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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: russwinter who wrote (54682)	2/25/2006 9:43:48 AM
From: Perspective	Respond to of 110194

Any suggestions on good industry group analysis websites? Message 22203648 Thanks, BC

To: russwinter who wrote (54682)	2/25/2006 9:54:17 AM
From: Perspective	Respond to of 110194

DBC: The first commodity-based exchange-traded fund (ETF) has just been launched biz.yahoo.com Motley Fool Risky Investing Just Got Easier Friday February 24, 12:29 pm ET By Selena Maranjian In case you didn't know it, commodities are very risky. Global commodity exchanges facilitate trading in all kinds of things, such as interest rates, currencies, metals, crude oil, gasoline, cotton, lumber, sugar, coffee, wheat, corn, and pork bellies. According to The Wall Street Journal, "Investing in commodities and financial futures is about as extreme as you can get on the risk scale." As Gail MarksJarvis noted in the Chicago Tribune, "Commodities are notoriously volatile. The Oppenheimer [commodities-based] fund climbed 26.4% last year and has returned about 20% or more for each of the last four years, according to fund-tracking firm Morningstar. But in 2001, the fund lost 31%. And in 1998, the loss was 45%." Investors are drawn to commodities because of the great leverage available. You can sometimes buy items by paying only about 10 percent of their value. In an extreme example, if you buy $50,000 of pork bellies for $5,000 and they double in value, you've made a lot of money by investing just a little. Of course, if pork bellies fall in value, you can lose your entire invested amount -- and then some! You can lose much more than you invest with commodities and futures. Smart people have lost a lot of moola this way. Fortunately, most of us don't even know how to go about investing in commodities, and those of limited means may have trouble even trying, as you typically can't get involved with small sums. That was then, though -- this is now. There's a new development that you may want to know about -- if only, perhaps, to avoid it. The first commodity-based exchange-traded fund (ETF) has just been launched: The Deutsche Bank Commodity Index Tracking Fund (AMEX: DBC - News). Open it up and you'll find futures contracts tied to various commodities, in the following approximate proportions: oil, 55%; aluminum, 12.5%; corn and wheat, 11.25% each; and gold, 10%. That's right -- no orange juice, no pork bellies. In fact, lots of other items are also excluded. So why is this ETF here? Well, commodities have been, pardon the pun, hot lately. Compared with the S&P 500's gain of about 5% last year, the Dow Jones AIG Commodity Index rose some 21%. But that index contains a much wider mix of commodities than DBC shares. What's the advantage of investing in such items? Well, sometimes the rising cost of raw materials can put pressure on companies' bottom lines. If you invest in the raw materials themselves, you can benefit from the inflation. There are plenty of disadvantages to this investment, too. For starters, remember that it's focused on just a small subset of the commodity world. Remember also how volatile many commodities are. The price of oil, for example, has certainly demonstrated that. And if it falls, it will take much of this ETF with it. Here's the bottom line: You have alternatives to commodities and this ETF. * You might fight inflation and/or diversify your portfolio with inflation-protected bonds and real estate. * You might look into some of the many other ETFs that may be more compelling. (Our ETF Center can get you up to speed pronto.) * You might invest in the stock of companies that produce and sell commodities. Smithfield Foods (NYSE: SFD - News), for example, is a major pork producer. Stephen Simpson had some kind words to say about it a while back. He has also covered copper specialists such as Phelps Dodge (NYSE: PD - News), Southern Copper (NYSE: PCU - News), and Freeport McMoRan (NYSE: FCX - News), all of which have experienced strong advances in the past year. And Will Frankenhoff recently delved into the future of oil companies such as ExxonMobil (NYSE: XOM - News) and Chevron (NYSE: CVX - News). * And if you really must, consider some managed mutual funds that focus on commodities, such as the Pimco Commodity Real Return fund. Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article.

To: russwinter who wrote (54682)	2/25/2006 11:12:02 AM
From: zebra4o1	Read Replies (1) \| Respond to of 110194

A sacrifice ratio of 4 sounds like a fancy way of saying that the US economy now cannot handle high interest rates - but somehow this leads to the conclusion that the Fed is going to keep raising rates? Maybe the Fed is playing a game of chicken? The Fed is trying to show those Asian central bankers who is the boss? US long term interest rates are now set by China and Japan. And their policy is to stimulate the US economy with low interest rates. These FCB might be as concerned about a US housing slow down as people on this board are. Could they possibly be as smart as us? That is why they keep supporting Fannie's and Freddie's bonds. It is Keynsian economic stimulus applied internationally.

To: russwinter who wrote (54682)	2/25/2006 4:04:11 PM
From: Wyätt Gwyön	Read Replies (3) \| Respond to of 110194

if the SR is now estimated at 4, we should not expect the Fed to ease back in policymaking in the near term. That means rates are headed higher and for longer than many expect. you can say that again. Jim Grant, whose readership must include 4000 of the 8000 hedge fund manglers out there, is on the record saying the Fed is "done". Fred Hickey in his latest letter says he believes in Grant's "gut". i disagree. wouldn't it be the surprise of the year if Bernanke turns out to have real balls and raises to 7%, which would be a fairly balanced rate? that would spell death to the world economy as we know it and create some great buying opps. all of the reasons people give for the Fed to stop have to do with the domestic credit bubble and the weak and vulnerable domestic consumer. but perhaps Bernanke is also concerned about outside forces, like how the hell can the Fed be easing when Japan starts raising? and how the hell can Japan not raise from 0 when their economy is growing at 5.5%? of course, 7% may be too extreme for Chopper Ben, but consider that a couple years ago, Mish and other bond bulls didn't think 2% would happen. he could easily do five, that's practically in the bag. what if he goes to 6%? i just don't think a lot of the positioning in terms of gold speculation, heavy foreign currency and international equity fund buying, manic buying of all and sundry junk from emerging markets after their outperformance streak is getting long in the tooth--really your entire Risklove Industrial Complex--is at all ready for a US Fed at 6%. i don't know that it would happen, but it's a very interesting potential train wreck for all risklove trades.

To: russwinter who wrote (54682)	2/26/2006 1:43:10 AM
From: glenn_a	Respond to of 110194

Re: the Sacrifice Ratio, that was a very interesting article Russ. Although, with regards to "fighting" inflation, the 8-word sentence in the article "That is why the Fed is acting preemptively" (in raising interest rates to fight inflation) is surely an attempt at comic relief, no? Will have to see how the Fed and the economy behave in 2006, but the perspective of the Sacrifice Ratio is an interesting one. It provides one potential theoretical underpinning for why the Fed may prove more determined in its efforts to raise interest rates and bring inflation under control than many of the, what's the word you use "Humpties", are currently betting. g