The most interesting part of the producer price index in my opinion is in the Crude Materials category. The crude materials category includes many raw materials that companies use to make finished goods (eg. wastepaper, iron ore, cotton) The crude materials category has several groupings that are up year over year in excess of 50%, which tells me that corporate profits for companies that rely heavily on raw materials to generate finished goods could be squeezed for profits. An example would be wastepaper; wastepaper is up 98.4% over the course of one year, and with the earthquake in Chile and China's economy picking up I would venture to guess wastepaper prices go up even more. Trade: Short Kimberly Clark (KMB) @ $60.93 (Stop Loss:$64 & Take Profit: $56)
The next interesting grouping was the cane sugar, which is up 35.6% year over year. With companies finally figuring the adverse health benefits of high fructose corn syrup I think the demand for sugar will continue to pick up, thus driving the prices higher. Most likely the cost difference between sugar and high fructose corn syrup will be passed on to the consumer so my trade will come via a long position in a company that profits from high sugar prices. Trade: Long Imperial Sugar (IPSU) @ $15.20 (Stop Loss: $14 & Take Profit: $20)
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment