Survivor Trading System - Trades of 3 February

I trades di Survivor System del 3 February. I risultati real-time sono a disposizione al seguente link: http://www.box.net/shared/5vajnzc4cp

Trades of Survivor System on 3 February. Real-time results are available at the following link: http://www.box.net/shared/5vajnzc4cp

Everyone loves commodities!

By Frank Holmes

The essence of natural resources and commodity investing can be boiled down to one key point: As the earth’s population swells to 7 billion, the migration to cities accelerates, incomes rise, and people desire things the things that improve their lives, thus increasing global demand for commodities and natural resources.

A larger, wealthier class of people in the emerging world are demanding more goods as they raise their standard of living and the supply of these goods is impacted by geopolitics, diminishing mature sources and even weather.

The story begins in emerging markets where economies are growing at stable, healthy rates. Current growth rates for countries such as China, India, Malaysia and others are in the 6-10 percent range, manageable levels that are not characteristic of overheating economies. Many forecasters are expecting a slight slowdown in growth for emerging countries but a few (South Africa, Indonesia and Russia) should see GDP growth rates surpass last year’s levels.

Many point to China’s bank lending, which was roughly $1.2 trillion last year, as a negative because it is such a large amount for a $5 trillion economy, but we don’t see it that way. We think what’s taking place is more of a normalization of liquidity and interest rates. Growth will still be in the upper single digits, which is very constructive for commodity demand going forward.

Economic growth is just the tip of the iceberg. Many of these emerging markets are just discovering credit. India, China, Brazil and Russia all have consumer debt levels growth below 20 percent. Other burgeoning countries like Saudi Arabia and South Africa have less than 5 percent. As credit expands to this hungry consumer base, the consumption of refrigerators, furniture, air conditioners and other luxuries we consider necessities here in the U.S. should follow suit.

We’ve already seen the impact rising income levels can have on consumption in Chinese car sales. From 2003 to 2010, China’s car sales have increased over 300 percent. In fact, car sales jumped 45 percent last year alone in China. This increase has made China the global leader in car sales. China isn’t alone however, estimates show that 72 million cars were produced globally last year and expectations are that it will jump to 79 million in 2011.

This auto boom has shifted the dynamics of energy consumption in the developing world. The transportation sector has historically consumed about 35 percent of all energy used in the developing world. But over the next 15 years or so, it’s expected to reach about 60 percent—comparable levels to that of the developed countries of North America and Western Europe.

Emerging market demand is largely the reason global oil demand levels are at record highs despite a sluggish economic recovery in the U.S. and Western Europe. Much of this demand comes from China and India, whose combined share of global oil demand has increased from 9 percent in 2002 to roughly 15 percent last year.

But it’s not just oil emerging markets have been gobbling up. It takes a lot of base metals such as copper, tin, nickel and others to expand a nation’s power grid, sewer system and transportation lines. China’s most recent Five-Year Plan calls for $50 billion to be spent on upgrading the country’s power grid and an another $110 billion on building 13,000 kilometers of high-speed railways.

This is a reason why we’ve seen the price of copper, lead, tin, nickel and zinc jump more than 100 percent during the past two years.

The market isn’t expecting prices for these metals to turn around any time soon. Take copper for example. Current prices are north of $4 a pound but the futures market remains bullish with prices set around $5.43 a pound.

Copper’s supply/demand fundamentals are very supportive of higher prices. Mine production has been declining since the early 1990s but the metal’s versatility has kept copper demand on the rise.

For instance, you may not think that air conditioning demand would have much to do with copper prices but each central air conditioning unit contains roughly 50 pounds of copper. The monthly output of air conditioners in China has increased since the beginning of 2009, coinciding with a 217 percent increase in copper prices.

Copper isn’t alone. We’re bullish on many industrial commodities for similar reasons. As the rebound in global economic growth continues, we should see increased demand for other commodities like metallurgical coal, which is used to make steel.

The biggest threat to commodity prices is the possibility that the Federal Reserve may begin to raise interest rates, which would weigh on commodity prices. More than likely however, the Federal Reserve will maintain historically low interest rates and the U.S. economic recovery will remain on course through the year.  [..]

