil-led inflation.
Crude rebounded above $95 a barrel on Tuesday after falling 3 percent a day earlier as the potential of a recession in top fuel consumer the United States led investors to expect lower demand.
The euro was up 0.1 percent versus the dollar, holding above $1.47.
"All the normal fundamental reasons to be friendly to gold are still there so you have to go with the flow. The market seems to be building another head of steam and the buying this morning was quite heavy," a London-based trader said.
In other precious metals, platinum advanced in line with sharp gains in Japanese platinum futures. Key TOCOM platinum for the December delivery closed up 80 yen or 1.5 percent at 5,313 yen a gram.
Japanese platinum futures often set the trend for the cash price as TOCOM is the most liquid market for the white metal.
Spot platinum rose to $1,540/44 an ounce from $1,530/$1,534 quoted in New York late on Monday, closing in on last week's record $1,553.
Palladium rose to $373/375 an ounce from $365/$368 in New York on Monday, while silver rose to $15.45/15.50 an ounce from $15.12/15.17.
(Additional reporting by Chikafumi Hodo)
(Editing by Michael Roddy)
* Tuesday January 8 2008
(changes dateline, byline, adds quotes, updates prices PVS TOKYO)
By Veronica Brown
LONDON, Jan 8 (Reuters) - Gold surged to a record high above $875 per ounce on Tuesday as investors poured into the market, confident of further upside in the metal with support from a weaker dollar and firm oil.
Spot gold sprinted to a record $875.80 an ounce, surpassing the historic high of $869.05 hit last week.
By 1100 GMT, bullion stood at $872.70/873.40 an ounce, up roughly 1.5 percent from $859.70/860.40 quoted late in New York on Monday.
"There's extraordinary investor appetite for gold which seems relentless," SGCIB economist Stephen Briggs said.
"The buying just seems to go on and on and on."
Other bullion markets reflected the move in spot gold. The most active February COMEX gold futures contract was trading up $14.80, or 1.7 percent, at $876.80 from the New York settlement.
In Tokyo, the key December 2008 gold contract on the Tokyo Commodity Exchange (TOCOM) ended at 3,097 yen a gram, up 53 yen or 1.7 percent from Monday's close of 3,044 yen.
Traders said gold and other commodity prices had found support so far in January from fund re-allocation cash, with pension funds and other long-term investors having pumped an estimated more than $100 billion into commodities over the past five years.
But the stakes were being raised for a corrective sell-off as investors are holding large long positions already.
"There will be a correction after such a run...the market is very, very, long," Briggs said.
The Commodity Futures Trading Commission said in its latest Commitments of Traders report that the noncommercial net long position rose to 199,438 lots in the week up to Dec. 31, from 184,375 lots a week earlier..
WIDER INVESTMENT
Broader investment interest in gold remained solid moving into 2008, with gold held in New York-listed StreetTRACKS Gold Shares, the world's largest gold-backed ETF, rising to a record high of 639.35 tonnes by Jan 7.
"The steady influx of money to gold ETFs...and the large volume of shares in the big gold mines being traded are proof that there are still a large number of new investors attracted to this market, which should provide a support line for the price," Commerzbank analyst Eugen Weinberg said in a note to clients.
Fundamentals played in gold's favour with a weaker dollar versus the euro making the metal cheaper for non-U.S. investors, while firm oil highlighted its allure as a hedge against oil-led inflation.
Crude rebounded above $95 a barrel on Tuesday after falling 3 percent a day earlier as the potential of a recession in top fuel consumer the United States led investors to expect lower demand.
The euro was up 0.1 percent versus the dollar, holding above $1.47.
"All the normal fundamental reasons to be friendly to gold are still there so you have to go with the flow. The market seems to be building another head of steam and the buying this morning was quite heavy," a London-based trader said.
In other precious metals, platinum advanced in line with sharp gains in Japanese platinum futures. Key TOCOM platinum for the December delivery closed up 80 yen or 1.5 percent at 5,313 yen a gram.
Japanese platinum futures often set the trend for the cash price as TOCOM is the most liquid market for the white metal.
Spot platinum rose to $1,540/44 an ounce from $1,530/$1,534 quoted in New York late on Monday, closing in on last week's record $1,553.
Palladium rose to $373/375 an ounce from $365/$368 in New York on Monday, while silver rose to $15.45/15.50 an ounce from $15.12/15.17.
(Additional reporting by Chikafumi Hodo)
(Editing by Michael Roddy)
Commodities Climb to Record, Led by Metals, as Equities Slump
By Millie Munshi
Jan. 8 (Bloomberg) -- Commodities jumped to a record on speculation that metals, energy and grains will outperform equity and bond markets this year.
The UBS Bloomberg Constant Maturity Commodity Index rose as much as 2.5 percent to 1,334.71, the highest ever. Copper surged to a seven-week high, gold soared to a record and energy prices rebounded. The commodity gauge climbed 22 percent last year, while the Standard & Poor's 500 Index rose 3.5 percent.
``It's all about what's going to be driving returns this year,'' said Stuart Flerlage, who helps manage more than $600 million at NuWave Investment Corp. in New York. ``Commodities have performed well, and they're going to continue to perform well.''
Copper jumped 5 percent as inventories in China, the world's biggest metal consumer, tumbled to the lowest since Feb. 1. Crude oil rose more than $2 a barrel on speculation that a government report will show U.S. stockpiles fell for an eighth week. The S&P 500 was down as much as 0.4 percent today after tumbling 4.5 percent last week.
``Part of what's driving today's rally is the long-term picture for global demand,'' said William O'Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey. ``But you can't dismiss the fact people are looking at alternative-asset classes and deciding commodities are the best place to put their money. There's nervousness about other financial markets.''
China, the world's fastest-growing major economy, expanded by almost 12 percent in the third quarter. Growth is set to continue as the country's trade surplus probably swelled to a record last month, according to economists surveyed by Bloomberg.
`Demand-Driven'
``There continues to be a demand-driven story in commodities,'' Flerlage of NuWave said. ``The only way that story is going to go away is if we see a significant global slowdown. China still has tons of spending and building to do.''
Copper futures for March delivery gained 15.75 cents to $3.2985 a pound on the Comex division of the New York Mercantile Exchange. Nickel surged as much as 6.4 percent in London.
Gold futures for February delivery rose $18.20, or 2.1 percent, to $880.20 an ounce at 1:29 p.m. on the Comex. Earlier, the price climbed to a record $884. Gold for immediate delivery reached $881.28, the highest ever.
Crude-oil futures for February delivery rose $2.05, or 2.2 percent, to $97.14 a barrel on the Nymex. Futures reached a record $100.09 a barrel on Jan. 3. Prices are up 73 percent from a year ago.
Soybeans, Sugar Rally
Soybeans extended a rally to the highest in 34 years, and soybean oil climbed to a record. Sugar gained to a one-year high, cocoa rose to the highest in almost five years and platinum jumped to a record.
Treasuries declined as two-year note yields near the lowest since 2004 discouraged investors from buying short-term U.S. government debt.
Some investors are buying raw materials as a hedge against inflation. Prices will continue to gain on speculation the Federal Reserve will lower U.S. borrowing costs this year, weakening the dollar, traders said.
``I don't see any relief to raging commodity prices until the Federal Reserve is done cutting interest rates,'' Ralph Preston, a strategist at Heritage West Financial Inc. in San Diego, said yesterday. Commodity prices will gain ``for years to come,'' he said.
Interest Rates
Interest-rate futures are showing a 100 percent chance the Fed will lower its benchmark rate by at least a quarter- percentage point at its next policy meeting on Jan. 30. The central bank lowered borrowing costs three times in 2007.
Some raw-material prices will gain this week as traders rebalance investments in commodity indexes, Flerlage of NuWave said. Investments in funds and other products tracking such indexes will rise to $150 billion this month from $110 billion last year, according to Standard & Poor's.
``Commodities are getting a lot of bullish momentum,'' said Adam Klopfenstein, a market strategist for Lind-Waldock in Chicago. ``There's a lot of global demand.''
Higher commmodity prices are boosting profits for producers including Freeport-McMoRan Copper & Gold Inc., the world's biggest publicly traded copper company and Exxon Mobil Corp., the largest oil producer.
