Crop prices have been moving sharply higher over the past several weeks due to a number of different factors. #-ad_banner-#In the U.S., a particularly cold spring has featured freezing temperatures and snowfall well into the prime planting time for Midwestern farmers. A delay in planting means that it will take longer for crops to mature — with the potential for supply disruptions in the works. While the Midwest is dealing with cold and snow, farmers in California are facing one of the most severe droughts seen in decades. Low levels of rainfall have left reservoirs well below normal levels and… Read More

Crop prices have been moving sharply higher over the past several weeks due to a number of different factors. #-ad_banner-#In the U.S., a particularly cold spring has featured freezing temperatures and snowfall well into the prime planting time for Midwestern farmers. A delay in planting means that it will take longer for crops to mature — with the potential for supply disruptions in the works. While the Midwest is dealing with cold and snow, farmers in California are facing one of the most severe droughts seen in decades. Low levels of rainfall have left reservoirs well below normal levels and have made it increasingly difficult for farmers to irrigate crops. Expectations for the next few months continue to be bleak for California and other areas of the southwestern United States. This could pressure crop output and result in shortages and agriculture price spikes. Internationally, political tensions are also causing fear of supply disruption. For instance, Ukraine was expected to be the third-largest corn shipper this year, but that’s in doubt with Russian troops on the country’s border. Military action could have a destabilizing effect on the entire region, and disrupt supplies of grains that were previously expected to… Read More

As gold and silver prices exit a two-year bear market and begin to turn higher, we’re seeing some great opportunities in precious metal mining companies. #-ad_banner-#Chinese demand for gold is a large part of what is driving the price of the yellow metal higher. According to the World Gold Council, China surpassed India in gold purchases last year. This demand should continue to rise in 2014 as China braces for what could be a very painful contraction in its economic growth rate. A recent Bloomberg article noted that Chinese bond defaults were now “unavoidable,” and the country’s shadow banking system… Read More

As gold and silver prices exit a two-year bear market and begin to turn higher, we’re seeing some great opportunities in precious metal mining companies. #-ad_banner-#Chinese demand for gold is a large part of what is driving the price of the yellow metal higher. According to the World Gold Council, China surpassed India in gold purchases last year. This demand should continue to rise in 2014 as China braces for what could be a very painful contraction in its economic growth rate. A recent Bloomberg article noted that Chinese bond defaults were now “unavoidable,” and the country’s shadow banking system has been referred to as a “ticking time bomb.” With a white-hot real estate bubble posing significant risk, and China’s policymakers expanding the allowed trading range for the yuan, Chinese investors have legitimate reasons to want to protect their wealth against a potential debasement of their currency. Buying gold is one way to help protect their purchasing power, and as long as the country remains on unstable economic footing, I expect demand for gold to increase. Not only is this demand good news for precious metal miners as they will be able to sell production at higher prices, higher gold… Read More

Prices for agriculture commodities such as corn, wheat and soy have been climbing sharply over the past several weeks. The chart of PowerShares DB Agriculture (NYSE: DBA) helps illustrate the magnitude of this price spike. #-ad_banner-#There are a number of factors conspiring to send agriculture prices higher. A continued drought in California after one of the warmest winters on record there sets the stage for a potential rise as it is becoming more difficult for farmers to irrigate crops. Meanwhile, geopolitical risk could be playing a factor as well, as Ukraine represents a meaningful portion of the world’s… Read More

Prices for agriculture commodities such as corn, wheat and soy have been climbing sharply over the past several weeks. The chart of PowerShares DB Agriculture (NYSE: DBA) helps illustrate the magnitude of this price spike. #-ad_banner-#There are a number of factors conspiring to send agriculture prices higher. A continued drought in California after one of the warmest winters on record there sets the stage for a potential rise as it is becoming more difficult for farmers to irrigate crops. Meanwhile, geopolitical risk could be playing a factor as well, as Ukraine represents a meaningful portion of the world’s wheat production. Higher agriculture prices have a tendency to juice fertilizer prices. While challenging weather conditions and increased risk remain, I expect global demand for fertilizer to be robust as farmers use it to boost yields. Shares of Potash Corp. of Saskatchewan (NYSE: POT) look particularly attractive, not only because of the rising demand for fertilizer, but also because of political events that could result in a much better pricing environment for potash fertilizer. Leading up to last July, there was an established cartel agreement between Russian Uralkali, the world’s largest potash producer, and Belaruskali, a producer in Belarus. A… Read More

