The Science of Global Warming
I'd like to claim one thing before I start this post: I am an environmentalist and consistently do my part to spare the planet from our own destruction. It saddens me to see video clips of giant glaciers melting away into the ocean, or tsunamis sweeping away entire coastal Japanese villages. I cycle to work every day. I eat vegetarian. I am appalled at Brazil for clearing away so much rainforest to raise cattle. Plastic cutlery and paper cups are evil.
Not everyone can live this way, and hardly anyone is consciously willing to sacrifice economic prosperity for the sake of avoiding radical global climate change. Yes, global warming is pretty much here to stay, so as long as we're forced to live with it we may as well seek out opportunities to profit from it in our portfolios.
One of the industries that global warming can wreak disaster on is Agriculture. The production of many agricultural products are sensitive to the weather, and the more extreme climate conditions can cause conditions from drought to flooding to hail storms.
In the past year alone, the Russian wheat harvest was impacted by searing heat, Australia's fruit and vegetable crops were pummeled by torrential rain, and hail ruined a large crop of South American coffee beans. All of this means lower supply and higher prices for these agri products.
There are other factors involved as well, such as the weakening US Dollar which many of these products trade in. Inflationary pressures also have an impact as cheap credit abounds and populations world wide continue to grow, but it's the weather that produces the heaviest price swings more than any other factor.
The PowerShares DB Agriculture Fund is an ETF which is designed to track the performance of a basket of some of the most highly traded commodities, including Corn, Soybeans, Sugar, Live Cattle, and Cocoa.
The ETF has been on a downtrend as of late after peaking in early 2011. Let's add 50 shares of this into our virtual portfolio now, and an additional 50 in the next few weeks to see if we can get it for an even lower price. NOTE: This is how we scale in' to a position and somewhat protects us from draw downs while dollar-cost-averaging the price. This strategy worked well on that Gold purchase the price of the ETF went down after buying the first 50 shares. I'm still waiting for it to stop going down before buying another 50.