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buying their products.
2) Regular followers of this letter know that I have been a huge bull on India since the beginning of the
year (see my last update). After doubling since November, the Bombay Sensex index has backed off 15%,
along with the global risk reversion trade. The immediate road may be a rocky one as the new government
brought in by the Congress Party's smashing May win imposes some Obamaesque changes on the
economy. That means a lot more borrowing and higher inflation. For a quick snapshot of the state of play
in India, please read Martin Hutchinson's excellent piece at Money Morning.
3) Fortune magazine ran an excellent article about the flood of institutional money pouring into agricultural
land, a sector I have been harping on for some time. The amount of arable land per person has fallen
precipitously since 1960, from 1.1 acres to 0.6 acres, and that could halve again by 2050. Water is about
to become even more scarce than land. Productivity gains from new seed types are hitting a wall. Rising
incomes in emerging markets is producing more meat eaters, another huge call on grain and water
supplies. To produce one pound of beef, you need 16 pounds of grain and over 2,000 gallons of water.
China, especially, is in a pickle because it has 20% of the world's population, but only 7% of the arable
land, and it has committed $5 billion to agricultural land in Africa. Similarly, South Korea has leased half
the arable land in Madagascar to insure their food supplies. George Soros has snatched up 650,000
acres of land in Argentina and Brazil on the cheap, an area half the size of Rhode Island, and has become
the largest shareholder in Potash (POT). Even hedge funds are getting into the game, quietly building
portfolios of farms in the Midwest and the South. Time to take another look at Agrium (AGU), Monsanto
(MON), and the ag ETF (MOO).
4) I stopped by to visit some old friends at the National Oceanic and Atmospheric Administration (NOAA) in
Tiburon, California, located at the abandoned Navy base that was home to the Golden Gate Bridge's
antisubmarine net during WWII. They warned me that we could be headed for an El Niño winter (check out
their site) . So named because all of the fish disappeared off the coast of Chile one Christmas, El Niño's
are caused by a sudden warming of ocean temperatures in the Central and Eastern Pacific, which lead to
unusual weather patterns. During the last El Niño in 1998, the rainfall in San Francisco soared from 20
inches to 100 inches, the American River dykes broke, railroads were destroyed beyond repair, the
Sierras got 40 feet of snow, and species of fish like mahi mahi normally found in Hawaii suddenly hit the
hooks of happy fishermen in San Francisco Bay. Australia endured a terrible draught. This could all be
great for wheat prices and bad for insurance companies, and no doubt many will claim it is all caused by
global warming.
2) Regular followers of this letter know that I have been a huge bull on India since the beginning of the
year (see my last update). After doubling since November, the Bombay Sensex index has backed off 15%,
along with the global risk reversion trade. The immediate road may be a rocky one as the new government
brought in by the Congress Party's smashing May win imposes some Obamaesque changes on the
economy. That means a lot more borrowing and higher inflation. For a quick snapshot of the state of play
in India, please read Martin Hutchinson's excellent piece at Money Morning.
3) Fortune magazine ran an excellent article about the flood of institutional money pouring into agricultural
land, a sector I have been harping on for some time. The amount of arable land per person has fallen
precipitously since 1960, from 1.1 acres to 0.6 acres, and that could halve again by 2050. Water is about
to become even more scarce than land. Productivity gains from new seed types are hitting a wall. Rising
incomes in emerging markets is producing more meat eaters, another huge call on grain and water
supplies. To produce one pound of beef, you need 16 pounds of grain and over 2,000 gallons of water.
China, especially, is in a pickle because it has 20% of the world's population, but only 7% of the arable
land, and it has committed $5 billion to agricultural land in Africa. Similarly, South Korea has leased half
the arable land in Madagascar to insure their food supplies. George Soros has snatched up 650,000
acres of land in Argentina and Brazil on the cheap, an area half the size of Rhode Island, and has become
the largest shareholder in Potash (POT). Even hedge funds are getting into the game, quietly building
portfolios of farms in the Midwest and the South. Time to take another look at Agrium (AGU), Monsanto
(MON), and the ag ETF (MOO).
4) I stopped by to visit some old friends at the National Oceanic and Atmospheric Administration (NOAA) in
Tiburon, California, located at the abandoned Navy base that was home to the Golden Gate Bridge's
antisubmarine net during WWII. They warned me that we could be headed for an El Niño winter (check out
their site) . So named because all of the fish disappeared off the coast of Chile one Christmas, El Niño's
are caused by a sudden warming of ocean temperatures in the Central and Eastern Pacific, which lead to
unusual weather patterns. During the last El Niño in 1998, the rainfall in San Francisco soared from 20
inches to 100 inches, the American River dykes broke, railroads were destroyed beyond repair, the
Sierras got 40 feet of snow, and species of fish like mahi mahi normally found in Hawaii suddenly hit the
hooks of happy fishermen in San Francisco Bay. Australia endured a terrible draught. This could all be
great for wheat prices and bad for insurance companies, and no doubt many will claim it is all caused by
global warming.
| Mad Hedge Trading Ideas: Intel, India, Agriculture, and Global Warming by The Mad Hedge Fund Trader, July 16, 2009 |
1) Intel's blowout earnings yesterday made crystal clear who is going to be buttering
our bread for the next few decades (see income statement ). More than 80% of their
earnings came from foreign sources, far and away the main driver of economic
activity in the world today. If it weren't for the outrageous $1.4 billion antitrust fine
from the EC, the earnings would have been even better. If you are going to own
equities, make them BRIC ones. If allocation restrictions won't let you go 100% foreign
and you must buy the US, make sure they are American companies that are really
foreign ones in disguise. Intel (INTC), Oracle (ORCL), Hewlett Packard (HPQ), IBM
(IBM), and Microsoft (MSFT) all get 70%-80% of their earnings from abroad. You
don't want to own anything that is dependent on newly impoverished Americans
our bread for the next few decades (see income statement ). More than 80% of their
earnings came from foreign sources, far and away the main driver of economic
activity in the world today. If it weren't for the outrageous $1.4 billion antitrust fine
from the EC, the earnings would have been even better. If you are going to own
equities, make them BRIC ones. If allocation restrictions won't let you go 100% foreign
and you must buy the US, make sure they are American companies that are really
foreign ones in disguise. Intel (INTC), Oracle (ORCL), Hewlett Packard (HPQ), IBM
(IBM), and Microsoft (MSFT) all get 70%-80% of their earnings from abroad. You
don't want to own anything that is dependent on newly impoverished Americans
| The Mad Hedge Fund Trader trades based on global long/short macro ideas backed by deep fundamental research View The Mad Hedge Fund Trader Read The Mad's Bio. |
|
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