It’s been hard to miss the rally in precious metals this year. While the broader market took it on the chin midway through January, gold and silver prices were finding support. And as equities have had to fight to return to their 2014 highs, gold and silver prices have actually made new highs for the year. #-ad_banner-#The fact that gold and silver have been dropping for roughly two years helps to make the case for a sustained rally in precious metals. After such a long decline, we may have finally reached the point where a meaningful amount of “true believers”… Read More

It’s been hard to miss the rally in precious metals this year. While the broader market took it on the chin midway through January, gold and silver prices were finding support. And as equities have had to fight to return to their 2014 highs, gold and silver prices have actually made new highs for the year. #-ad_banner-#The fact that gold and silver have been dropping for roughly two years helps to make the case for a sustained rally in precious metals. After such a long decline, we may have finally reached the point where a meaningful amount of “true believers” have finally become frustrated enough to throw in the towel. With the last remaining “weak holders” shaken out, sellers may be in short supply, allowing gold and silver buyers to push prices higher for months to come. It also helps that demand for precious metals from China has been on the rise, with the World Gold Council recently reporting that China’s gold purchases have now surpassed those of India. In particular, a surge in physical bar and coin demand from China may indicate that gold purchases represent investments and hedges against inflation rather than simply demand for jewelry from affluent… Read More

Do you have a stock position that you have owned for a long time? Maybe it’s a position that you inherited, or one that was given to you years ago. Maybe it is company stock that you methodically accumulated as an employee. #-ad_banner-#Many investors hold long-term positions that have grown tremendously over time. In most cases, it doesn’t make sense to sell this stock because of the tax implications — not to mention the aversion to selling an asset that has been growing for so long. But what are you giving up by holding on to this stock? Is it… Read More

Do you have a stock position that you have owned for a long time? Maybe it’s a position that you inherited, or one that was given to you years ago. Maybe it is company stock that you methodically accumulated as an employee. #-ad_banner-#Many investors hold long-term positions that have grown tremendously over time. In most cases, it doesn’t make sense to sell this stock because of the tax implications — not to mention the aversion to selling an asset that has been growing for so long. But what are you giving up by holding on to this stock? Is it really the best investment that you can make with your capital? Are you missing out on an opportunity to make more money by sitting on this long-term position? Now, before you quit reading, let me tell you that I’m not suggesting you sell your long-term position. You have your reasons for holding this position and I respect that. But what I am suggesting is that you consider a strategy to help you create additional income from your long-term position. Case Study: A 20-Year Investment I once worked for a hedge fund manager named John who held a large block… Read More

It’s been more than two years since gold prices peaked. Since then, precious metal prices have been in a well-defined bear market despite the widespread belief that the Federal Reserve’s stimulus programs would naturally send them higher. #-ad_banner-#Ironically, as the Fed finally begins to taper its bond purchasing program, precious metal prices now appear to be bottoming. Although it may seem counterintuitive at first, the fact that gold is rallying right now actually makes perfect sense. For quite some time, the Fed has kept interest rates artificially low and injected capital into the U.S. economy by purchasing massive… Read More

It’s been more than two years since gold prices peaked. Since then, precious metal prices have been in a well-defined bear market despite the widespread belief that the Federal Reserve’s stimulus programs would naturally send them higher. #-ad_banner-#Ironically, as the Fed finally begins to taper its bond purchasing program, precious metal prices now appear to be bottoming. Although it may seem counterintuitive at first, the fact that gold is rallying right now actually makes perfect sense. For quite some time, the Fed has kept interest rates artificially low and injected capital into the U.S. economy by purchasing massive amounts of Treasury bonds and mortgage-backed securities. Gold bugs claimed that these capital injections would lead to high levels of inflation as more dollars were forced into the financial system. This didn’t happen because the velocity of money was so very low. Despite the low interest rates, banks were not lending capital to borrowers, and businesses were not borrowing money for growth investments. In short, the cash was just sitting stagnant instead of being put to work to help the economy grow. Today, however, the tide is beginning to turn. The U.S. economy is finally showing signs of a recovery,… Read More

The covered call strategy has some tremendous benefits. It allows us to boost the amount of income we receive from our investment portfolio, while also helping to protect our investments from losses if stocks trade moderately lower. #-ad_banner-#However, the strategy has one primary drawback. If the underlying stock that we own moves dramatically higher, our gains are capped. This is because our covered call strategy leaves us obligated to sell our stock to another investor at a specified price (the strike price) should the stock close above this price when the calls expire. Generally, I’m happy… Read More

