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6 pts

Opinion on  AB Svensk Ekportkredit ELEMENTS Linked to the Rogers International Commodity Ind (RJA)
Soft commodities will soar like oil

Jun 26, 2008 10:57 AM UTC
Return Risk
-41.18% MID
Analyst


The bull market in oil is just the beginning.After consolidating for sometime,agricultural commodities are going to break out on the upside.

http://www.upsecurities.com/solutions/documents/RICI%20Ag%20B...


What I like about RJA is its diversified nature.Rubber and cocoa are at all time high but it is not reflected in DBA.The prices of live hogs and cattle will go  up going forward since a large number of animals have been slaughtered to offset rising costs and Korea has opened up its borders.The price of corn,wheat and soyabeans is going up because of the floods in the Midwest.

http://www.reuters.com/article/hotStocksNews/idUSSEO212880200...

http://ap.google.com/article/ALeqM5jND4r3B-VBZu2Ogg2_yzjYnPIP...


Orange juice prices are rising reflecting the risk of hurricanes in florida the second biggest producer after Brazil.(Brazil always keep popping up hmm).

http://www.livemint.com/2008/06/22222349/Orange-juice-prices-...

Cotton prices are at an all time high and show no sign of easing up.
"If the revised outlook on cotton production by Cotton Outlook is an indicator, the textile industry is in for a tough time.

In its outlook on raw cotton production for 2008-09 (August-July) season, the journal has pruned the production estimated by 1.39 million tonnes (mt) from last month’s estimated of 26.25 mt. The output for the coming season is seen at 24.78 mt against last year’s 25.81 mt."

http://www.thehindubusinessline.com/2008/06/26/stories/200806...

Canola is a type of edible oil derived from plants initially bred in Canada by Keith Downey and Baldur Stefansson in the 1970s. Record prices there as well.

http://www.canada.com/vancouversun/news/business/story.html?i...

Many of you must have read the article about drivers not changing their tires because of increased cost.The increased cost of tires is due to the increased cost of rubber and oil.

http://sify.com/finance/fullstory.php?id=14703107

from the article
"Rubber prices have risen by over 30% in the last six months, adding Rs 800 to each car's production cost. "

Sugar prices may leave bitter aftertaste screams the headline.
http://timesofindia.indiatimes.com/Bangalore/Sugar_price_rise...

Hey that is an Indian paper you say.What does that matter?Well India is the world's largest producer of sugar.

http://economictimes.indiatimes.com/Investors_Guide/Sugar_cos...

Wool is a textile fiber.Depending on its cleanliness it is divided into three grades 1.greasy or unscoured wool 2.scoured wool and 3.snow white wool.
http://www.tis-gdv.de/tis_e/ware/fasern/wolle/wolle.htm

Wool prices seems to be depressed for now.

http://www.thewest.com.au/default.aspx?MenuID=77&ContentI...

http://www.abc.net.au/rural/news/content/200806/s2263460.htm...

 



Rice prices are falling after the news making recent highs.

http://www.bangkokpost.com/260608_Business/26Jun2008_biz49.ph...

The price of oats and barley is poised to go higher since farm land is being diverted to plant corn and wheat.

http://www.canadiancattlemen.ca/issues/ISArticle.asp?id=86160...

The azuki bean is the second most popular legume in Japan after soyabean.(wikipedia)

