Coal and the Commodities Bounce

By Chip Hanlon | August 21, 2008 | 12:20 PM | 3 Comments

In a move that's very closely related to its tariff hikes early this year, you may have seen that, starting yesterday, China hiked export tariffs on its coal producers and even went so far as to back that up with an oral request that its coal producers reduce their exports. Now, as then, the message is clear: China's powerful demand for raw materials continues.

Much has been made of "demand destruction" of late, and with some merit. For example, oil above $140 so radically altered peoples' habits world-wide that it seems unlikely crude will find its way back to that level and stay there anytime soon.

And while I believe most commodities will likely have a tough time making new highs in the short-term, the new trading ranges many are likely in the early stages of carving out will be at very elevated historical levels. With particularly tight supply and demand fundamentals, coal is one good that traders can focus most closely on for a short-term trade in commodities. Patriot Coal (NYSE: PCX), Joy Global (NSDQ: JOYG) and even the exchange-traded fund, (NYSE: KOL), could be interesting trades to consider.*

I'm Buying Frosted Flakes

Is there a political correctness monitor for literally every topic? Today, the Nutrition Police are out in force, up in arms that Olympic icon, Michael Phelps, would sign a deal with Kellogg's to endorse its Frosted Flakes. Get a life, people. Trust me, it's the last thing this big guy needs but I will definitely be buying a box this weekend in solidarity with the politically incorrect out there.

Olympic Volleyball Update

It wasn't easy, but the USA men's volleyball team got by Serbia in five sets to move into the semifinals with Russia. Much like the 1980 "Miracle on Ice" Olympic hockey team, whose famous upset of the Soviets came in the semi-finals before they advance to win gold vs. Finland, this is probably THE game for our American team. Should we advance, the winner of Brazil vs. Italy won't be a pushover, but the U.S. has beaten both of them recently, including a sweep of Brazil in its final match before traveling to Beijing.  The team has struggled most in the last couple of years with the Russians. Friday's game is HUGE. I wrote of my tie to this team at the end of this post.

*Disclosure: the author serves as portfolio consultant to the Delta Global Coal Portfolio, which holds PCX and JOYG.