Commodities For Dummies

Introduction     1About This Book     1Conventions Used in This Book     3Foolish Assumptions     3How This Book Is Organized     4Commodities: Just the Facts     4Getting Started     5The Power House: How to Make Money in Energy     5Pedal to the Metal: Investing in Metals     5Going Down to the Farm: Trading Agricultural Products     5The Part of Tens     6The Appendix     6Icons Used in This Book     6Where to Go from Here     7Commodities: Just the Facts     9Investors, Start Your Engines! An Overview of Commodities     11First Things First     12Going for a Spin: Choosing the Right Investment Vehicle     14The futures markets     14The equity markets     16Managed funds     18Physical attractiveness     18Checking Out What's on the Menu     19Energy     19Metals     20Agricultural products     21Benefiting from Commodities Creatively     23Earn, Baby, Earn! Why You Should Invest in Commodities     25You Can't Argue with Success     26The 21st Century Is the Century of Commodities     28Ka-boom! Capitalizing on the global population explosion     29Brick by brick: Profiting from urbanization     30Full steam ahead! Benefiting from industrialization     32It's All about Me! Why Commodities Are Unique     34Inelasticity     34Is it safe in here? Commodities as a safe haven     36Hedge-hogging galore! Commodities as a hedge against inflation     36Could you hurry up, please! Bringing new sources online takes time     38Sell in May and go away? Definitely nay!     38Time to Get Down to Business: Commodities and the Business Cycle     39Is Investing in Commodities Only for the Brave?     41Biting Off More Than You Can Chew: The Pitfalls of Using Leverage     42Watch Your Step: Understanding the Real Risks behind Commodities     43Geopolitical risk     43Speculative risk     44Corporate governance risk     45Managing Risk     45Due diligence: Just do it     45Diversify, diversify, diversify     49Get Ready to Rumble! Commodity Bulls vs. Bears     51Seeing Both the Forest and the Trees     52Ride the Wave? Kondratieff and the Super Cycle Theory     58Keeping It Simple: Looking at the Laws of Supply and Demand     58Feel the Love: Welcoming Commodities into Your Portfolio     61The Color of Money: Taking Control of Your Financial Life     62Looking Ahead: Creating a Financial Road Map     63Figuring out your net worth     64Identifying your tax bracket     66Are you hungry? Determining your risk appetite     68Making Room in Your Portfolio for Commodities     69Fully Exposed: The Top Ways to Get Exposure to Commodities     70Looking towards the future with commodity futures     70Funding your account with commodity funds     73You're in good company: Investing in commodity companies     74Getting Started     77Show Me the Money! Choosing the Right Manager     79Mutually Beneficial: Investing in Commodity Mutual Funds     79Riddle me this, riddle me that: Asking the right questions     80Taking a look at what's out there     83Examining Exchange Traded Funds     84Mastering MLPs     85The ABCs of MLPs     86Cash flow is king     89The nuts and bolts of MLP investing     91Heads Up! Risk and MLPs     92Relying on a Commodity Trading Advisor     93Jumping into a Commodity Pool     95Track and Trade: Investing through Commodity Indexes     97Checking Out Commodity Indexes     98What's the use of an index?     98So how do I make money using an index?     99From Head to Toes: Anatomy of a Commodity Index     99Cataloguing the Indexes     101Goldman Sachs Commodity Index     101Reuters/Jefferies Commodity Research Bureau Index     104Dow Jones-AIG Commodity Index     106Rogers International Commodities Index     108Deutsche Bank Liquid Commodity Index     111Which Index Should You Use?     113Understanding How Commodities Exchanges Work     115Why Do We Have Commodities Exchanges, Anyway?     116Identifying the Major Commodity Exchanges     117Ready, Set, Invest: Opening an Account and Placing Orders     120Choosing the right account     121Placing orders     123Tracking your order from start to finish     126Owning a Piece of an Exchange     129Back to the Future: Getting a Grip on Futures and Options     133The Future Looks Bright: How to Trade Futures Contracts     134The competition: Who trades futures?     136Contract specs: Keeping track of all the moving pieces     138For a Few Dollars Less: Trading Futures on Margin     142Taking a Pulse: Figuring Out Where the Futures Market Is Heading     143Contango: It takes two to tango     143Backwardation: One step forward, two steps back     144Keeping Your Options Open: Trading with Options     145Cutting to the chase: Options in action!     146Trader talk     147Options have character     148Technically Speaking: Using Technical Analysis     151Looking at Charts: A Picture Is Worth More Than a Thousand Words     152Line it up: Checking out line charts     153Going for bar charts     153Lighting up the chart with candlesticks     155Identifying Patterns: The Trend Is Your Friend     156Identifying support and resistance     156Trend lines: Ride the trend till the end     159Pump Up the Volume!     