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ARE YOU READY FOR A 60% SURGE IN VOLATILITY?

by Cullen Roche

Steven Sears had a good piece in Barrons over the weekend disussing the low level of the VIX.  As the market has continued to melt higher we’ve seen increasing levels of complacency as investors become increasingly comfortable with the market and their belief that it simply cannot decline.  While the economic fundamentals certainly back this outlook it’s always nice to have an insurance contract in your back pocket just in case.  In this case, it might be a bit of covered call writing or some outright VIX purchases.

Sears notes that MKM analysts believe the VIX could jump 60%+ in the coming months.   Not a bad insurance contract to have just in case.  Better yet, it doesn’t keep you out of the game entirely.  Remember, you can’t hit a pitch you don’t swing at.  But now isn’t the time to be swinging for the fences.  Via Barrons:

“ONE SELDOM-DISCUSSED REALITY of the modern options market is that the computers that control pricing models sometimes get out of tune with market reality. As stocks grind higher, as occurred in the fourth quarter, the models anticipate lower implied volatility because stock prices have advanced in the past. The past few days saw institutional investors buying bearish puts to protect against a decline, but the action wasn’t significant enough to cause a rapid increase in implied volatility.
A lesson of the past year is that wise investors buy volatility when it seems too low, and sell when it is too high. The volatility metronome also works for timing stock trades.
Risk premiums, as measured by the Chicago Board Options Exchange Volatility Index, are too low now, given the cross-currents roiling the surface of the stock market. This typically marks a good time to buy defensive index options to hedge against broad-market declines and volatility spikes.
With VIX around 18, Jim Strugger, MKM Partners’ derivatives strategist, is telling clients to buy VIX Feb. 21 calls and sell VIX Feb. 30 calls to protect against an earnings-season volatility spike that could temporarily interrupt the bull advance.
“After being bullish on equities since late August, and riding this volatility wave lower, we’re saying, ‘get ready for a VIX spike to 30,’ ” Strugger says.” [..]

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Largest Two Month Decline In Unemployment Rate Since 1958

by Bespoke Investment Group

Today's non-farm payrolls report had little for the bulls to sink their teeth into.  After a stronger than expected ADP Employment Report, multi-year highs in the employment component of the ISM Manufacturing and Non-Manufacturing reports, and the largest monthly drop on record in mass layoffs for the month of January, Non-Farm Payrolls for the month came in well short of expectations (+36K vs +140K).

The only bright spot in today's employment report was a surprising drop in the unemployment rate which fell from 9.4% to 9.0% for its second straight monthly decline of 0.4%.  In fact, over the last two months the unemployment rate has declined by 0.8%, which is the largest two-month decline since 1958.  While part of this decline is attributable to the fact that people are dropping out of the work force (bad thing), unlike the payroll survey -- which has shown anemic growth in jobs -- the household survey (which the unemployment rate is based on) has been showing much stronger growth.  

While both sides will spend the day and weekend arguing over the merits of each survey, the bottom line is that an unemployment rate of 9.0% sound a lot better than the 9.8% level two months ago or the 10.1% rate we saw in October of 2009.

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Wheat prices at risk of 'spike', BarCap says

by Agrimoney.com

Wheat prices face a "spike" if the concerns over global supplies prompt export bans or accelerated stockpiling, Barclays Capital said, as Bangladesh unveiled plans to speed up its imports.

The investment bank said it was optimistic over prospects for prices of all three main Chicago-traded crops, given tight supply and demand fundamentals for soybeans and, in particular, corn, its "preferred exposure" across the agricultural commodities sector.

However, it singled out wheat as possessing the potential dynamics for a leap in prices, given the grain's dietary importance at a time when many importing countries, in the face of civil unrest, are attempting to limit food price inflation.

United Nations data on Thursday showed world food prices at a record high last month, with cereals 3% more expensive than in December.

"The rise in wheat prices and tighter supplies has led to heightened concerns in key importing countries in the Middle East and North Africa to secure supplies," BarCap said.

