Daily Investment Tips

There is a strong case for a higher corn prices in 2011. Heavy rain and flooding across the US will affect this years crop. Cargill, the world’s largest agricultural commodities trader, estimates that about 2.5m acres of corn have been lost. A decline in production can only mean more upward pressure on corn prices. Source FT Commodities News.

Even before the US flood corn prices were under upward pressure from the following factors.

1. Surging demand from emerging markets,
2. Rising consumption of the grain by the ethanol industry.
3. Rising global population in key consuming nations in Africa and Asia
4. droughts in other key producing regions.

written by Constantine Njeru \\ tags: 5m, Acres Of Corn, Africa, Agricultural Commodities, Asia, Cargill, Commodities News, Commodities Trader, Consumption, Corn Price, Corn Prices, Decline, Droughts, Emerging Markets, Estimates, Ethanol Industry, Flood, Global Population, Heavy Rain, Upward Pressure

In a speech given in New Delhi March 25, 2011, the chairman of Berkshire Hathaway, Warren Buffet predicted the decline of the U.S. dollar.

The billionaire investor warned investors to avoid “long-term fixed-dollar investments” such as 10-year U.S. Treasury bonds. Buffett worries that the $2.3 trillion in new money the US government has pumped into the economy, when combined with interest rates so low they’re practically giving money away, are combining to dilute the value of the dollar.

U.S Dollar Projection: Forecast : Prediction

As a result, Buffett warns: “If you ask me if the U.S. Dollar is going to hold its purchasing power fully at the level of 2011, 5 years, 10 years or 20 years from now, I would tell you it will not.”

written by Constantine Njeru \\ tags: 10 Years, Berkshire Hathaway, Billionaire, Buffett, Decline, Dollar Investments, Economy, Giving Money, Interest Rates, Investor, Investors, March 25, New Delhi, New Money, Purchasing Power, Trillion, U S Treasury, U S Treasury Bonds, Us Government, Warren Buffet

I was reading the latest quarterly report from Berkshire Hathaway, they just reported 40% profit decline for quarter ending June 2010.

The business remains solid but the company profits seem to be dragged down by its derivative contracts that the company signed in 2007.

The contracts are tied to equity indices. When the US stock market rises Berkshire gains but when the the stock indices slide down Berkshire looses.

In the last quarter the paper losses from this derivative contract was $1.5 billion.

In 2009 second-quarter the stock market soared & Berkshire recorded a mostly unrealized $1.5 billion gain on its derivatives in last year’s second quarter.

Warren Buffet himself correctly predicted the value of those derivatives would vary widely quarter to quarter.

How big a risk are this derivative contracts? Warren Buffet himself once referred to them as weapons of mass destruction.  Only time will tell.

For a better understanding of this derivative contract read this article Berkshire misunderstood derivatives.

written by Constantine Njeru \\ tags: Amp, Berkshire Hathaway, Company Profits, Decline, Derivative Contracts, Derivatives, Investing, Last Quarter, Paper Losses, Quarterly Report, Risk, Second Quarter, Slide Down, Stock Indices, Us Stock Market, Weapons Of Mass Destruction