Featured Trades: (COFFEE), (JO), (COCOA), (SBUX)

2) The Markets Develop a Caffeine Habit. Since my last piece on coffee two months ago (click here), the ETF for aromatic commodity (JO) has tacked on 23%, and 42% since I put out my watershed call (click here for 'Going Back Into the Ags').

But this may just be the down payment. Weather in primary producer, Latin America, has been poor. US coffee stockpiles are now at 10 year lows. Major producer Vietnam is threatening to cease exports and start hoarding, as Russia has already done with wheat. Although prices are now at 13 year highs, we may get even more of a jolt out of this trade.

Has anyone thought about shorting Starbucks (SBUX) on this news? They can't keep passing prices on to consumers forever in this deflationary world.? What is the one agricultural commodity that has gone down this summer? Ironically, it is cocoa, where a single hedge fund attempted to corner and create a short squeeze, unsuccessfully, it would appear (click here for 'Hedge Fund Corners the Cocoa Market' ).? Better start stocking up on those 50 pound bags of coffee beans at Costco.

Stockpiling for That Caffeine Habit

Featured Trades: (EMERGING MARKET CURRECIES), (FXC), (FXA)
Currency Shares Canadian Dollar Trust ETF
Currency Shares Australian Dollar Trust ETF

4) Emerging Market Currencies Are on Fire. If you think that emerging stock markets have been hot this year, take a look at their currencies, which are all blasting through to new all time highs. The Malaysian ringgit is up 11.1% against the buck this year, the Thai baht has appreciated by 8.9%, and the Singapore dollar has jumped by 6.8%.

The central banks of these countries have tried to stem the inflows to maintain export competitiveness, as Japan has done, to no avail. The ocean of money pouring in from the big hedge funds has just been too great. Friends who are using 5X leverage modest for the foreign exchange market are reporting windfall returns.

For me, this move was a no brainer to see coming, as internationally strong economies are the basis, not only for bull markets in equities, but virile currencies as well (click here for 'Time to Play the Minor Asian Currencies'). Unfortunately, there are no dedicated currency ETF's for these relatively illiquid currencies, as there thankfully are for the Canadian (FXC) and Australian (FXA) dollars. At least not yet, anyway.

The great thing for the investors in these countries, like Singapore (EWS) (click here for 'Singapore Sizzles' ), and Thailand (TF) (click here for that call) is that this creates a double leveraged effect on profits. Rising foreign shares are worth even more when their currencies are increasing in value too.

Even the Chinese Yuan (renminbi) has been strong, with the People's Bank of China kicking and screaming all the way. Concerns about a generalized dollar collapse have driven the ETF (CYB) up 2% this month. Like everything else in the emerging world, these currencies are overbought for the short term, but should continue to power on for another decade.

Hey Baby, Can You Spare a Baht?

Featured Trades: (COAL), (BTU), (MEE), (JOYG), (BNR)

1) Is Coal the New Black Gold? After the halting and starting three week rally we have seen in stocks, I would be negligent to recommend equity plays here. But there is one sector you should add to your 'buy on meltdowns' list and that is King Coal.

Demand from emerging markets, especially metallurgical coal needed to make steel, is absolutely exploding. Industry experts say a major super cycle of buying from China, South Korea, Japan, and Taiwan that is creating a long term structural shortage for the black stuff. One of the reasons Warren Buffet's Berkshire Hathaway acquired the Burlington Northern Railway (BNR), was that it obtains 75% of its earnings from transporting coal to west coast ports for shipment to Asia.

The US currently derives 50% of its power generation from burning coal, and that dependence isn't changing any time soon. The only potential drag is the subterranean price of natural gas, to which many coal burning utilities may switch, if prices fall further. Not only do power companies have the environmental incentive to switch to relatively clean burning CH4, it is also cheaper on a dollar per BTU basis. However, this only affects the domestic demand for coal, not the foreign markets.

If the Republicans win the November elections, a regulatory back off will deliver a sudden boost to profitability, and you can count on perceptions to front run that. The new cost of recent regulations brought in by the Obama administration has already been priced in to these stocks. Some of the premier names to look at here include Peabody Energy (BTU), Massey Energy (MEE), and Joy Global (JOYG).

