Why fertilizer is a better buy than gold
Potash might not glitter, but it may be worth some consideration for the commodities portion of your portfolio.
After rocketing $500 an ounce in the first eight months of the year, gold prices have tumbled as investors take an increasingly bearish view of commodities in general.
For most commodities, that skepticism is warranted. But gold's recent nosedive and predictions that it will fall to $1,400 an ounce in coming weeks, well below the September record of $1,923.70, has some market watchers raising their eyebrows. After all, isn't gold a different kind of commodity -- a sort of haven, an asset that serves as a refuge from uncertain economic times and volatile markets, just the kind that we have lived through in the second half of 2011?
Yes. But the gold market has changed a great deal in recent decades. It has never really been dominated by end users as copper, soybeans and crude oil ultimately are. Instead, with every year that has passed, the role of speculators in the gold market has grown.
Investors no longer buy gold bars and stash them in bank vaults; they snap up gold ETFs or other derivatives tied to the price of gold, and they can buy or sell whenever they want. Long-term investors, who want to maintain a strategic allocation to gold in their portfolios, have given way to speculators eager to jump on or off the bandwagon as momentum dictates.
There is still more than $100 billion in gold held in easy-to-sell exchange traded vehicles, by some estimates. Investors who don’t want to lose more, or who want to hang on to what is left of any profits, may well add to the selling pressure. The changes to the ways in which gold can be purchased and the much broader investor base have dramatically changed its nature as a haven.
So are there any "safe" commodities left to invest in? If you listen to economists, probably not. Forecasts of a slowdown in global growth next year are common, and that will wreak havoc on demand for things like copper and crude oil. It's not surprising that their prices have come under siege. But there is one intriguing option: potash.
True, potash never really glitters like gold; rather, it lurks in the shadows. It's not traded on the futures markets. Investors who are interested have to invest indirectly, via stocks of producers like Potash Corp. of Saskatchewan (POT) and The Mosaic Company (MOS). But the absence of a futures contract also means potash prices haven’t been the focus of speculation.
Not that potash prices don’t face risks. Shelley Goldberg, a Roubini Global Economics analyst who last week produced a report analyzing the potash market, concluded that there are in fact many risks involved. Cash-strapped farmers may cut back on fertilizer purchases for a year or two without harming productivity, creating some short-term downside risk to both the commodity price and the stock prices. Still, the long-term fundamentals remain relatively upbeat. Demand for agricultural productivity isn’t going to abate, particularly in emerging markets like China, India and Brazil.
Global demand was expected to climb 11% this year, and even if the rate of growth in demand from China ebbs, Indian needs will likely more than compensate as the country tries to become self-sufficient in foodstuffs, especially grains. Goldberg points out that India’s fertilizer budget is bigger than its military budget.
With that in mind, when designing a portfolio for 2012, you might want to think about including shares of Potash Corp. of Saskatchewan, whose stock ended last week at $39.50. Largely bullish analysts expect the shares to hit $60.
If you’re still in the mood to gamble a bit, there’s upstart Western Potash, the development-stage player that now trades for C$1 a share on the Toronto Stock Exchange. Analysts rate it a "speculative buy" and say its share price could double -- that is, if it isn’t acquired by one of the behemoth players in the industry or Chinese or Indian interests.
Holy Moly!!!!! you mean gold won't endlessly increaase in value?
time to go a-lookin for golden cow patties
Amonium Nitrate is part of the ingredients for ANFO which is an explosive commonly used in underground mining operations and made famous as home made explosive used by anti-government groups. Caustic potash is a common ingredient in field improvised explosives compounds taught by the US Military.
Amonium Nitrate Fuel Oil explosive is popular because is has a low degree of post ignition fumes and also can be molded, pumped, platicised to work in wet environments that would degrade TNT or dynamites.
Right, notice how the people who write the article are tied into financial markets, probably some broker prodded them to write it. And by this time, its too late anyway.
Everyone already knows if its a play or if its BS same deal.
Let's go back to the" HONEY WAGONS",like they had after WW2 in Europe.It where very good fertilizer and got rid of the poops..at the same time.
If you confused,ask a GI....statient in Europe 50 years ago.
This by-product can give life and it can take it away. i.e. when mixed with soil in the ground it will grow food and provide sustenance. it can also kill hundreds when blended with other ingredients. Oklahoma bombing for instance. Everything is linked and one can not do well without the other, sorta the web of life.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
The US isn't strong enough not to care about them now. But one day it will be.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.