'Further price rises'

 Jitters have been further enhanced by fears that Russia may extend its ban on grain shipments beyond this year, or that curbs by other exporters, or panic buying by importers, could further sap available supplies.

"We expect prices to climb further in the near term of these supply concerns," the bank said.

"Spikes cannot be ruled out if countries enact export bans or importers pre-empt export restrictions and make sizeable purchases."

While large exporters, bar Ukraine, have not follow Russia in trade curbs, some smaller shippers, such as Romania, have warned of depleted stocks, and Moldova earlier this week unveiled plans for a ban.

'Frantic efforts'

The comments came as Bangladesh's state grains buyer, the Directorate General of Food, said it would increase the size of rice and wheat tenders to accelerate purchases.

"If possible, for wheat tenders we may ask for 100,000 tonnes instead of the earlier 50,000 tonnes," a directorate source told Reuters, the news agency.

Ahmed Hossain Khan, the head of the department, said that Bangladesh authorities were "making frantic efforts to import rice and wheat to ensure food security".

The move follows a similar move by Algeria, which bought at least 1.75m tonnes of wheat last month, with countries including Iraq and Jordan also busy in the import market.

'Dire situation' 

BarCap said it was particularly bullish over prices of higher quality wheat, in part because of the particular desire for food rather than feed grain, but also the poor start to America's high protein, hard red winter wheat crop.

Although overall US winter wheat seedings, for harvest this year, rose by 10%, "the bulk of the increased plantings were for soft red winter wheat, with seeded area up 47%, rather than the higher quality hard red winter wheat, where seeded area rose just 4%."

Hard red winter wheat, traded in Kansas, is furthermore deemed in poor condition following a dry start and, most lately, freezing temperatures which have provoked concerns of elevated rates of winterkill.

A lack of moisture has also dogged winter grains in China, the top wheat producing country.

"The situation has been dire in Shandong, the country's second largest wheat producing area," the bank said.

"A significant cut in China's winter wheat productions could propel international prices strongly higher." [..]

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China corn imports 'could jump' to rebuild stocks

by Agrimoney.com

China's corn imports could quadruple this year, to way above previous forecasts, to replenish stocks which have fallen way below official targets, US industry officials said.

The US Grains Council, which in October pegged China's 2011 corn imports at 2m-3m tonnes, said that the figure could reach 3m-9m tonnes, questioning estimates from some other analysts that a bumper autumn harvest had curtailed the country's needs.

"Estimates given to us were that China is short 10m-15m tonnes in stocks and will need to purchase corn this year," Terry Vinduska, the USGC chairman, said, following a council visit to China.

"We learned the government normally keeps stocks at 30% but they are currently a little over 5%, which may lead to imports of 3m-9m tonnes."

Top rank?

Imports at this level could see China vie with South Korea for the title of world's top corn importer, after historically importing very little of the grain, further squeezing supplies of the grain which are already at their tightest since the 1990s.

Demand is being boosted by China's rocketing economic growth, running at an annual pace of 8-10%, the USGC said. Corn is processed into chemicals from ethanol to sweeteners to lysine, a dietary supplement, besides being used as an animal feed in a country with an increasingly carnivorous diet.

Nonetheless, corn futures moved little in Chicago on the USGC estimate, standing 0.3% higher at $6.64 ¼ a bushel at 12:15 GMT, if outperforming peers soybeans and wheat, which showed small declines.

Forecasts by the USGC, whose role is to promote America's grain exports, are often treated with some caution by investors.

The US Department of Agriculture estimates China's corn imports for 2010-11 at 1.0m tonnes, compared with a 14-year high of  1.3m tonnes the previous season.

'Too conservative'

However, separately, Barclays Capital dismissed the USDA estimate as "too conservative", given plentiful signals of tightness in Chinese supplies.

"Tightness in the domestic Chinese corn market has been reflected in myriad ways: high domestic prices; a pick-up in imports; weekly corn auctions; and China releasing corn from strategic reserves," the bank said.

"For 2010 as a whole, China stayed a net corn importer for seven consecutive months while corn imports for 2010 as a whole posted a 1781% year-on-year increase. [..]

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