₪ David Pescod's Late Edition April 18, 2007
BASIC POINTS
As far as we are concerned the one must read piece of research that you might be able to find every month is Donald Coxe’s Basic Points.
He was one of the first to get onto the excitement of the commodity cycle - his commentary always has thoughtful insights, beautiful use of the English language and usually has some pretty good advice.
For this month and dated April 13, 2007, (Bye-Bye, Bond Bull) he makes a major change in his basic scenario suggesting that “deflation is no longer a concern and the opposite might well be.” What is there to be worried about — inflation. He reduces his long term bond portfolio to “zero” and he again talks about “The Four Scarcity Stories of Our Time” which is energy and metals and how those commodities have run but he now adds the shortage of both workers and grains and oilseeds.
On oilseeds he writes, “The third Asian-spawned scarcity – feed grains and oilseeds—has just arrived……...This first-ever cereal scarcity without a major crop failure would seem to be purely an ethanol story…...However, that only helps to explain the bull market in corn. The coming rises in prices for meat, eggs, and dairy products will reflect the overall supply/demand imbalance of coarse grains and soybeans while soaring middle class in China, India and elsewhere in the Third World expands its diets (and midsections) with non-vegetable proteins.”
As far as investment recommendations he writes:
1. Maintain market weight in Energy stocks.
2. Overweight exposure to gold, using mining stocks and/or the ETF.
3. Reaming overweight the producing base metal stocks with long-life secure reserves. They remain the preeminent asset class for the next five years.
Coxe always seems to be ahead of the curve and thinking of things that sometimes seem a bit bizarre , but eventually becomes the common and in this issue he comes up with something really different to worry about……….bees…….or the lack of them.
He gives the example of “the painful food-price inflation of the 1970’s, was kicked off by the collapse of the anchovy harvest after the major El Nino of 1973. Now he suggests that the concern could be the shortage of bees.
He writes, “Bees are nature’s gift to producers of a wide range of crops, particularly fruits. For reasons experts have not yet been able to establish, the populations in bee colonies across much of the US and Canada have been decimated since last autumn. Apiarists call this a crisis. Already a Congressional committee has met to consider the evidence and suggest some remedies…..”
This seems like a little tib-bit of information, but without bees around to pollinate crops one could in-vision the potential for things to go wrong in the agricultural business.
He writes, “Crops that collectively contribute approximately one-third of the American diet, and almost $15 billion to the U.S. economy, are at risk……..”
Again, if you think that this is silly—well if you start yahooing and googling “bees” (that common insect that you take for granted) you’ll see a famous quote by Albert Einstein.
Albert Einstein: "If the bee disappeared off the surface of the globe then man would only have four years of life left. No more bees, no more pollination, no more plants, no more animals, no more man."
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For those who read Coxe’s piece on growing interest and probably prices in agricultural commodities, based on the better diet or at least bigger diets that we might see coming out of Asia—there is going to be one very important commodity needed for generating these crops and products. - POTASH.
You can see that some of the very few producers in the world are already doing quite well as the chart on Potash Corporation of Saskatchewan has been one of the speculator gainers over the last while and they are one of the big producers.
For those looking for a little guy with some leverage that could be quite important down the road and we featured an article with Scott Koyich on Anglo Minerals a long time ago. Anglo has about a million acres in Saskatchewan that’s been joint ventured with one of the world’s biggest mining companies BHP and if you look at news releases out of Anglo over the last six months you see almost nothing…...while most juniors pump up press releases like you wouldn’t believe.
We had hoped to publish an interview with some of the executives of Anglo on what it is that might actually have, but it looks like their partner BHP won’t let us go with it just yet…..but in the meantime, if your looking for juniors with potentially significant potash plays, this should be on your list!
 
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