To contact the reporter on the story: Millie Munshi in New York at mmunshi@bloomberg.net
Jan. 8 (Bloomberg) -- Commodities jumped to a record on speculation that metals, energy and grains will outperform equity and bond markets this year.
The UBS Bloomberg Constant Maturity Commodity Index rose as much as 2.5 percent to 1,334.71, the highest ever. Copper surged to a seven-week high, gold soared to a record and energy prices rebounded. The commodity gauge climbed 22 percent last year, while the Standard & Poor's 500 Index rose 3.5 percent.
``It's all about what's going to be driving returns this year,'' said Stuart Flerlage, who helps manage more than $600 million at NuWave Investment Corp. in New York. ``Commodities have performed well, and they're going to continue to perform well.''
Copper jumped 5 percent as inventories in China, the world's biggest metal consumer, tumbled to the lowest since Feb. 1. Crude oil rose more than $2 a barrel on speculation that a government report will show U.S. stockpiles fell for an eighth week. The S&P 500 was down as much as 0.4 percent today after tumbling 4.5 percent last week.
``Part of what's driving today's rally is the long-term picture for global demand,'' said William O'Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey. ``But you can't dismiss the fact people are looking at alternative-asset classes and deciding commodities are the best place to put their money. There's nervousness about other financial markets.''
China, the world's fastest-growing major economy, expanded by almost 12 percent in the third quarter. Growth is set to continue as the country's trade surplus probably swelled to a record last month, according to economists surveyed by Bloomberg.
`Demand-Driven'
``There continues to be a demand-driven story in commodities,'' Flerlage of NuWave said. ``The only way that story is going to go away is if we see a significant global slowdown. China still has tons of spending and building to do.''
Copper futures for March delivery gained 15.75 cents to $3.2985 a pound on the Comex division of the New York Mercantile Exchange. Nickel surged as much as 6.4 percent in London.
Gold futures for February delivery rose $18.20, or 2.1 percent, to $880.20 an ounce at 1:29 p.m. on the Comex. Earlier, the price climbed to a record $884. Gold for immediate delivery reached $881.28, the highest ever.
Crude-oil futures for February delivery rose $2.05, or 2.2 percent, to $97.14 a barrel on the Nymex. Futures reached a record $100.09 a barrel on Jan. 3. Prices are up 73 percent from a year ago.
Soybeans, Sugar Rally
Soybeans extended a rally to the highest in 34 years, and soybean oil climbed to a record. Sugar gained to a one-year high, cocoa rose to the highest in almost five years and platinum jumped to a record.
Treasuries declined as two-year note yields near the lowest since 2004 discouraged investors from buying short-term U.S. government debt.
Some investors are buying raw materials as a hedge against inflation. Prices will continue to gain on speculation the Federal Reserve will lower U.S. borrowing costs this year, weakening the dollar, traders said.
``I don't see any relief to raging commodity prices until the Federal Reserve is done cutting interest rates,'' Ralph Preston, a strategist at Heritage West Financial Inc. in San Diego, said yesterday. Commodity prices will gain ``for years to come,'' he said.
Interest Rates
Interest-rate futures are showing a 100 percent chance the Fed will lower its benchmark rate by at least a quarter- percentage point at its next policy meeting on Jan. 30. The central bank lowered borrowing costs three times in 2007.
Some raw-material prices will gain this week as traders rebalance investments in commodity indexes, Flerlage of NuWave said. Investments in funds and other products tracking such indexes will rise to $150 billion this month from $110 billion last year, according to Standard & Poor's.
``Commodities are getting a lot of bullish momentum,'' said Adam Klopfenstein, a market strategist for Lind-Waldock in Chicago. ``There's a lot of global demand.''
Higher commmodity prices are boosting profits for producers including Freeport-McMoRan Copper & Gold Inc., the world's biggest publicly traded copper company and Exxon Mobil Corp., the largest oil producer.
To contact the reporter on the story: Millie Munshi in New York at mmunshi@bloomberg.net
Houston Firm Launches Energy Hedge Fund
January 9, 2008
After six months of marketing its energy hedge fund to institutional investors, Houston-based ETG Capital this week launched its ETG Capital Master Fund. The cross-commodity, relative-value energy hedge fund, with between $25 million to $50 million, has exposure to the U.S. power, natural gas, crude oil and refined products sectors.
The firm intially aimed to launch the fund in October, but was derailed by a committed investor who had too much exposure to the fast-sinking credit markets, according to co-founder Don Addison. The fund attracted commitments frm mainly large funds of funds looking for additional energy exposure.
“We’ve had 50 to 60 investor meetings over the last five or six months and there is tremendous appetite at the institutional level for the energy commodity sector,” said Addison.
No more than 50% of the fund’s capital can be allocated to any one particular commodity. The offering employs short-, intermediate- and long-term trading, and 85% percent of its trades are in some sort of spread, either in commodities, time or location within a commodity.
Addison said the firm is currently fairly bullish on the U.S. power sector and will be initiating several long positions across the curve in U.S. power. The fund will probably be a seller of natural gas on a “heat-rate basis,” but within that sector there are certain periods, particularly next winter when the firm will begin to initiate more long natural gas positions.
He also mentioned that the firm is contemplating launching an alternative energy offering in the carbon trading space but those plans are “still a bit further on the horizon at this point.”
The fund charges a 2% management fee and a 20% incentive fee with a $1 million minimum investment requirement.
After six months of marketing its energy hedge fund to institutional investors, Houston-based ETG Capital this week launched its ETG Capital Master Fund. The cross-commodity, relative-value energy hedge fund, with between $25 million to $50 million, has exposure to the U.S. power, natural gas, crude oil and refined products sectors.
The firm intially aimed to launch the fund in October, but was derailed by a committed investor who had too much exposure to the fast-sinking credit markets, according to co-founder Don Addison. The fund attracted commitments frm mainly large funds of funds looking for additional energy exposure.
“We’ve had 50 to 60 investor meetings over the last five or six months and there is tremendous appetite at the institutional level for the energy commodity sector,” said Addison.
No more than 50% of the fund’s capital can be allocated to any one particular commodity. The offering employs short-, intermediate- and long-term trading, and 85% percent of its trades are in some sort of spread, either in commodities, time or location within a commodity.
Addison said the firm is currently fairly bullish on the U.S. power sector and will be initiating several long positions across the curve in U.S. power. The fund will probably be a seller of natural gas on a “heat-rate basis,” but within that sector there are certain periods, particularly next winter when the firm will begin to initiate more long natural gas positions.
He also mentioned that the firm is contemplating launching an alternative energy offering in the carbon trading space but those plans are “still a bit further on the horizon at this point.”
The fund charges a 2% management fee and a 20% incentive fee with a $1 million minimum investment requirement.
1/08/2008
PEOPLE MOVES
John Icke, most recently president of Accenture Business Services for Utilities, has been named president and chief operating officer at Canada’s Longview Capital Partners, which invests in natural-resource early-stage companies.
Commods bull Rogers says boom far from over
Mon Jan 7, 2008 4:01am EST
By Tony Munroe
HONG KONG (Reuters) - The resources boom that saw oil hit the $100 barrier for the first time on Wednesday and propelled gold to a record is in no danger of petering out, says Jim Rogers, a long-time, high-profile commodities bull.
The American investor says he is convinced that a decade or more of gains lies ahead for the sector, even after oil hit the triple-digit mark that he has predicted for years, although a weakening U.S. economy could dampen some metals such as tin.
"I sound like a broken record, but it ain't over yet. It's got a long way to go," he told Reuters on Thursday by telephone from Singapore, where he is based.
"It's come a ways, but we may be in the fourth inning of a nine-inning ball game, to speak in U.S. baseball terms."
He declined to predict where the oil price CLc1 would be at the end of this year after a 57 percent rally in 2007. Oil prices have trebled since 2003, as long-term investors plough money into the sector on signs that the world would struggle to supply enough crude and fuel to meet fast-growing global demand.
The fall in the U.S. dollar -- another familiar refrain for Rogers, who co-founded the Quantum Fund with billionaire George Soros in the 1970s -- also fuelled buying.
"Commodities prices are going to go up no matter what happens to the U.S. dollar, even if it rises, because there are serious supply/demand shortages which have developed over the past 25 to 30 years," he said.
Rogers said he likes agricultural commodities but is avoiding vulnerable metals, such as tin, adding that he recently bought the Chinese renminbi, Japanese yen , and Swiss franc .
"I do know the price of oil, the price of all commodities, are going to go much higher during the course of the bull market, and the bull market's got another 10 to 15 years to go. In the end, everybody's going to be dumbfounded, including me, and I'm the bull."
U.S. MAY HURT METALS
Rogers, who is famously bullish on China, said the decline in the dollar is "turning into a disaster", and added a slowdown in the United States would cause pain for parts of the economy in China and elsewhere, and may hurt prices of some metals.
"If you're in real estate in Shanghai or Beijing or Hong Kong or something, you're going to get affected. If you sell to Wal-Mart (WMT.N: Quote, Profile, Research), you're going to be affected, and perhaps badly," he said.
"And that will have an effect on some commodities. Will it affect sugar? No, I doubt it. Will it affect tin? Perhaps. Will it affect cotton? I doubt it, but it will affect some places and some parts of the world economy," said Rogers, whose Rogers International Commodity Index rose 31 percent in 2007.
Rogers said he remains "extremely optimistic" about China, and is not selling his Chinese stock holdings, although he would not necessarily buy at current levels. He is also adding to his holdings of China's appreciating currency, the renminbi.
"I bought more renminbi yesterday, and certainly expect China to be the next great country in the world," he said, urging investors to "get your money out of U.S. dollars while you can".
"I am still short the investment banks in America, and these are the guys (Federal Reserve Chairman) Bernanke's trying to save. I think that's been the single area with the most excess -- that and home-building," he said.
By Tony Munroe
HONG KONG (Reuters) - The resources boom that saw oil hit the $100 barrier for the first time on Wednesday and propelled gold to a record is in no danger of petering out, says Jim Rogers, a long-time, high-profile commodities bull.
The American investor says he is convinced that a decade or more of gains lies ahead for the sector, even after oil hit the triple-digit mark that he has predicted for years, although a weakening U.S. economy could dampen some metals such as tin.
"I sound like a broken record, but it ain't over yet. It's got a long way to go," he told Reuters on Thursday by telephone from Singapore, where he is based.
"It's come a ways, but we may be in the fourth inning of a nine-inning ball game, to speak in U.S. baseball terms."
He declined to predict where the oil price CLc1 would be at the end of this year after a 57 percent rally in 2007. Oil prices have trebled since 2003, as long-term investors plough money into the sector on signs that the world would struggle to supply enough crude and fuel to meet fast-growing global demand.
The fall in the U.S. dollar
"Commodities prices are going to go up no matter what happens to the U.S. dollar, even if it rises, because there are serious supply/demand shortages which have developed over the past 25 to 30 years," he said.
Rogers said he likes agricultural commodities but is avoiding vulnerable metals, such as tin, adding that he recently bought the Chinese renminbi
"I do know the price of oil, the price of all commodities, are going to go much higher during the course of the bull market, and the bull market's got another 10 to 15 years to go. In the end, everybody's going to be dumbfounded, including me, and I'm the bull."
U.S. MAY HURT METALS
Rogers, who is famously bullish on China, said the decline in the dollar is "turning into a disaster", and added a slowdown in the United States would cause pain for parts of the economy in China and elsewhere, and may hurt prices of some metals.
"If you're in real estate in Shanghai or Beijing or Hong Kong or something, you're going to get affected. If you sell to Wal-Mart (WMT.N: Quote, Profile, Research), you're going to be affected, and perhaps badly," he said.
"And that will have an effect on some commodities. Will it affect sugar? No, I doubt it. Will it affect tin? Perhaps. Will it affect cotton? I doubt it, but it will affect some places and some parts of the world economy," said Rogers, whose Rogers International Commodity Index rose 31 percent in 2007.
Rogers said he remains "extremely optimistic" about China, and is not selling his Chinese stock holdings, although he would not necessarily buy at current levels. He is also adding to his holdings of China's appreciating currency, the renminbi.
"I bought more renminbi yesterday, and certainly expect China to be the next great country in the world," he said, urging investors to "get your money out of U.S. dollars while you can".
"I am still short the investment banks in America, and these are the guys (Federal Reserve Chairman) Bernanke's trying to save. I think that's been the single area with the most excess -- that and home-building," he said.
1/07/2008
Horlick`s Bramdean to launch environmental fund, moves in with Tchenguiz into Mayfair office
Bramdean and Consensus start on road to establish environmental fund as research shows new investment in the clean technology sector grew by over 40 pct in 2007.
From Thomson IM: Nicola Horlick's Bramdean Asset Management is moving into premises alongside a firm owned by its Iranian major shareholder Vincent Tchenguiz as it underlines its new focus on hedge fund products with a relocation to Mayfair. Bramdean, which announced last year that it would become a specialist adviser and manager of alternative investments, also said it is moving ahead with plans to launch an environment investment fund.
In December, Horlick told Thomson Investment Management News that the firm was looking for investment prospects in the new energy sector. Bramdean's new premises in Park Lane are also occupied by Tchenguiz' Consensus Business Group. The firm said the move, scheduled for Jan 7, would enable it to work closely with Tchenguiz, chairman of Consensus, 'on various initiatives' including developing plans to launch the environmental investment fund in 2008.
From Thomson IM: Nicola Horlick's Bramdean Asset Management is moving into premises alongside a firm owned by its Iranian major shareholder Vincent Tchenguiz as it underlines its new focus on hedge fund products with a relocation to Mayfair. Bramdean, which announced last year that it would become a specialist adviser and manager of alternative investments, also said it is moving ahead with plans to launch an environment investment fund.
In December, Horlick told Thomson Investment Management News that the firm was looking for investment prospects in the new energy sector. Bramdean's new premises in Park Lane are also occupied by Tchenguiz' Consensus Business Group. The firm said the move, scheduled for Jan 7, would enable it to work closely with Tchenguiz, chairman of Consensus, 'on various initiatives' including developing plans to launch the environmental investment fund in 2008.
1/06/2008
Water-starved China begins work on massive water diversion project
China started digging Friday an ambitious water diversion project that will see vast amounts transported from the fertile south of the country to the arid north, state media reported.
Work started on a tunnel underneath the Yellow River in the eastern province of Shandong as part of a planned 486 billion yuan (US$66 billion, €45 billion) network of canals aimed to divert water from the southern Yangtze River, the official Xinhua News Agency said.
Building the South-North Water Diversion project, which was approved in 2002, could take 60 years, the government has said.
The Yellow River tunnel will be completed in three years, Xinhua said.
China, especially the northern part, is undergoing a serious water shortage, with 130 cities facing extreme shortages. Intense demand by booming Chinese industries, farms and sprawling cities has left many areas without adequate water supplies.
China supports 21 percent of the world's population with just 7 percent of its fresh water supplies.
Work started on a tunnel underneath the Yellow River in the eastern province of Shandong as part of a planned 486 billion yuan (US$66 billion, €45 billion) network of canals aimed to divert water from the southern Yangtze River, the official Xinhua News Agency said.
Building the South-North Water Diversion project, which was approved in 2002, could take 60 years, the government has said.
The Yellow River tunnel will be completed in three years, Xinhua said.
China, especially the northern part, is undergoing a serious water shortage, with 130 cities facing extreme shortages. Intense demand by booming Chinese industries, farms and sprawling cities has left many areas without adequate water supplies.
China supports 21 percent of the world's population with just 7 percent of its fresh water supplies.
If Soy Is Expensive, Why Does Goldman Say Nevermind?
By Saijel Kishan
Jan. 2 (Bloomberg) -- Selling soybeans at their highest prices in three decades and corn while it flirts with the 1996 peak is a money-losing trade, according to Goldman Sachs Group Inc. and Deutsche Bank AG.
Corn at $4.55 a bushel is ``cheap,'' Frankfurt-based Deutsche Bank says. Goldman Sachs in New York expects soybeans to rise 29 percent in 2008, the best investment in commodities. Investors who followed the banks' advice and bought raw materials last year profited as the Standard & Poor's GSCI Index advanced 33 percent, beating the 3.5 percent gain in the S&P 500 Index and the 9.1 percent return from U.S. Treasuries, according to data compiled by Merrill Lynch & Co.
Rising wealth from Shanghai to Sao Paulo is leading to better diets and straining corn and soybean supplies just as record energy prices boost sales of biofuels. Even after rising 17 percent in 2007, corn costs about $2 a bushel after adjusting for inflation, compared with a $7.80 high in 1974.
