Roseman's Eruptions

Commodities Mentors Recollected

Montreal, Canada

As I enter my 20th year in this business, I’m still learning new things about the markets and investing almost every day. And for better or for worse, I’ve tried my best to be a good investor while always preoccupied with minimizing capital loss.

The last three years have been anything but normal; I’ve amassed more grey hair since 2008 than I plan on growing over the next ten years; and I’m afraid I’ll have much more grey hair from now until 2015 as another Black Swan, or unforeseen market, event smashes the financial system.

The Battle between North Sea Brent and West Texas Crude

Montreal, Canada

The price of benchmark oil has dislocated from the rest of the global market resulting in performance anomalies for two major contracts. This poses another headache for passive commodity investors looking to diversify in index funds linked to oil futures contracts.

Investors in commodities have struggled to determine which popular oil contract better represents the true state of the oil market. Increasingly, it looks like North Sea Brent is the smarter option.

Inflation Burst a Guarantee

Montreal, Canada

The United States continues to spend like there’s no tomorrow. The Congressional Budget Office, or CBO, projects a record budget deficit of $1.5 trillion in fiscal 2011—up from $1.29 trillion in 2010. This marks the third year in a row of budget deficits totaling more than $3.5 trillion.

Despite some chatter lately to cut spending and Obama’s initiative to reduce the budget deficit (small pocket change), the United States shows no signs of introducing austerity measures, unlike counterparts in Western Europe.

The Big Mac and Corporate Earnings in 2011

Montreal, Canada

The Golden Arches might soon be home to Golden Prices.

The world’s largest restaurant chain, as measured by revenues, will shortly begin hiking prices across its vast fast-food menu as a result of surging commodities since last summer. Everything from sugar to live cattle has risen sharply over the past 6-12 months, forcing restaurant chains to consider raising prices to protect profit margins.

Natural Gas and Gold Bets Turn Bearish

Montreal, Canada

The smart money says natural gas is heading lower. The fast money is betting against gold since late October.

Producers in the natural gas industry have turned markedly bearish on gas prices. Hedge funds and other speculators have also joined the bearish chorus amid a wave of new discoveries in the United States gas shales.

Gold-EUR Correlation on the Rise

Montreal, Canada

Gold prices continue to maintain a negative correlation to the U.S. dollar ever since former U.S. President, Richard Nixon, closed the gold window in August 1971. That relationship will always remain negative because gold represents real wealth and a true inflation-hedge while the dollar is backed by absolutely nothing, except U.S. printing presses and more than $14 trillion of national debt. Gold is real wealth, the dollar is not.

Two-Tier Currency as Remedy for EUR Crisis

Montreal, Canada

Since the emergence of the European credit crisis 12 months ago, a host of suggestions to remedy the debacle have been put forward. These range from a Brady-type bond restructuring, which occurred in the late 1980s and early 1990s in Latin America, to the dissolution of the EUR altogether and the reintroduction of independent European central banks.

Why is Cargill Selling its Stake in Mosaic?

Montreal, Canada

Back in 2002, I plugged the Mosaic Corporation (NYSE-MOS) after Cargill Inc. took the fertilizer company public. Cargill is THE commodity house in the world. I don’t think anyone does a better job managing its commodity business than Cargill, a private company founded just after the American Civil War.

Though I sold MOS before the credit crisis, I regret dumping the stock too early. From 2002 until now Mosaic has posted a cumulative eightfold advance.

Why Is the Baltic Dry Index Plunging?

Montreal, Canada

The widely followed Baltic Dry Index, a popular gauge measuring dry bulk charter rates, has plunged to levels last seen during the aftermath of the credit crisis. Since October the index has tanked almost 50% to 1,453.

What’s bizarre about the performance of the Baltic Dry Index is the ongoing draw-down of the gauge even amid soaring commodities prices since August.

Plunging Crop Output Boosts Cargill

Montreal, Canada

The world’s biggest agricultural trader, Cargill, earned a near-record profit in its fiscal second quarter. As grain prices continue to soar since last summer, trading houses that specialize in seed processing and global distribution are making big bucks.