160Moving Averages: Anything But Average      162Keeping it simple with the SMA     162Taking it up a notch with the EMA     162It's All Relative: Using the RSI     164Breaking into Bollinger Bands     165The Power House: How to Make Money in Energy     167It's a Crude, Crude World! Investing in Crude Oil     169Crude Realities     170No need for a reservation: Examining global reserve estimates     171Staying busy and productive: Looking at production figures     173It can be demanding: Checking out demand figures     174Going in and out: Eyeing imports and exports     176Going Up the Crude Chain     178You want that light and sweet or heavy and sour?     179Make Big Bucks with Big Oil     182Oil companies: Lubricated and firing on all cylinders     182Get your passport ready: Investing overseas     185Welcome to Gas Vegas, Baby! Trading Natural Gas     189What's the Use? Looking at Natural Gas Applications     190Calling all captains of industry: Industrial uses of natural gas     192If you can't stand the heat, get out of the kitchen! Natural gas in your home     193Going commercial: Natural gas's commercial uses      194Truly electrifying! Generating electricity with natural gas     195Getting from here to there: Natural gas and transportation     196Liquefied Natural Gas: Getting Liquid without Getting Wet     196Investing in Natural Gas     197Natural selection: Trading Nat Gas futures     199Nat Gas companies: The natural choice     200Fuel for Thought: Looking at Alternative Energy Sources     201Out with the Old and in with the New?     201King Coal: Not as Scary as You Think     203Coal hard facts     203Paint it black     206It's a coal investment     207Investing in Nuclear Power: Going Nuclear without Going Ballistic     208You've Been Zapped! Trading Electricity     210Current affairs     210Power plays     211Always Brand Spanking New! Renewable Energy Sources     213Sunny delight: Solar energy     214Fast and furious: Wind energy     214Totally Energized: Investing in Energy Companies     217Bulls Eye! Profiting from Oil Exploration and Production     217Going offshore     218Staying on dry land     221Servicing the oilfields      221Oh My, You're So Refined! Investing in Refineries     223How to Become an Oil Shipping Magnate     226Swimming in oil: Transportation supply and demand     226Ships ahoy!     228Masters of the sea: Petroleum shipping companies     229Swimming with sharks: Avoiding industry risk     231Pedal to the Metal: Investing in Metals     233Getting the Glitters: Investing in Gold, Silver, and Platinum     235Going for the Gold     235The gold standard     236Good as gold     240Get the Tableware Ready: Investing in Silver     244Checking out the big picture on the silver screen     244A sliver of silver in your portfolio     246Bling Bling: Investing in Platinum     248Platinum facts and figures     249Going platinum     249Metals That Prove Their Mettle: Steel, Aluminum, and Copper     253Building a Portfolio That's As Strong As Steel     254Steely facts     254Investing in steel companies     255Aluminum: Everything Is Illuminated     257Just the aluminum facts     257Aluminum futures      258Aluminum companies     260A Visit to Dr. Copper     260Quick copper facts     260Copper futures contracts     262Copper companies     263Weighing Investments in Heavy and Not-So-Heavy Metals     265Palladium: Metal for the New Millennium     265Zinc and Grow Rich     269You Won't Get Nickel and Dimed by Investing in Nickel     270Mine Your Own Business: Unearthing the Top Mining Companies     273Diversified Mining Companies     274BHP Billiton     274Rio Tinto     275Anglo-American     276Specialized Mining Companies     278Newmont Mining-Gold     278Silver Wheaton-Silver     278Phelps Dodge-Copper     279Alcoa-Aluminum     280Arcelor-Mittal-Steel     281Going Down to the farm: Trading Agricultural Products     283Breakfast of Champions: Profiting from Coffee, Cocoa, Sugar, and Orange Juice     285Give Your Portfolio a Buzz by Investing in Coffee     285Coffee: It's time for your big break     286Brewing the right investment strategy     287Warming Up to Cocoa      289Invest in Sugar: It's Such a Sweet Move!     291Orange Juice: Refreshingly Good for Your Bottom Line     293How to Gain from Grains: Trading Corn, Wheat, and Soybeans     297Field of Dreams: How to Invest in Corn     298Welcome to the Bread Basket: Investing in Wheat     300Trading Soybeans: It's Not Just Peanuts     302Soybeans     303Soybean oil     304Soybean meal     305Alive and Kicking! How to Make Money Trading Livestock     307Holy Cow! How to Invest in Cattle     308Live cattle     309Feeder cattle     310Lean and Mean: Checking Out Lean Hogs     311You Want Bacon with That? How to Trade Frozen Pork Bellies     312The Part of Tens     315Top Ten Ways to Invest in Commodities     317Futures Commission Merchant     317Commodity Trading Advisor     318Commodity Pool Operator     318Integrated Commodity Companies     318Specialized Commodity Companies     318Master Limited Partnerships     319Exchange Traded Funds     319Commodity Mutual Funds     319Commodity Indexes     320Emerging Market Funds     320Top Ten Market Indicators You Should Monitor     321Consumer Price Index     321EIA Inventory Reports     322Federal Funds Rate     322Gross Domestic Product     322London Gold Fix     323Non-farm Payrolls     323Purchasing Managers Index     324Reuters/Jefferies CRB Index     324US Dollar     324WTI Crude Oil     324Ten or So Resources You Can't Do Without     327The Wall Street Journal     327Bloomberg     328Commodities-Investor.com     328Nightly Business Report     328Morningstar     329Yahoo! Finance     329Commodity Futures Trading Commission     329The Energy Information Administration     329Stocks and Commodities Magazine     330Oil & Gas Journal     330National Futures Association     330The Appendix     331Glossary of Technical Terms     333Index     343