The covered call strategy has some tremendous benefits. It allows us to boost the amount of income we receive from our investment portfolio, while also helping to protect our investments from losses if stocks trade moderately lower. #-ad_banner-#However, the strategy has one primary drawback. If the underlying stock that we own moves dramatically higher, our gains are capped. This is because our covered call strategy leaves us obligated to sell our stock to another investor at a specified price (the strike price) should the stock close above this price when the calls expire. Generally, I’m happy to take this trade-off. I would much rather have a high-probability opportunity to make a solid 25% to 35% per year on my investments than a low-probability chance to make a much larger gain. After all, I consider myself to be a stable, systematic investor rather than a long-shot gambler. However, there are times when the long-term opportunity for an investment is just too good to completely pass up by selling covered calls. But does this mean that we need to give up the income opportunity available to us as covered call traders? Not necessarily… Creating Income While Still ‘Letting… Read More

When setting up a covered call trade, it is important to estimate ahead of time what that trade is likely to return. Not only will this allow you to evaluate the expected return on your current trade, but it will also give you a benchmark for comparing this trade with other opportunities that may be on your radar. I have set up a simple spreadsheet that allows me to input the necessary data to determine what a covered call setup will return if the position is called away at expiration. The sheet also tells… Read More

When setting up a covered call trade, it is important to estimate ahead of time what that trade is likely to return. Not only will this allow you to evaluate the expected return on your current trade, but it will also give you a benchmark for comparing this trade with other opportunities that may be on your radar. I have set up a simple spreadsheet that allows me to input the necessary data to determine what a covered call setup will return if the position is called away at expiration. The sheet also tells me the amount of risk that the covered call protects me against should the stock trade lower. Below is a screen shot of the spreadsheet, which can be easily replicated in Microsoft Excel. The blue cells represent numbers that are entered manually, and the white cells represent data calculated by the formulas. #-ad_banner-#The first three cells are fairly clear. For a covered call setup, we will enter the market price of the stock, the strike price of the call option that we are selling, and the premium (or price) of the option. So, for the example above, we… Read More

Using a covered call strategy can be a great way to generate steady returns in your portfolio. As a general rule, I expect my covered call trades to increase my capital by about 25% to 35% per year, depending on the market environment. (If you’re new to the covered call strategy, click here for an introduction to how this strategy works.) Whenever I set up a new covered call trade, there are a number of different dynamics to be aware of.#-ad_banner-# I always want to start with an underlying stock that has a high probability of increasing in price. I… Read More

Using a covered call strategy can be a great way to generate steady returns in your portfolio. As a general rule, I expect my covered call trades to increase my capital by about 25% to 35% per year, depending on the market environment. (If you’re new to the covered call strategy, click here for an introduction to how this strategy works.) Whenever I set up a new covered call trade, there are a number of different dynamics to be aware of.#-ad_banner-# I always want to start with an underlying stock that has a high probability of increasing in price. I typically look for stocks with strong fundamental growth and a chart pattern that indicates investors are steadily buying the stock. Next, I want to make sure that the option contract we use has plenty of premium built into it. Since we make our income by selling attractively priced call options, we need to make sure we’re getting a good value for the contracts we sell. There are a number of variables that go into picking the right options contract. In previous articles, we’ve discussed the need to carefully select the right strike price and the right expiration date. It’s also… Read More

Many of you might remember Crocs (Nasdaq: CROX) as the growth stock darling that ran up several hundred percent before falling like a stone and nearly having its shares delisted. A bearish collapse like this can become seared in the mind of any trader, causing many to swear off the stock for good. To be sure, Crocs had some very serious problems that almost put the company out of business. Supply chain issues made it difficult for the company to keep shoes on retailers’ shelves, and… Read More

Many of you might remember Crocs (Nasdaq: CROX) as the growth stock darling that ran up several hundred percent before falling like a stone and nearly having its shares delisted. A bearish collapse like this can become seared in the mind of any trader, causing many to swear off the stock for good. To be sure, Crocs had some very serious problems that almost put the company out of business. Supply chain issues made it difficult for the company to keep shoes on retailers’ shelves, and this was during a period of high demand. Following its near extinction, shares rebounded from less than $1 in 2008 to a high above $32 in July 2011. Since that time, however, CROX has once again been pressured, falling more than 50%. #-ad_banner-#The stock has been largely challenged by management’s inability to build on its brand. Over the past year, operating margins have been cut by a third as management focused on expanding the company’s global footprint. Revenue growth has also been disappointing, with the most recent quarterly report showing a year-over-year sales decline of 2.4%. So why,… Read More