``We are in the early stages of a rally that could last 20 years'' in agriculture, said Christopher Wyke, product manager at London-based Schroders Plc, which manages $3.5 billion in commodities and is buying more corn and soybean contracts while reducing energy holdings. ``Prices are historically cheap.''
Not since the Soviet Union harvest failures of the 1970s have food prices risen so quickly. European Central Bank President Jean-Claude Trichet said Dec. 19 that the region faced a ``more protracted'' period of elevated inflation than expected because of food and oil prices.
Falling Inventories
World soybean inventories will plunge 23 percent in the 2007-2008 marketing season to 47.3 million tons from a record 61.1 million the previous year, the U.S. Agriculture Department estimates.
Soybean consumers face a ``large deficit'' in supplies because of increasing sales to China and production of biofuels, according to Goldman Sachs, the world's biggest securities firm.
``There are still good investment opportunities in the oilseed,'' Goldman analysts led by Jeffrey Currie said in a Dec. 11 report.
Goldman predicts soybeans will reach $14.50 a bushel. Investors who buy $10 million of November contracts on the Chicago Board of Trade would earn $2.9 million should the forecast prove accurate. A hedge fund that borrowed money to increase the bet using margin could turn that $10 million into about $59 million.
Corn Versus Wheat
Soybeans for March delivery jumped as much as 31.25 cents, or 2.6 percent, to $12.455 a bushel today on the Chicago Board of Trade and were at $12.40 as of 8:51 a.m. local time.
The bank forecast December 2008 corn prices will increase 12 percent to $5.30 a bushel from $4.735 now. Goldman recommended buying corn and selling wheat in a ``spread'' trade to exploit changes in the relative value of the crops.
Corn for March delivery climbed as much as 6.5 cents, or 1.4 percent, to $4.62 a bushel today in Chicago, the highest since June 1996.
Rallies in agricultural markets historically last about two years, boosting prices by 135 percent, according to Michael Lewis, the London-based global head of commodities research at Deutsche Bank. Prices may climb as much as 250 percent during three to four years in this cycle, he said. The rally in agriculture markets started in the fourth quarter of 2006.
Farmers are planting more acres to take advantage of the price rise, which could damp gains. The U.S. national corn yield has more than doubled to 153 bushels an acre in 2007 from 71.9 in 1974, while the soybean average has jumped 74 percent to 41.3 bushels from 23.7 in 1974, government statistics show.
`Battle for Land'
Droughts from Ukraine to Australia have cut crop yields, sending prices for wheat to a record in December and soybeans to a 34-year high. Corn rose to $4.62 a bushel in Chicago trading today, the highest since 1996. Farmers are planting more wheat at the expense of corn, soybeans and cotton.
Wheat farmers worldwide may increase plantings by 4 percent, the London-based International Grains Council said in November. In the U.S., the world's largest wheat exporter, growers will sow 64 million acres (26 million hectares) in the year ending May 31, up 6 percent, the Agriculture Department said in October.
``We'll continue to see a battle for land between the grains,'' said Matthew Sena, an analyst at New York-based Castlestone Management LLC, which oversees $800 million. ``The run-up in wheat prices will prevent a dramatic supply response for soybeans and corn.''
Biofuels Demand
Castlestone invests about $100 million in commodities, and Sena said the fund has been adding to its corn and soybean holdings while cutting investments in wheat.
Demand for biofuels, made from corn, oilseeds and sugar, is growing as countries seek to cut their dependence on fossil fuels after oil rose to a record $99.29 a barrel in November. Demand is straining the availability of farmland as well as water supplies.
``The severity of these factors means that there's a better chance of this being the longest and biggest agricultural rally ever,'' said Colin Waugh, portfolio manager at New York-based Galtere International Fund, which manages $1.3 billion in commodities and related investments.
The biggest winners from the U.S. energy bill signed by President George W. Bush on Dec. 20 may be companies including Archer Daniels Midland Co. of Decatur, Illinois, and Sacramento- based Pacific Ethanol Inc. The legislation requires biofuels production to increase to 36 billion gallons in 2022 from 7.5 billion in 2012.
Population Growth
U.S. ethanol prices at $2.2157 a gallon on average are 11 percent cheaper than New York wholesale gasoline futures at $2.4908 a gallon.
Crop prices ``will show a tendency to go up, and the reason is the growing world population, changing food patterns and limited availability of land,'' said Martin Richenhagen, chief executive officer of Agco Corp., the second-largest U.S. maker of tractors and combines after Deere & Co. ``This is good news for the farmer.''
Higher food prices may cause faster inflation. U.S. consumer prices increased 0.8 percent in November, the most in more than two years. Inflation in the 13-nation euro region accelerated to 3.1 percent in November, the fastest since 2001, according to Eurostat. Japan's core consumer prices rose at the fastest pace in more than nine years in November.
Tortilla Prices
Developing nations will feel the greatest pain. The cost of corn tortillas in Mexico, where shortages in 2006 boosted inflation, may rise 13 percent this year, according to Gruma SAB, the world's largest maker of corn flour. Food prices in China, the fastest-growing economy, increased 18.2 percent in November.
The rise in crop prices is creating the ``risk of social unrest,'' said Roland Jansen, whose $129 million Mother Earth Resources fund in Liechtenstein gained 28 percent in 2006, more than double the returns of commodity indexes. ``We've already seen it happen, like in Mexico. China will probably release stocks to pacify the population. There's a real danger of unrest there.''
To contact the reporter on this story: Saijel Kishan in London at skishan@bloomberg.net
Commodities set to take breather in '08
Anything pulled out of the ground has been on a roll for years. Slowing global growth should change all that
DAVID PARKINSON
January 1, 2008
After years of surging prices in the global commodity markets, 2008 might prove a more difficult year, as a slowing global economy should take the wind out of the sails of much of the market, analysts say.
But while opportunities for investors could prove more limited, there could still be a handful of commodities poised to outperform. The trouble will be trying to find them.
"We're looking at a dramatic slowdown of the global economy," said Derek Burleton, senior economist at Toronto- Dominion Bank. "That's going to have some meaningful impact on commodity demand."
"We're looking at markets that are near historical highs. What more can you expect?" said analyst Randy Mittelstaedt, who tracks agricultural futures for R.J. O'Brien & Associates in Chicago. "The easy opportunities are long gone."
While the Reuters/Jefferies CRB Index, the global benchmark for commodity prices, has advanced nearly 17 per cent in 2007, the tone of the market over all has been mixed. The year's gains largely reflect the surge in crude oil, which is up 57 per cent and is the most heavily weighted component of the CRB Index, and to a lesser extent gold (up 32 per cent), soybeans (up 76 per cent) and wheat (up 76 per cent).
Meanwhile, prices for base metals have been falling, while such products as natural gas and cattle have been in a sideways drift. With oil having retreated from its November peaks, the overall outlook for commodities as a group looks to be flat to downward heading into 2008.
"We seem to be at the front end of a decline here," said Edward Meir, commodity analyst at Man Financial Inc. in Darien, Conn. "I'm not that bullish on most of the commodities for 2008."
Nevertheless, the analysts believe there are a few rocks that have been left unturned in the commodity market, offering some opportunities for gains in 2008. Favourite picks for the year include hogs, natural gas, corn, soybeans, aluminum and tin.
"We have hogs at the top of our list," Mr. Burleton said. Hog prices have recovered somewhat after hitting four-year lows in November, but remain near two-year lows, hurt by slow seasonal demand and a large U.S. herd. But with slaughter rates picking up and high prices for other meats expected to lift demand, Mr. Burleton expects hog prices to rebound in the second half.
NATURAL GAS
Natural gas has been the poor cousin to oil in the past year, drifting sideways as supplies in storage have swelled. But those low prices, coupled with Alberta's plan to increase its royalty take, have severely slowed drilling activity for new natural gas wells. Mr. Burleton believes this slowdown in new supplies should fuel higher prices in the coming months.
