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Inflation, Investing and Everything

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Thursday February 14, 2008

The great green land grab

guardian.co.uk :

Down in Patagonia, which stretches across southern Chile and Argentina, an estimated 300 wealthy north Americans have bought - mostly for little more than GBP 30 [USD $58] an acre - very many millions of the wildest, remotest and most stunning acres in the world in the name of wilderness preservation. Their near neighbours are the founder of CNN, Ted Turner, the financier George Soros, the fashion tycoons Luciano and Carlo Benetton, and the actors Sharon Stone and Christopher Lambert. Last year Turner became the largest landowner in Argentina, now owning 2m acres of Patagonia, which, he says, will be farmed "ecologically".

Because forests lock up nearly one eighth of all the world's carbon, US hedge funds, financiers, governments, the World Bank, private companies and many conservation charities see the chance to make potentially enormous amounts of money by stopping trees being felled. The big new climate change idea, now snowballing around the world, is for rich countries to pay poor ones not to cut down trees in return for carbon credits. One plan is to give communities or countries cash; another is for a global system of carbon trading where poor countries sell the carbon locked up in their trees to allow rich countries to continue polluting as usual.

It sounds good for the climate and the communities, but the reality on the ground is it could be disastrous. "Once you get big carbon money going to the world's forests you get questions about who actually owns the trees," says Dr Tom Griffiths, who works with Forest Peoples Programme. The carbon rush, he says, could turn conservation back to the bad old days of fences and guns and guards, with increasing control by governments and big international conservation groups over vast areas of land.

- I have alluded to this earlier, that there might be a war coming to a forest near you : bio-fuels merchants versus carbon-credits eco-warriors. Billions of dollars, tons of carbon, and the health of the global climate are at stake. There are reports that some of the shooting has already started. Tree Wars, anyone?

(2008-02-14 23:07:21 SGT) [Biz] Permalink

Wheat hits record $11.53 on supply concerns

ap.google.com :

Wheat futures briefly jumped to a new record above $11 a bushel Monday [11 Feb 2008] on expectations of tight global supplies that could lead to higher prices for bread, pasta and other food. Wheat prices have surged 20% since the start of year, pushed higher by growing world demand and bad weather that has pummeled crops in Canada, Argentina and India. U.S. exporters are selling wheat at a record pace to meet demand, rapidly depleting stockpiles. Wheat for March delivery jumped the newly imposed 60-cent limit to fetch an all-time high of $11.53 a bushel in electronic trading on the Chicago Board of Trade. "It's an unprecedented move in wheat markets," said Jason Ward, analyst with Northstar Commodity in Minneapolis.

Relentless demand for agricultural products from fast-growing countries including China and India has exacerbated the supply crunch. Though many big food companies protect themselves against volatile prices swings, experts say U.S. consumers should expect higher food prices to eventually work their way into the grocery aisle. "It's going to affect everything - pasta, bread, cereal. It's a big deal," Ward said.

- Inflation is taking off and going exponential. Everyone needs to eat, so you could say demand for food-related commodities should be relatively price-inelastic. I am looking to hedge myself against food price inflation via investing into agricultural commodities and agriculture-related companies, and perhaps you might want to consider doing the same too.

(2008-02-14 13:18:02 SGT) [Biz] Permalink

Platinum hits record $1972.75 on South African power outages

bloomberg.com :

Platinum futures in Tokyo climbed to a record after Anglo Platinum Ltd., the world's biggest producer of the metal, yesterday [11 Feb 2008] said output will drop for a second year. Platinum for immediate delivery gained as much as $33.75 to $1,972.75 an ounce. The metal, used in vehicle emissions filters and jewelry, has surged 29% this year, almost triple gold's 10% gain. Platinum's gain this year is the second-biggest after wheat among the 33 members of the JPMorgan Commodity Curve Index.

Most mines in South Africa, source of about three-quarters of global platinum supplies, were closed for five days last month because of power shortages. Eskom Holdings Ltd., the state-owned utility, has told major customers it won't have sufficient capacity to guarantee adequate power until 2013.

- The platinum:gold ratio has been hovering around 1.90 to 2.00 for the past couple years or so. In the recent sessions it has however taken off and is now at 2.17. Credit goes to the South African power outages, seeing how South Africa accounts for most of the world's platinum production, and to the IMF for hammering gold down in the past few days (a sign of desperation in my opinion, but, ah, that's another story altogether).

That's a US Platinum Eagle bullion coin above, but personally, I'm not long platinum. By its nature, platinum is rarer, much less liquid, and costs twice as much as gold (and thus twice as hard to save up for). Unlike GLD, the gold ETF (which is holding $18 billion worth of gold bars), there are no commonly available ETF's for platinum besides an ETC listed on the London Stock Exchange. I could go for that if I really wanted to, but I've decided not to bother. Still, the long story is good, with emissions regulations getting stricter, which calls for increased platinum usage in vehicle catalytic converters.