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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (4766)	3/9/2006 4:11:54 AM
From: elmatador	Read Replies (2) \| Respond to of 217689

"In 15 years the world will have a different fuel matrix," says Jean-Paul Prates, an oil industry analyst in Rio de Janeiro. "If ethanol continues to grow, the geopolitics of fuels will change completely." Brazil prepares to grow the next world fuel By Jonathan Wheatley Published: March 9 2006 02:00 \| Last updated: March 9 2006 02:00. The tankers have been joined recently by another symbol of the industry's power: terminals for ethanol, a sugar cane product, whose arrival points to a shift with implications for the future of the world's fuels. The world market for ethanol has grown from 28m litres in 2000 to 49m litres last year. "In 15 years the world will have a different fuel matrix," says Jean-Paul Prates, an oil industry analyst in Rio de Janeiro. "If ethanol continues to grow, the geopolitics of fuels will change completely." Mr Prates may be sticking his neck out, but sugar, ethanol and oil are already mixing with each other on global markets. "The correlation [between the three] is a massive story," says one London trader. "There are hedge funds dedicated to energy which see ethanol as the next big thing. But they can't buy ethanol futures as there's no market. So there's a huge fresh wave of money going into sugar." Brazil is better placed than any other producing country to ride that trend. It produces 28m tonnes of sugar a year out of global production of about 145m tonnes, easily dwarfing its nearest competitors. It makes about 40 per cent of the sugar traded on global markets and its output is increasing by nearly 20 per cent a year. "Brazil is the biggest and lowest-cost producer in the world, and that makes us the global price-maker," says Paulo Diniz, finance director of Cosan, Brazil's biggest sugar and ethanol producer. The rapid growth of Brazil's industry stems from deregulation in the 1990s. Formerly, the government controlled not only prices but also who could produce how much sugar or ethanol each year and to whom they could sell it. Deregulation coincided with a massive undervaluation of the Brazilian Real, adding to Brazil's enormous natural advantages for growing sugar cane in terms of climate and soil. Although the currency has since strengthened, Brazilian producers have retained their competitive edge. Indeed, Mr Diniz at Cosan says Brazil's size and cost advantage have enabled it to pass on the effects of the stronger Real to export markets, contributing to the recent price rise. Raw sugar is trading at about 17.5 cents a pound, up from about 5 cents a pound just two years ago (but down from a recent high of about 20 cents). Brazil's expansion over the past decade has forced other low-cost producers, such as Australia and Thailand, to cut back production. With the recovery in prices those countries have emerged from restructuring and are making good money again, but producers remain reluctant to invest in expansion. Another factor behind high prices is the gradual removal of distortions in global markets, especially the recent World Trade Organisation ruling that the European Union must remove export subsidies on sugar from next year. Toby Cohen of Czarnikow, a London sugar brokerage and consultancy firm, says EU exports will fall from almost 8m tonnes this year to about 1.5m next year. "A lot of global demand is filled by EU exports and Brazilian producers will be able to capture that," he says. Mr Diniz says the third big driver of prices is the new relation between sugar, ethanol and oil. There has always been a strong correlation between ethanol and sugar prices: about two-thirds of Brazil's sugar mills can switch between ethanol and sugar production. The correlation between petrol and ethanol has never been as strong, but this is changing. "Today the world is discovering ethanol," says Mr Diniz. "Demand is at levels never seen before." Brazil shows how far demand for fuel ethanol could go. Flex fuel cars, which can run on petrol or ethanol or any mix of the two, account for 70 per cent of all new cars sold in Brazil. Whether this is a trend that will sweep the world remains to be seen. Yet there are moves in the EU to increase the proportion of ethanol in petrol from 5 to 10 per cent. That would generate a surge in demand that Brazil would be best placed to supply.

To: TobagoJack who wrote (4766)	3/9/2006 4:17:41 PM
From: energyplay	Read Replies (1) \| Respond to of 217689

I trust you are not going to more than a 50% gold allocation. Let me assume that your friends aren't making fun because thay think that silver, platinum, copper, and light sweet crude oil are better investments. ;-) Don't they own SOME gold ? ****** I think the long term trend is - Gold UP US Dollar and all other Curencies DOWN Scare materials and consumed materials UP (copper, oil) Plentiful materials DOWN (office space, paper) Volume manufactured goods DOWN Skilled artisan custom and low volume goods UP (complicated watches an example) Professional services - three types - Fungible, functional, abstraction based DOWN (call centers, software coding, logic design, accounting, x-ray interpetation) all these jobs going to India, Ireland, etc. Personalized, high touch, customized services - Flat to UP (haircuts, doctor visits, system & analog electronics, plumbing work) - lots of upward cost pressure here, downward pressure from immigration and partial outsourcing Performance based professional services UP - becuse of better ranking information (hedge funds, legal litigation, negotiation, venture capital, artist, movies) People now pay hedge funds 20% for the performance they used to get from Fidelity Magelland for 2%. Winner takes all factor drives this. If you do a Crouching Tiger, Amelie (du Montmart), Finding Nemo, etc. the rewards are huge. ***** I think we will see many strong counter trends while the long term trend goes on. I expect some of the counter trends to last man months, maybe even more than a year. My guess is we will need to to fight the counter trends, but to step aside instead of in front of the train, and try to make some money somewhere else that does not strongly correlate with the GUDD or GDDU game. I think energy trusts, bought at the right price, can fit into this, especially with large monthly distributions. Occasionally tech, biotech, and conventional value stocks should also have a role in this. Secular growth, such as BRIC, Eastern Europe, LATAM, has a role here at the right time and the right price. I also don't think the GUDD trend will run fast enough to produce the sort of short term returns I want. Gold going from $ 270 (thanks, Gordon Brown) to $550 (thanks, Iranian nut-job mullahs) provided a good strong run in a short time frame. $500 to $1000, and then $1000 to $2000+, will likely take longer, and/or require a long waiting time.