Is It Time to Look Into Coal?

SPECIAL $5/BUSHEL CORN ISSUE

Featured Trades: (WHEAT), (CORN),
(GOLD), (SILVER)
Teucrium Commodity Trust Corn Fund ETF
SPDR Gold Trust ETF
iShares Silver Trust ETF
ETFS Physical Platinum Trust ETF
ETFS Physical Palladium Trust ETF

1) Wheat Melt Up Warning! Last week, I warned of a short squeeze in corn due to worsening conditions across the entire agricultural front. Since then, the ETF (CORN) has risen ten out of 12 days. That leaves corn severely overbought, and the hot money looking for a new temporary home.

Adding fuel to the flames was the Environmental Protection Agency's announcement today that they would go ahead with an E15 program, gasoline that has a 15% ethanol content, more than the 13% many were expecting. Ethanol itself is up 35% in recent months (click here). I also have to wonder if the fears of quantitative easing sparked by Japan's massive intervention in the foreign exchange market last week was driving some money into the foodstuff sector.

So bring on wheat! Russia has reiterated its export ban until the end of 2011. It is only a question of how much of this year's damage will spill over into next year's crop. Could Russia be forced to import wheat to feed its hungry masses? If you wait long enough, even the unthinkable happens.

It's looking like we are getting an early freeze, and possible snow in Canada, which will decimate crops there. Take a look at the chart below for Hard Red Wheat, which after a doubling in the early summer has been consolidating in a tight range, refusing to sell off. Technical analysts tell me this is a chart that is begging to go up, and could do so at the drop of a hat.

I think you may get a rotation out of corn and into wheat that could trigger another melt up in this essential foodstuff. This is already happening in the other bull markets I have guided you into. Look at how the buying in gold (GLD) and silver (SLV) has spilled over into platinum (PPLT) and palladium (PALL), and even the rare earths (click here for 'Peak Rare Earths is Upon Us' ). Ditto with the agriculture area, with Potash (POT) providing a jolt to Mosaic (MOS) and Agrium (AGU).

What is the big picture here? Buy hard stuff and avoid paper. The government can create all of the Treasury bonds and dollars it wants. Calories of sugar, bushels of corn, barrels of oil, and ounces of precious metals are another story.

Regrettably, the Teucrium people have not been able to get their wheat ETF off the ground yet, so you may have to open a futures account to capture this one. The symbol is MWH1. The usual caveats apply here. Wheat is not the screaming buy that it was when I first recommended the ags in June (click here for Going Back Into the Ags), so keep the appropriate risk control measures and stops in place.

This is the Way to Launch a New ETF!

Printing Presses Not Welcome Here

Featured Trades: (MSFT)

1) Another Sign of a Bond Market Top. As much as I like it, I am not accustomed to getting such instant gratification when I pick up a stock tip. But that is precisely what happened when Bill Fleckenstein told me he liked Microsoft (MSFT) at $23 last week (click here for my radio interview with Fleck).
Since then the stock has popped 10%.

There were rumors yesterday that the company was planning to issue long term bonds at current subterranean interest rates and use the proceeds to buy back its own shares, which are selling at a modest ten times earnings. At these terms, Mr. Softy should be doing this trade until the cows come home.

It reminds me of the type of financial engineering I saw in Japan during the late eighties, where companies could issue debt with attached five year equity warrants at 0% interest rates. Almost all of these warrants ended up expiring out of the money because of the stock market crash that followed, so the borrowers were able to obtain free money for five years. For leveraged, capital intensive industries this can have a huge impact on profitability. US companies were paying 8% for medium term money then. When investors are stupid enough to make these deals possible, the astute managers should take the gift.

If (MSFT) goes ahead with the plan, and they'd be nuts not to, it could only be great news for the stock. Microsoft has recovered from its disastrous Vista operating system, and is now hitting on all cylinders with a series of successful new product launches. A share price of $30 should be in the cards.

Can Microsoft Get Something for Nothing?