CORN/SOYBEANS
Mr. Mittelstaedt said there is still "substantial" potential for gains in corn or soybean prices in the coming year - but maybe not for both. The two products, which have become favourites among speculative hedge funds, have traded off each other because farmers tend to shift acreage from one crop to the other depending on where they see the better prices. Last year, the rising interest in ethanol production sent corn prices skyward and prompted farmers to switch to corn in droves, which served to ease corn prices by boosting production while at the same time lifting soybean prices due to the reduced acreage for the crop. Mr. Mittelstaedt said a modest shift of acreage this year back to soybeans would probably help keep prices for both crops relatively strong. However, a more dramatic swing back to soybeans - or, alternatively, a surprisingly small acreage shift - "the one that doesn't get [the acreage] could go absolutely ballistic."
ALUMINUM/TIN
Aluminum and tin are expected to be the hottest base metals in 2008. Mr. Meir sees some potential for a rally in aluminum prices, which are off more than 15 per cent from their early-2007 peaks. "Demand is still very strong," he said, adding that aluminum doesn't look nearly as pricey as some of the other base metals. Mr. Burleton agreed that the demand outlook for aluminum is hot, which should bode well for a price rebound in the near term. However, he remains concerned about high inventories and rising production capacity, which he said could drag prices down again by the second half.
Mr. Meir thinks supply worries could give tin a further lift in 2008, after the metal hit new heights in 2007. A tighter regulatory framework for tin production in Indonesia, the world's leading producer of the metal, could force marginal producers shut down rather than bringing their production facilities up to code, he said.
DAVID PARKINSON
January 1, 2008
After years of surging prices in the global commodity markets, 2008 might prove a more difficult year, as a slowing global economy should take the wind out of the sails of much of the market, analysts say.
But while opportunities for investors could prove more limited, there could still be a handful of commodities poised to outperform. The trouble will be trying to find them.
"We're looking at a dramatic slowdown of the global economy," said Derek Burleton, senior economist at Toronto- Dominion Bank. "That's going to have some meaningful impact on commodity demand."
"We're looking at markets that are near historical highs. What more can you expect?" said analyst Randy Mittelstaedt, who tracks agricultural futures for R.J. O'Brien & Associates in Chicago. "The easy opportunities are long gone."
While the Reuters/Jefferies CRB Index, the global benchmark for commodity prices, has advanced nearly 17 per cent in 2007, the tone of the market over all has been mixed. The year's gains largely reflect the surge in crude oil, which is up 57 per cent and is the most heavily weighted component of the CRB Index, and to a lesser extent gold (up 32 per cent), soybeans (up 76 per cent) and wheat (up 76 per cent).
Meanwhile, prices for base metals have been falling, while such products as natural gas and cattle have been in a sideways drift. With oil having retreated from its November peaks, the overall outlook for commodities as a group looks to be flat to downward heading into 2008.
"We seem to be at the front end of a decline here," said Edward Meir, commodity analyst at Man Financial Inc. in Darien, Conn. "I'm not that bullish on most of the commodities for 2008."
Nevertheless, the analysts believe there are a few rocks that have been left unturned in the commodity market, offering some opportunities for gains in 2008. Favourite picks for the year include hogs, natural gas, corn, soybeans, aluminum and tin.
"We have hogs at the top of our list," Mr. Burleton said. Hog prices have recovered somewhat after hitting four-year lows in November, but remain near two-year lows, hurt by slow seasonal demand and a large U.S. herd. But with slaughter rates picking up and high prices for other meats expected to lift demand, Mr. Burleton expects hog prices to rebound in the second half.
NATURAL GAS
Natural gas has been the poor cousin to oil in the past year, drifting sideways as supplies in storage have swelled. But those low prices, coupled with Alberta's plan to increase its royalty take, have severely slowed drilling activity for new natural gas wells. Mr. Burleton believes this slowdown in new supplies should fuel higher prices in the coming months.
CORN/SOYBEANS
Mr. Mittelstaedt said there is still "substantial" potential for gains in corn or soybean prices in the coming year - but maybe not for both. The two products, which have become favourites among speculative hedge funds, have traded off each other because farmers tend to shift acreage from one crop to the other depending on where they see the better prices. Last year, the rising interest in ethanol production sent corn prices skyward and prompted farmers to switch to corn in droves, which served to ease corn prices by boosting production while at the same time lifting soybean prices due to the reduced acreage for the crop. Mr. Mittelstaedt said a modest shift of acreage this year back to soybeans would probably help keep prices for both crops relatively strong. However, a more dramatic swing back to soybeans - or, alternatively, a surprisingly small acreage shift - "the one that doesn't get [the acreage] could go absolutely ballistic."
ALUMINUM/TIN
Aluminum and tin are expected to be the hottest base metals in 2008. Mr. Meir sees some potential for a rally in aluminum prices, which are off more than 15 per cent from their early-2007 peaks. "Demand is still very strong," he said, adding that aluminum doesn't look nearly as pricey as some of the other base metals. Mr. Burleton agreed that the demand outlook for aluminum is hot, which should bode well for a price rebound in the near term. However, he remains concerned about high inventories and rising production capacity, which he said could drag prices down again by the second half.
Mr. Meir thinks supply worries could give tin a further lift in 2008, after the metal hit new heights in 2007. A tighter regulatory framework for tin production in Indonesia, the world's leading producer of the metal, could force marginal producers shut down rather than bringing their production facilities up to code, he said.
Commodities’ indexes up 30 p.c. in ‘07; ‘08 seen strong
Story by REUTERS
Publication Date: 1/2/2008
Investors in commodity indexes in 2007 saw some of their biggest gains in 30 years, as five indexes in the energy, metals and agricultural markets end the year with profits of almost 30 per cent on average. Early indications for 2008 are that growth in China and other emerging markets will keep demand for raw materials bubbling, while trouble in nuclear-capable states like Pakistan could send oil and gold to new record highs.
Even the prospect of a recession hitting the US economy next year has a possible bright side for commodities. If the Federal Reserve continues to cut interest rates in an effort to spark the economy, the automatic weakening of the US dollar would make commodities priced in dollars more attractive in foreign-exchange terms.
“Looking ahead, I think the overall range of prices could be drifting higher just as a result of the costs for producing additional supplies,” said Dan Raab, managing director at AIG Financial Products, which runs the Dow Jones-AIG Commodity Index.
“The growth in the developing countries has also become a much more significant feature of the demand picture for commodities, although a slowdown stemming from the U.S. could withhold some of that,” Raab told Reuters.
International security concerns — including what might happen in nuclear-armed Pakistan in the wake of Benazir Bhutto’s assassination — could result in new peaks for safe-haven assets like gold.
“I see gold at over $950 by middle of next year for sure,” said Zachary Oxman, senior trader and analyst at Wisdom Financial.
Publication Date: 1/2/2008
Investors in commodity indexes in 2007 saw some of their biggest gains in 30 years, as five indexes in the energy, metals and agricultural markets end the year with profits of almost 30 per cent on average. Early indications for 2008 are that growth in China and other emerging markets will keep demand for raw materials bubbling, while trouble in nuclear-capable states like Pakistan could send oil and gold to new record highs.
Even the prospect of a recession hitting the US economy next year has a possible bright side for commodities. If the Federal Reserve continues to cut interest rates in an effort to spark the economy, the automatic weakening of the US dollar would make commodities priced in dollars more attractive in foreign-exchange terms.
“Looking ahead, I think the overall range of prices could be drifting higher just as a result of the costs for producing additional supplies,” said Dan Raab, managing director at AIG Financial Products, which runs the Dow Jones-AIG Commodity Index.
“The growth in the developing countries has also become a much more significant feature of the demand picture for commodities, although a slowdown stemming from the U.S. could withhold some of that,” Raab told Reuters.
International security concerns — including what might happen in nuclear-armed Pakistan in the wake of Benazir Bhutto’s assassination — could result in new peaks for safe-haven assets like gold.
“I see gold at over $950 by middle of next year for sure,” said Zachary Oxman, senior trader and analyst at Wisdom Financial.
Chinese National Petroleum Corporation AM and Chicago Climate Exchange explore emissions trading platform in China
CNPCAM and CCX have signed a memorandum of understanding to create a joint venture company to explore the feasibility and implementation of an emissions trading platform in China. Details of the collaboration will be defined in the coming months.
CNPCAM is an investment arm of and wholly owned by Chinese National Petroleum Corporation (CNPC). CNPCAM plans to invest in innovative energy fields according to the development strategies of CNPC and to promote the transformation of CNPC from a pure supplier of oil and gas to a composite energy company with multiple functions. Further, CNPCAM proposes to set up an overall comprehensive financial service system through its strategic investment in the financial sectors including banking, trust and insurance etc.