http://www.island.wsu.edu/CROPS/ADZUKIBE.htm


<nobr> Making more possible </nobr>
<nobr> Rogers </nobr>
<nobr> International </nobr>
<nobr> Commodity </nobr>
<nobr> Index </nobr>
<nobr> ® </nobr>
<nobr> — </nobr>
<nobr> Agriculture </nobr>
<nobr> 2 </nobr>
<nobr> 3 </nobr>
<nobr> Table of Contents </nobr>
<nobr> Why Commodities? </nobr>
<nobr> 4 </nobr>
<nobr> Who is Jim Rogers ? </nobr>
<nobr> 5 </nobr>
<nobr> The Rogers International Commodity Index </nobr>
<nobr> ® </nobr>
<nobr> — Agriculture </nobr>
<nobr> 6 - 7 </nobr>
<nobr> Why Agricultural Commodities? Why Now? </nobr>
<nobr> 8 - 9 </nobr>
<nobr> Factors that Might Affect the Price of Agricultural Commodities </nobr>
<nobr> 10 - 11 </nobr>
<nobr> Risk Considerations </nobr>
<nobr> 12 - 13 </nobr>
<nobr> Index Disclaimers </nobr>
<nobr> 14 </nobr>
<nobr> 4 </nobr>
<nobr> Why Commodities? </nobr>
<nobr> > Studies have shown that </nobr>
<nobr> commodities returns are </nobr>
<nobr> negatively correlated with equity </nobr>
<nobr> and bond returns and positively </nobr>
<nobr> correlated with inflation. This </nobr>
<nobr> means that as equity and bond </nobr>
<nobr> returns decrease, commodity </nobr>
<nobr> returns would tend to increase </nobr>
<nobr> and as inflation increases, </nobr>
<nobr> commodity returns would also </nobr>
<nobr> tend to increase. </nobr>
<nobr> > Some market observers believe </nobr>
<nobr> that as capital flowed into equity </nobr>
<nobr> markets in the 1980s and 1990s, </nobr>
<nobr> less capital was invested in </nobr>
<nobr> commodities development (i.e., </nobr>
<nobr> oil exploration, mine excavation </nobr>
<nobr> and planting coffee and sugar </nobr>
<nobr> crops). This may have led </nobr>
<nobr> to a decrease in commodity </nobr>
<nobr> supplies and values. If demand </nobr>
<nobr> for commodities has increased </nobr>
<nobr> while global supply has not </nobr>
<nobr> increased or been slow to </nobr>
<nobr> increase, commodity prices may </nobr>
<nobr> rise as supply catches up with </nobr>
<nobr> demand. </nobr>
<nobr> > Investors seeking a diversified </nobr>
<nobr> portfolio may look to include </nobr>
<nobr> exposure to commodities for </nobr>
<nobr> these or many other reasons. </nobr>
<nobr> Correlation of Commodity Futures Returns with Stocks, Bonds, </nobr>
<nobr> and Inflation in Five Year Intervals (1959 - 2004)* </nobr>
<nobr> * A perfect positive correlation of one implies that as one measure moves either up or down, the other </nobr>
<nobr> measure will move in lockstep in the same direction. Conversely, a perfect negative correlation of negative </nobr>
<nobr> one means that if one measure moves in either direction. </nobr>
<nobr> ‘Stocks’ are represented by the S&P 500 total return index , ‘Bonds’ are represented by the Ibbotson </nobr>
<nobr> corporate bond total return index , ‘Inflation’ is measured by the Consumer Price Index (CPI), and </nobr>
<nobr> ‘Commodity Futures’ are represented by an equally weighted commodity futures total return index . </nobr>
<nobr> Cor </nobr>
<nobr> r </nobr>
<nobr> elation </nobr>
<nobr> 0.45 </nobr>
<nobr> -0.25 </nobr>
<nobr> 0.25 </nobr>
<nobr> -0.25 </nobr>
