Twofer Tuesday

First up is an article from Barron's with some good information about the sugar market and a peculiar trade recommendation. Jimmy Rogers seems partial to sugar, along with cotton, in every interview he says the fundamentals are improving but never seems to mention what the fundies are. The Barron's article touches on this.

Brazil is the biggest sugar grower in the world but they've had too much rain and India has been too dry both of which help build a foundation for higher prices per the article. Generally demand seems likely to increase. Along with improved diets in emerging countries people will be eating dessert.

Sugar is one of the four components of the PowerShares Agriculture Fund (DBA), a client holding, and there is also the iPath Sugar ETN (SGG) for anyone inclined to buy the commodity in a brokerage account. There are also quite a few sugar stocks around the world as well. The article mentions Imperial Sugar (IPSU) which I've never heard of that is trying to get back on track after an explosion at its Georgia plant.

The trade recommendation seems so odd that I'm just going to paste it in so I don't misquote it;

Consider selling January $12.50 puts that were recently bid at $1.30. Normally, we like to limit aggressive, speculative options sales in thinly traded issues to narrow time frames that rarely exceed three months. But we like to sell options with premiums of $1 or greater. To satisfy the premium threshold requires selling January options.

The article in question is the daily Striking Price column so the author knows more than I do options but the idea of selling options to get a $1 premium seems like an odd way to come at it. If you need $1 then why not just look at options on $100 stocks?

Assuming I am missing something this is an example where the information about, in this case, the sugar market is useful (there are weird things happening in India with sugar all the time) but the suggested trade has no value for me. The point is that there are a lot of articles with useful info but that draw a useless (for you) conclusion. Reading it is still worthwhile.

The image comes from Barry Ritholtz and shows the busiest 25 sea ports in the world. You can click on it to make it bigger. The list is obviously dominated by various ports in Asia. I've written about ports and companies related to the shipping business a couple of times over the years. Things like port companies, container companies and the like are of interest (perhaps just intellectually) because they should capture what is happening on the ground in these places.

The starting point of the thesis is that the the more economic activity going on, the more traffic being handled which means more revenue. The downside is that the companies can be very capital intensive and so have a lot of debt. Textainer (TGH) "engage(s) in the purchase, management, leasing, and resale of a fleet of marine cargo containers worldwide." That means a lot of buying, selling and borrowing. The company has been profitable, pays an enormous dividend but has been wildly volatile, peak to trough it dropped 77% and has about tripled off of its low.

Port of Tauranga (PTAUF) dropped a less aggressive 28% and has come almost all the way back. It has a smaller debt load than TGH and pays a pretty good dividend as well. Unfortunately, as a New Zealand stock, it is probably difficult to trade. I say unfortunately from the stand point of it not being a viable choice, don't read that as I would buy it if it were easier to trade.

As time goes on and I continue to look at these types of stocks it seems that they correlate closely to stock markets and economic cycles. When I first stumbled across the space I had hoped they could somehow have a low correlation which now seems obviously wrong but that is exactly why I talk about watching these things for a long time, a couple of years in some cases, in order to learn about them.