CNPCAM was established in 2000 in Beijing, China. By 31 October 2007, its total assets are RMB7,458,000,000.
CCX, launched in 2003, is a global environmental market and North America's only voluntary but legally binding greenhouse gas emissions trading system. Chicago Climate Futures Exchange? (CCFE?), a wholly-owned subsidiary of CCX, is the world's first and largest environmental derivatives exchange handling criteria pollutants, such as sulfur dioxide. In 2005, CCX launched the European Climate Exchange (ECX), now the leading exchange operating in the European Union Emissions Trading Scheme. Since 2006, both CCX and ECX have been owned by Climate Exchange Plc, a publicly traded company listed on the AIM division of the London Stock Exchange.
CNPCAM is an investment arm of and wholly owned by Chinese National Petroleum Corporation (CNPC). CNPCAM plans to invest in innovative energy fields according to the development strategies of CNPC and to promote the transformation of CNPC from a pure supplier of oil and gas to a composite energy company with multiple functions. Further, CNPCAM proposes to set up an overall comprehensive financial service system through its strategic investment in the financial sectors including banking, trust and insurance etc.
CNPCAM was established in 2000 in Beijing, China. By 31 October 2007, its total assets are RMB7,458,000,000.
CCX, launched in 2003, is a global environmental market and North America's only voluntary but legally binding greenhouse gas emissions trading system. Chicago Climate Futures Exchange? (CCFE?), a wholly-owned subsidiary of CCX, is the world's first and largest environmental derivatives exchange handling criteria pollutants, such as sulfur dioxide. In 2005, CCX launched the European Climate Exchange (ECX), now the leading exchange operating in the European Union Emissions Trading Scheme. Since 2006, both CCX and ECX have been owned by Climate Exchange Plc, a publicly traded company listed on the AIM division of the London Stock Exchange.
Recruitment battle for commodity traders
December 24, 2007 2:10 AM ET
Financial Times
Banks are pulling commodities traders out of retirement and doubling their salary guarantees as they fight for business in one of the few booming areas in Wall Street and the City of London.
The hiring spree comes after the S&P GSCI, the most popular commodity index, surged this year by almost 29 per cent - its largest jump in five years - thanks to a leap in raw materials prices such as oil, wheat or gold.
Options Group, the New York-based executive search firm, is predicting that 350 new commodity hires could be made in the first half of 2008, up 17 per cent from the same period in 2007.
The recruiting battle comes as banks are growing their commodities business from traditional areas, such as oil, gas and metals derivatives, into agriculture, emissions, shipping, forestry and physical trading.
So far this year, a record 550 commodity traders have been hired, with banks taking about 365 new traders. Some banks are offering traders incentive payments of up to 17 per cent of their own profit and loss to entice them or retain them onboard.
Roger Jones, co-head of commodities at Barclays Capital in London, said: "Investors are increasingly looking at commodities as an asset class while companies continue to need risk management. We expect this trend to continue into 2008."
Damian Goodburn of the Options Group said that staff supply is becoming tighter as new markets develop, forcing banks to take on "people with a less than obvious skill-set, especially in emerging markets".
Due to the scarcity of talent in the Asia region, senior traders in commodity hubs such as Singapore may receive pay packages 25 to 30 per cent higher than last year.
However, Wall Street banks are likely to keep overall salaries capped in London and New York due to their losses related to the credit squeeze, according to commodities bankers. They added that their main concern is now to avoid desertions to competitors.
"Commodities are not an island inside the banks, and staff bonuses are set to suffer," said the head of commodities at a large bank in London. "There are going to be a lot of disappointed traders - and that creates a hiring opportunity," he added.
The lack of traders and high salaries are particularly acute for physical trading, where commodities are dealt with directly.
Matthieu Prieuret, of capital markets consultants Smart, said: "Valuable physical traders in London are a scarce resource."
Copyright 2007 Financial Times
Financial Times
Banks are pulling commodities traders out of retirement and doubling their salary guarantees as they fight for business in one of the few booming areas in Wall Street and the City of London.
The hiring spree comes after the S&P GSCI, the most popular commodity index, surged this year by almost 29 per cent - its largest jump in five years - thanks to a leap in raw materials prices such as oil, wheat or gold.
Options Group, the New York-based executive search firm, is predicting that 350 new commodity hires could be made in the first half of 2008, up 17 per cent from the same period in 2007.
The recruiting battle comes as banks are growing their commodities business from traditional areas, such as oil, gas and metals derivatives, into agriculture, emissions, shipping, forestry and physical trading.
So far this year, a record 550 commodity traders have been hired, with banks taking about 365 new traders. Some banks are offering traders incentive payments of up to 17 per cent of their own profit and loss to entice them or retain them onboard.
Roger Jones, co-head of commodities at Barclays Capital in London, said: "Investors are increasingly looking at commodities as an asset class while companies continue to need risk management. We expect this trend to continue into 2008."
Damian Goodburn of the Options Group said that staff supply is becoming tighter as new markets develop, forcing banks to take on "people with a less than obvious skill-set, especially in emerging markets".
Due to the scarcity of talent in the Asia region, senior traders in commodity hubs such as Singapore may receive pay packages 25 to 30 per cent higher than last year.
However, Wall Street banks are likely to keep overall salaries capped in London and New York due to their losses related to the credit squeeze, according to commodities bankers. They added that their main concern is now to avoid desertions to competitors.
"Commodities are not an island inside the banks, and staff bonuses are set to suffer," said the head of commodities at a large bank in London. "There are going to be a lot of disappointed traders - and that creates a hiring opportunity," he added.
The lack of traders and high salaries are particularly acute for physical trading, where commodities are dealt with directly.
Matthieu Prieuret, of capital markets consultants Smart, said: "Valuable physical traders in London are a scarce resource."
Copyright 2007 Financial Times
Platinum hits lifetime high, gold steadies
Mon Dec 24, 2007 2:52pm EST
By Atul Prakash
LONDON (Reuters) - Platinum hit an historic high in light festive-season trading on Monday, with speculators and industrial users buying on supply concerns and market tightness.
Gold steadied after trading in a narrow band, with investors keeping an eye on the dollar and oil for near-term direction.
Spot platinum settled European trade at a record high of $1,526/1,530 an ounce, against $1,521/1,525 in New York late on Friday. The metal has surged 37 percent this year.
In U.S. futures trade, the most-active platinum contract for January PLF8 settled off 10 cents at $1,536.20 an ounce on the COMEX metals division of the New York Mercantile Exchange.
Wolfgang Wrzesniok-Rossbach, head of sales at Germany's Heraeus, said a wave of buying by speculators and long-term investors had resulted in a surge in prices in recent weeks.
"The market observers are mainly pointing at the critical supply/demand picture in light of production shortfalls in South Africa and at the same time, ever-rising demand for the various industrial applications."
"Long-term industrial off-take should remain high and once the current holiday-related calmness ends, purchases could quickly pick up again."
Supply disruptions at some mines in South Africa, the world's top producer, have resulted in a deficit this year and are likely to leave the market in a deficit again next year.
Aquarius Platinum (AQP.L: Quote, Profile, Research) (AQPJ.J: Quote, Profile, Research) said last week it lost an attributable 250 ounces of platinum group metals a day due to a strike at its Marikana mine in South Africa.
Johnson Matthey (JMAT.L: Quote, Profile, Research), the world's top platinum refiner and fabricator, said in November the market would change course in 2007 and see a deficit of 265,000 ounces. It had a surplus of 65,000 ounces in 2006 after seven successive years of deficits.
"Given the current market tightness and the vulnerability to supply disruptions, platinum could easily surge to fresh records and is expected to remain strong across 2008," James Moore, precious metals analyst at TheBullionDesk.com, said in a report.
LOW INVENTORIES
Analysts said platinum inventories had fallen to a low level of just six to seven weeks of global consumption. Platinum lease rates also climbed up to around 10 percent from about 2.5-4.0 percent a month ago, indicating a tightness in the spot market.
Growing investment into exchange-traded funds also resulted in a decline in available supplies, with the promoters of such funds buying the matching quantity to keep in vaults.
Platinum PHPT.L held by London-based ETF Securities has surged to nearly 140,000 ounces from around 35,700 ounces in early November, industry sources said.
In other metals, spot gold ended European business at $812.30/813.10 an ounce, versus $810.50/811.30 in late New York trade on Friday. It hit a 28-year high of $845.40 in early November.
COMEX's most-active gold futures for February GCG8 ended up $1.10 at $816.50 an ounce.
(Additional reporting by Barani Krishnan in New York and James Regan in Sydney, editing by Matthew Lewis)
By Atul Prakash
LONDON (Reuters) - Platinum hit an historic high in light festive-season trading on Monday, with speculators and industrial users buying on supply concerns and market tightness.
Gold steadied after trading in a narrow band, with investors keeping an eye on the dollar and oil for near-term direction.
Spot platinum settled European trade at a record high of $1,526/1,530 an ounce, against $1,521/1,525 in New York late on Friday. The metal has surged 37 percent this year.
In U.S. futures trade, the most-active platinum contract for January PLF8 settled off 10 cents at $1,536.20 an ounce on the COMEX metals division of the New York Mercantile Exchange.
Wolfgang Wrzesniok-Rossbach, head of sales at Germany's Heraeus, said a wave of buying by speculators and long-term investors had resulted in a surge in prices in recent weeks.
"The market observers are mainly pointing at the critical supply/demand picture in light of production shortfalls in South Africa and at the same time, ever-rising demand for the various industrial applications."
"Long-term industrial off-take should remain high and once the current holiday-related calmness ends, purchases could quickly pick up again."
Supply disruptions at some mines in South Africa, the world's top producer, have resulted in a deficit this year and are likely to leave the market in a deficit again next year.
Aquarius Platinum (AQP.L: Quote, Profile, Research) (AQPJ.J: Quote, Profile, Research) said last week it lost an attributable 250 ounces of platinum group metals a day due to a strike at its Marikana mine in South Africa.
Johnson Matthey (JMAT.L: Quote, Profile, Research), the world's top platinum refiner and fabricator, said in November the market would change course in 2007 and see a deficit of 265,000 ounces. It had a surplus of 65,000 ounces in 2006 after seven successive years of deficits.
"Given the current market tightness and the vulnerability to supply disruptions, platinum could easily surge to fresh records and is expected to remain strong across 2008," James Moore, precious metals analyst at TheBullionDesk.com, said in a report.
LOW INVENTORIES
Analysts said platinum inventories had fallen to a low level of just six to seven weeks of global consumption. Platinum lease rates also climbed up to around 10 percent from about 2.5-4.0 percent a month ago, indicating a tightness in the spot market.
Growing investment into exchange-traded funds also resulted in a decline in available supplies, with the promoters of such funds buying the matching quantity to keep in vaults.
Platinum PHPT.L held by London-based ETF Securities has surged to nearly 140,000 ounces from around 35,700 ounces in early November, industry sources said.
In other metals, spot gold ended European business at $812.30/813.10 an ounce, versus $810.50/811.30 in late New York trade on Friday. It hit a 28-year high of $845.40 in early November.
COMEX's most-active gold futures for February GCG8 ended up $1.10 at $816.50 an ounce.
(Additional reporting by Barani Krishnan in New York and James Regan in Sydney, editing by Matthew Lewis)
Strong returns for commodities in 2007
By Javier Blas
Published: December 21 2007 20:15 | Last updated: December 21 2007 20:15
Commodities indices in 2007 are set to enjoy their best annual returns in the past five years after the boom in prices for raw materials extended with strong gains for agricultural commodities this week.
Total returns at the S&P GSCI index, the most popular commodity index tracked by about $70bn of funds, are up almost 29 per cent, the highest since the index posted a 32 per cent increase in 2002. The performance is in strong contrast with a 15 per cent decline in 2006.
In Chicago, agricultural commodities surged this week, pulled higher by strong demand from emerging countries and tight supplies. Global inventories for cereals are set to fall to a multi-decade low. Wheat and rice prices hit a record high, soyabean prices soared to a 34-year high while corn prices jumped to an 11-year high.
CBOT March 2008 corn surged on the week by 6.1 per cent to $4.48 a bushel while CBOT January soyabean moved 1.3 per cent higher to $11.73¾ a bushel.
CBOT March wheat rose 1.1 per cent to $9.48¾ a bushel on the week, having jumped briefly to a record high above the $10-a-bushel level. The cereal market was boosted by traders’ concerns that Russia may impose further export tariffs that will limit supply.
Bankers and traders said they expected more investment money to flow into the agricultural arena in early 2008, contributing to higher prices.
Metals prices closed the week higher, posting strong gains on Friday, supported by robust demand from Asian economies. In light trading at the London Metal Exchange, copper rose 4.5 per cent on the week to $6,818 a tonne, recovering from a nine-month low. Aluminium ended the week flat at $1,414 a tonne.
Lead surged 7.2 per cent to $2,647 a tonne while tin rose 2.3 per cent to $16,475 a tonne. Zinc moved 3.1 per cent higher to $2,413 a tonne.
Crude oil prices were volatile on the week amid mixed signals about demand. The US government weather service forecasted a warmer-than-usual winter but traders also pointed out that recent demand indicators have been stronger-than-expected.
Nymex February West Texas Intermediate rose 1.5 per cent to $92.64 a barrel while ICE February Brent lost 0.6 per cent to $92.09 a barrel.
Barclays Capital, one of the most accurate crude oil price forecasters since 2000, upgraded its price forecast for WTI in 2008 to $87.40 a barrel.
Nymex January RBOB gasoline rose 1.7 per cent to $2.3795 a gallon, while Nymex January heating oil moved 0.2 per cent higher to $2.6121 a gallon.
Precious metals surged, with platinum hitting a record high of $1,516 a troy ounce and rising 2.6 per cent on the week to $1,514 an ounce. Spot gold rose 2.0 per cent to $810.4 an ounce.
Published: December 21 2007 20:15 | Last updated: December 21 2007 20:15
Commodities indices in 2007 are set to enjoy their best annual returns in the past five years after the boom in prices for raw materials extended with strong gains for agricultural commodities this week.
Total returns at the S&P GSCI index, the most popular commodity index tracked by about $70bn of funds, are up almost 29 per cent, the highest since the index posted a 32 per cent increase in 2002. The performance is in strong contrast with a 15 per cent decline in 2006.
In Chicago, agricultural commodities surged this week, pulled higher by strong demand from emerging countries and tight supplies. Global inventories for cereals are set to fall to a multi-decade low. Wheat and rice prices hit a record high, soyabean prices soared to a 34-year high while corn prices jumped to an 11-year high.
CBOT March 2008 corn surged on the week by 6.1 per cent to $4.48 a bushel while CBOT January soyabean moved 1.3 per cent higher to $11.73¾ a bushel.
CBOT March wheat rose 1.1 per cent to $9.48¾ a bushel on the week, having jumped briefly to a record high above the $10-a-bushel level. The cereal market was boosted by traders’ concerns that Russia may impose further export tariffs that will limit supply.
Bankers and traders said they expected more investment money to flow into the agricultural arena in early 2008, contributing to higher prices.
Metals prices closed the week higher, posting strong gains on Friday, supported by robust demand from Asian economies. In light trading at the London Metal Exchange, copper rose 4.5 per cent on the week to $6,818 a tonne, recovering from a nine-month low. Aluminium ended the week flat at $1,414 a tonne.
Lead surged 7.2 per cent to $2,647 a tonne while tin rose 2.3 per cent to $16,475 a tonne. Zinc moved 3.1 per cent higher to $2,413 a tonne.
Crude oil prices were volatile on the week amid mixed signals about demand. The US government weather service forecasted a warmer-than-usual winter but traders also pointed out that recent demand indicators have been stronger-than-expected.
Nymex February West Texas Intermediate rose 1.5 per cent to $92.64 a barrel while ICE February Brent lost 0.6 per cent to $92.09 a barrel.
Barclays Capital, one of the most accurate crude oil price forecasters since 2000, upgraded its price forecast for WTI in 2008 to $87.40 a barrel.
Nymex January RBOB gasoline rose 1.7 per cent to $2.3795 a gallon, while Nymex January heating oil moved 0.2 per cent higher to $2.6121 a gallon.
Precious metals surged, with platinum hitting a record high of $1,516 a troy ounce and rising 2.6 per cent on the week to $1,514 an ounce. Spot gold rose 2.0 per cent to $810.4 an ounce.