<nobr> -0.50 </nobr>
<nobr> 0.00 </nobr>
<nobr> 0.50 </nobr>
<nobr> Stocks </nobr>
<nobr> Bonds </nobr>
<nobr> Inflation </nobr>
<nobr> -0.42 </nobr>
<nobr> 5 </nobr>
<nobr> Who is Jim Rogers ? </nobr>
<nobr> Jim Rogers co-founded the </nobr>
<nobr> Quantum Fund, a global investment </nobr>
<nobr> partnership. The fund grew </nobr>
<nobr> approximately 4,000% from 1970- </nobr>
<nobr> 1980 while the S&P 500 Index </nobr>
<nobr> ® </nobr>
<nobr> rose </nobr>
<nobr> approximately 50% over the same </nobr>
<nobr> period. Following his success in the </nobr>
<nobr> hedge fund business, Jim Rogers </nobr>
<nobr> withdrew from active trading and </nobr>
<nobr> retired at age thirty seven. </nobr>
<nobr> In 1990, he embarked on a </nobr>
<nobr> motorcycle trip around the world </nobr>
<nobr> and published his experiences in the </nobr>
<nobr> book “Investment Biker” in 1994. </nobr>
<nobr> From 1999-2001, he visited 116 </nobr>
<nobr> countries and traveled over 152,000 </nobr>
<nobr> miles on his third trip around the </nobr>
<nobr> world. His second book, “Adventure </nobr>
<nobr> Capitalist” documented that journey. </nobr>
<nobr> In 1998 he started his own </nobr>
<nobr> commodities index fund, the Rogers </nobr>
<nobr> International Commodity Index </nobr>
<nobr> ® </nobr>
<nobr> and </nobr>
<nobr> in 2004 he published his third book, </nobr>
<nobr> “Hot Commodities”. </nobr>
<nobr> 6 </nobr>
<nobr> The Rogers International </nobr>
<nobr> Commodity Index </nobr>
<nobr> ® </nobr>
<nobr> — Agriculture </nobr>
<nobr> The Rogers International </nobr>
<nobr> Commodity Index (RICI </nobr>
<nobr> ® </nobr>
<nobr> ) is </nobr>
<nobr> comprised of 36 underlying </nobr>
<nobr> commodities futures contracts* </nobr>
<nobr> and was founded by James B. </nobr>
<nobr> Rogers on July 31, 1998. The </nobr>
<nobr> RICI </nobr>
<nobr> ® </nobr>
<nobr> ’s underlying commodities </nobr>
<nobr> are further broken down into three </nobr>
<nobr> sub-indices: Agriculture (34.90% </nobr>
<nobr> of RICI </nobr>
<nobr> ® </nobr>
<nobr> ), Metals (21.10%), and </nobr>
<nobr> Energy (44.00%). </nobr>
<nobr> The Rogers International </nobr>
<nobr> Commodity Index </nobr>
<nobr> ® </nobr>
<nobr> — Agriculture </nobr>
<nobr> (RICI </nobr>
<nobr> ® </nobr>
<nobr> -A) was established on </nobr>
<nobr> November 30, 2004. The value </nobr>
<nobr> of the RICI </nobr>
<nobr> ® </nobr>
<nobr> -A is based on 20 </nobr>
<nobr> agricultural commodity futures </nobr>
<nobr> contracts and aims to measure the </nobr>
<nobr> value of agricultural raw materials </nobr>
<nobr> consumed in the global economy. </nobr>
<nobr> The Index ’s weightings attempt </nobr>
<nobr> to balance consumption patterns </nobr>
<nobr> worldwide (in developed and </nobr>
<nobr> developing countries) and specific </nobr>
<nobr> contract liquidity. </nobr>
<nobr> The current weightings of the </nobr>
<nobr> RICI </nobr>
<nobr> ® </nobr>
<nobr> -A are listed on the following </nobr>
<nobr> page. The weightings are reviewed </nobr>
<nobr> annually and may be adjusted </nobr>
<nobr> annually or more frequently. </nobr>
<nobr> * A futures contract is exchange traded </nobr>
