Invest in What You Love

I always assumed
that I
drink way too much coffee, but I read a story in the Wall
Street
Journal
at the end of last year that made me change my mind.

The crux of
the article:

“…an
analysis in the Archives of Internal Medicine
found that people who drink three to four cups of java a day are 25%
less
likely to develop Type 2 diabetes than those who drink fewer than two
cups. And
a study presented at an American Association for Cancer Research meeting
found
that men who drink at least six cups a day have a 60% lower risk of
developing
advanced prostate cancer than those who didn’t drink any.”

Six cups
of coffee a
day seems like a lot, I realize, but I drink about that much. I go through a prodigious amount of coffee in
any given week – maybe about one pound. That’s 52
pounds a year!

Apparently,
I’m not
alone. Coffee is the second most popular
beverage in the world after plain old water. In
total, the world drinks 400 billion cups of coffee every year. It’s one of the world’s most traded
commodities – which made me think: why not find a way to invest in the
brown
bean?

Get While the Gettin’s Good

I said I would be using the banks as my “canaries in the coalmine” for earnings season. Financials tend to lead the stock market, both on the upside and the downside. 

 

Of the big banks to report so far, we’ve heard from JP Morgan (NYSE:JPM) and Bank of America (NYSE:BAC). And their results have been remarkably similar.   

 

Both banks posted better-than-expected profits based on strong trading results. And both banks continue to be hampered by impaired assets and non-performing loans. 

Simon vs. General Growth

Today, I start by offering my condolences. It’s tax day, never a pleasant time of the year.  

 

Yesterday, I noted that the recent rally lacked enthusiasm. Low volume and small daily gains were the hallmarks. Did all that change yesterday after Intel (Nasdaq:INTC) posted blowout numbers?  

 

Maybe. Volume posted its best totals since February. And the S&P 500 made its biggest gain since March 5. 

A Tax Free Commodity Investment

Whether you paid your taxes early, or you’re still tearing
your hair out looking for that one last receipt, there’s something aggravating
about April 15th.

To take your mind off things, I’ve dug up some information
on a special kind of tax-free investment: real estate investment trusts, or
REITs.

REITs are special companies that pay ZERO corporate taxes as
long as they pay out over 90% of their profits to shareholders in the form of
dividends. Obviously, you have to pay
tax on the dividends – but as a shareholder, that’s the only tax you’ll
pay. Non-REIT shareholders get dinged
twice: once as an owner (corporate tax) and again as a shareholder (capital
gains and dividend taxes).

Okay, I know what you’re thinking: what does a REIT have to
do with commodities?

No Doubt About Intel

Yesterday I gave a somewhat tongue in cheek treatment to the question of whether Alcoa (NYSE:AA) had beaten analysts’ earnings expectations or not.   

 

Intel (Nasdaq:INTC) left no room for doubt. The chip-maker crushed estimates by $0.05 a share, beat on revenues and profit margins and guided higher for the second quarter.   

 

What’s next for Intel? Fixing the housing problem? 

Why I’m Down on GLD

If you’ve been a reader for very long, you might have
noticed that I’m not a huge fan of the exchange traded fund Spidershares Gold
Trust (NYSE: GLD). Each share of this
ETF corresponds to 1/10 of an ounce of gold, kept in the fund’s vault in London.

I should point out up front: I’m both long-term and
short-term bullish on gold prices. I
think as long as governments around the world treat their currencies like their
own private piggy banks to inflate at will, gold will remain a good place to
put your money.

So why don’t I like GLD? I’ve glossed over these reasons before, but I think you deserve the benefit
of some research and facts before you put my theories into practice in your own
portfolio.

But first, all of my reasoning assumes that you are
bullish on gold. If you’re not bullish
on gold, please PLEASE drop me an email at editorial@resourceprospector.com
and tell me why.

Alcoa: Meet, Miss or Beat?

There are some investors who think the significance of aluminum company Alcoa’s earnings is overblown. There are stocks that provide a better measure of consumer spending habits, or otherwise give more insight into the economy’s health.  

 

But because Alcoa is always the first major company to report, it’s numbers are still treated like an omen for the 499 companies on the S&P 500.  

 

So, if you ignore one-time charges, Alcoa (NYSE:AA) reported $0.10 a share 1st Quarter profit yesterday afternoon. I would swear I read on Yahoo! Finance that analysts were expecting $0.11 a share. That would mean Alcoa missed estimates.

Radioactive Warning

There
are always at least two sides to every commodity story, the biggest being supply
and demand.

In
yesterday’s
issue of the Resource Prospector
, I talked about demand for
uranium. After following and untangling
the threads, it seems like demand is slated to rise. That’s according to two of the biggest
authorities on the subject, the World Nuclear Association, and the Nuclear
Energy Agency.

Today,
I’ll tackle the supply side of the equation – and I’ll show how current annual
production of uranium falls well short of annual consumption.

I
unearthed a WNA chart to better show this contrast, which I believe will be the
real catalyst for higher uranium prices.

Uranium in the Mail

There’s
nothing better than a well articulated question to get the juices flowing on a
Monday morning. To that point, I was
glad to see a question from John B. of the UK in my inbox today.

John’s
main point: uranium production numbers can be confusing. I agree.

There’s
a few main issues that, for the most part, are largely unknown.

John
asked,

“Mining Weekly (RSA) has
just quoted NEA [Nuclear Energy Agency] DG Luis Echavarri, ‘By 2030, there will
not be a very significant change in the number of NPPs [Nuclear Power Plants]
in the world’.

You quote WNA [World Nuclear Association]
reckoning on 5 times more uranium demand than at present in 2030!

Have you researched the schedule of closures and new build openings? It is all
very confusing.”


John
raises a good question that certainly merits further research.  It is
confusing when two authorities on nuclear power seem to be in
disagreement
over how many plants will be built in the next 20+ years and how much
that
might affect demand for uranium. But upon
closer inspection, I don’t think they are really disagreeing.

Earnings Season

Finally. Greece has been offered a lump-sum loan by the European Union. It’s been obvious for weeks that this needed to happen. Now that it has, at least we can look forward to not reading about this saga every day.   

 

A month ago, this Greek bailout might have been a significant catalyst for the stock market. Now, after the seemingly endless back and forth, there’s not much impact beyond a rally for Greek banks and bonds.   

 

From a trading perspective, the Greece news is being overshadowed be earnings season…