Harcourt launches Belair Sustainable Alternatives SRI fund of hedge funds
Print
Tue, 27 Nov 2007
Swiss alternative investment manager Harcourt, Swedish insurance group Folksam and Norwegian insurance group Storebrand have launched the Belair Sustainable Alternatives SRI Fund, a Luxembourg-domiciled fund of hedge funds.
The fund adheres to an institutional socially responsible investment framework and is open to external investors. 'We have been able to create a unique fund of hedge funds with leading managers that in the strictest sense fulfils the needs of institutional SRI investors aiming to gain exposure to hedge funds,' says Kaj Bergenhill, an alternative investments portfolio manager at Folksam.
'Today, assets managed according to SRI are already significant. Leading observers estimate the industry to be worth approximately USD4trn. With increased public and government awareness of global challenges such as environment and socioeconomic conditions, SRI is expected to continue to be more and more important to investors, but so far, investors have been challenged to find sophisticated SRI solutions based on hedge funds.
'No matter whether referred to as SRI, ESG or another acronym for sustainable and fair investing, it is all about taking the full responsibility for one's investments. We have been an active SRI investor and hedge fund investor for more than a decade. The Belair initiative enables others to gain a globally diversified exposure to leading hedge funds compliant with strict SRI criteria.
Jan Erik Saugestad, chief investment officer of Storebrand Kapitalforvaltning, says: 'The Belair fund of funds, a Luxembourg Sicav, offers diversified exposure across markets and hedge fund strategies to provide long-term, stable risk-adjusted performance.'
Through a combination of customised managed accounts and bilateral agreements, all underlying funds will adhere to an SRI framework jointly defined by Folksam and Storebrand and implemented by Harcourt. The portfolio has been seeded with USD200m at launch, with further capital already committed.
'We are equally committed to combine superior and sustainable risk adjusted returns,' says Peter Fanconi, chief executive of Harcourt Investment Consulting. 'Folksam and Storebrand are among the world's leading SRI investors. Both are actively engaged in developing and promoting corporate responsibility, and both are founding members of the United Nation's principle of responsible investments initiative.
'We are pleased at having teamed up with two of the most sophisticated SRI investors in creating a high quality SRI-compliant hedge fund solution. In July we were proud to sign the UN PRI as the first SRI hedge fund.'
The principle of responsible investments initiative is a set of aspirational guidelines for investors designed to bring environmental, social and corporate governance considerations into mainstream investment and ownership practices. Members of the initiative now account for more than USD11trn in assets.
Founded in 1997, Harcourt is headquartered in Zurich with offices in New York, Hong Kong, Stockholm, Madrid, Geneva and Cayman and is majority-owned by the Vontobel private banking group. It manages more than USD5bn in assets exclusively in alternative investments and employs more than 80 staff.
Tue, 27 Nov 2007
Swiss alternative investment manager Harcourt, Swedish insurance group Folksam and Norwegian insurance group Storebrand have launched the Belair Sustainable Alternatives SRI Fund, a Luxembourg-domiciled fund of hedge funds.
The fund adheres to an institutional socially responsible investment framework and is open to external investors. 'We have been able to create a unique fund of hedge funds with leading managers that in the strictest sense fulfils the needs of institutional SRI investors aiming to gain exposure to hedge funds,' says Kaj Bergenhill, an alternative investments portfolio manager at Folksam.
'Today, assets managed according to SRI are already significant. Leading observers estimate the industry to be worth approximately USD4trn. With increased public and government awareness of global challenges such as environment and socioeconomic conditions, SRI is expected to continue to be more and more important to investors, but so far, investors have been challenged to find sophisticated SRI solutions based on hedge funds.
'No matter whether referred to as SRI, ESG or another acronym for sustainable and fair investing, it is all about taking the full responsibility for one's investments. We have been an active SRI investor and hedge fund investor for more than a decade. The Belair initiative enables others to gain a globally diversified exposure to leading hedge funds compliant with strict SRI criteria.
Jan Erik Saugestad, chief investment officer of Storebrand Kapitalforvaltning, says: 'The Belair fund of funds, a Luxembourg Sicav, offers diversified exposure across markets and hedge fund strategies to provide long-term, stable risk-adjusted performance.'
Through a combination of customised managed accounts and bilateral agreements, all underlying funds will adhere to an SRI framework jointly defined by Folksam and Storebrand and implemented by Harcourt. The portfolio has been seeded with USD200m at launch, with further capital already committed.
'We are equally committed to combine superior and sustainable risk adjusted returns,' says Peter Fanconi, chief executive of Harcourt Investment Consulting. 'Folksam and Storebrand are among the world's leading SRI investors. Both are actively engaged in developing and promoting corporate responsibility, and both are founding members of the United Nation's principle of responsible investments initiative.
'We are pleased at having teamed up with two of the most sophisticated SRI investors in creating a high quality SRI-compliant hedge fund solution. In July we were proud to sign the UN PRI as the first SRI hedge fund.'
The principle of responsible investments initiative is a set of aspirational guidelines for investors designed to bring environmental, social and corporate governance considerations into mainstream investment and ownership practices. Members of the initiative now account for more than USD11trn in assets.
Founded in 1997, Harcourt is headquartered in Zurich with offices in New York, Hong Kong, Stockholm, Madrid, Geneva and Cayman and is majority-owned by the Vontobel private banking group. It manages more than USD5bn in assets exclusively in alternative investments and employs more than 80 staff.
Zurich-based Systematic Absolute Return AG to launch green FoHFs
Having researched environmental or ‘green’ investments for the past 12 months, SAR has completed its rigorous due diligence and has set a January 1st , 2008 launch date for a unique new environmental fund of hedge funds.
The SAR Environmental Fund is unleveraged and targets absolute returns above 15% net for investors, with limited correlation to general debt and equity markets.
SAR is a Zurich-based asset manager founded by Arne Schmidt and Michael Ahrndt in 2001. They currently manage two distinct funds of hedge funds. With regard to the positioning of the fund, Mr. Schmidt states, “This absolute return product differentiates itself in this burgeoning space through active hedging, a truly environmental character and the exclusion of venture capital investments from the universe.” The fund maintains global exposure and a diversified sector approach.
This space is already becoming a key investment theme and is set to offer superior growth rates and outperformance for decades to come. Climate change, population growth, water scarcity, increased pollution and expanding energy demand create an environment that will drive returns across short, medium and long-term investment horizons.
This innovative product is positioned to extract alpha from a variety of investment strategies such as renewable energy, clean technology, carbon finance, water, agricultural and timber projects as well as ecological microfinance.
Returns on a pro-forma basis were 26.75% in 2006 (launch Nov 06) and 24.54% YTD to October 07, with only one down month (24.91% annualised).
Mr. Schmidt will be conducting due diligence visits in North America during the first two weeks of December. If you wish to schedule a meeting or an interview with him or Mr. Ahrndt, please feel free to contact Andrew Perry at +41 43 268 8440, ir@sar-ag.ch
The SAR Environmental Fund is unleveraged and targets absolute returns above 15% net for investors, with limited correlation to general debt and equity markets.
SAR is a Zurich-based asset manager founded by Arne Schmidt and Michael Ahrndt in 2001. They currently manage two distinct funds of hedge funds. With regard to the positioning of the fund, Mr. Schmidt states, “This absolute return product differentiates itself in this burgeoning space through active hedging, a truly environmental character and the exclusion of venture capital investments from the universe.” The fund maintains global exposure and a diversified sector approach.
This space is already becoming a key investment theme and is set to offer superior growth rates and outperformance for decades to come. Climate change, population growth, water scarcity, increased pollution and expanding energy demand create an environment that will drive returns across short, medium and long-term investment horizons.
This innovative product is positioned to extract alpha from a variety of investment strategies such as renewable energy, clean technology, carbon finance, water, agricultural and timber projects as well as ecological microfinance.
Returns on a pro-forma basis were 26.75% in 2006 (launch Nov 06) and 24.54% YTD to October 07, with only one down month (24.91% annualised).
Mr. Schmidt will be conducting due diligence visits in North America during the first two weeks of December. If you wish to schedule a meeting or an interview with him or Mr. Ahrndt, please feel free to contact Andrew Perry at +41 43 268 8440, ir@sar-ag.ch
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