<nobr> and is an agreement to buy or sell a </nobr>
<nobr> particular commodity at pre-determined </nobr>
<nobr> price at a specified time in the future. </nobr>
<nobr> 7 </nobr>
<nobr> RICI </nobr>
<nobr> ® </nobr>
<nobr> -A Components and Weightings </nobr>
<nobr> Commodity </nobr>
<nobr> Weighting in </nobr>
<nobr> Agriculture Sub- Index </nobr>
<nobr> Overall Weighting in </nobr>
<nobr> Rogers International </nobr>
<nobr> Commodity Index </nobr>
<nobr> ® </nobr>
<nobr> Wheat </nobr>
<nobr> 20.06% </nobr>
<nobr> 7.00% </nobr>
<nobr> Corn </nobr>
<nobr> 13.61% </nobr>
<nobr> 4.75% </nobr>
<nobr> Cotton </nobr>
<nobr> 11.60% </nobr>
<nobr> 4.05% </nobr>
<nobr> Soybeans </nobr>
<nobr> 8.60% </nobr>
<nobr> 3.00% </nobr>
<nobr> Coffee </nobr>
<nobr> 5.73% </nobr>
<nobr> 2.00% </nobr>
<nobr> Live Cattle </nobr>
<nobr> 5.73% </nobr>
<nobr> 2.00% </nobr>
<nobr> Soybean Oil </nobr>
<nobr> 5.73% </nobr>
<nobr> 2.00% </nobr>
<nobr> Sugar </nobr>
<nobr> 5.73% </nobr>
<nobr> 2.00% </nobr>
<nobr> Cocoa </nobr>
<nobr> 2.87% </nobr>
<nobr> 1.00% </nobr>
<nobr> Lean Hogs </nobr>
<nobr> 2.87% </nobr>
<nobr> 1.00% </nobr>
<nobr> Lumber </nobr>
<nobr> 2.87% </nobr>
<nobr> 1.00% </nobr>
<nobr> Rubber </nobr>
<nobr> 2.87% </nobr>
<nobr> 1.00% </nobr>
<nobr> Soybean Meal </nobr>
<nobr> 2.15% </nobr>
<nobr> 0.75% </nobr>
<nobr> Canola </nobr>
<nobr> 1.92% </nobr>
<nobr> 0.67% </nobr>
<nobr> Orange Juice </nobr>
<nobr> 1.89% </nobr>
<nobr> 0.66% </nobr>
<nobr> Azuki Beans </nobr>
<nobr> 1.43% </nobr>
<nobr> 0.50% </nobr>
<nobr> Oats </nobr>
<nobr> 1.43% </nobr>
<nobr> 0.50% </nobr>
<nobr> Rice </nobr>
<nobr> 1.43% </nobr>
<nobr> 0.50% </nobr>
<nobr> Barley </nobr>
<nobr> 0.77% </nobr>
<nobr> 0.27% </nobr>
<nobr> Greasy Wool </nobr>
<nobr> 0.72% </nobr>
<nobr> 0.25% </nobr>
<nobr> Totals </nobr>
<nobr> 100.00% </nobr>
<nobr> 34.





</nobr>


RJA:  This call was made on 06/26/08 @ $12.33
Rating:   Positive   $12.33 (06/26/08)
Gain/Loss:   -38.44% in 195 days
Target:   in > one year
Allocation:   14.0% of portfolio


Comments (1)

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Corwin Amber   74%     1 point   commented 193 days ago reply

Nice analysis, thanks, I am with you, unfortunately for most people (except those investing in ag) all factors are pointed toward higher ag in $ terms for long term, dropping $, increased oil, farm production going down for a variety of factors (insane dictators in Zimbabwe, bad weather) though it doesn't make sense.
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Thomas George   21%     1 point   commented 193 days ago reply

You are welcome.Bad news indeed.Commodity bull markets are never pleasant.As this article shows corn,wheat and soyabean are very much below their inflation adjusted highs.

http://www.zealllc.com/2008/grains.htm
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Thomas George   21%     1 point   commented 193 days ago reply

On top of a fundamental bull market in commodities,we have central bankers creating monetary inflation.This is going to be really painful.

http://www.zealllc.com/2008/moninf.htm

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