The November trade gap from the prior month was originally reported as $47.75 billion., but that was revised lower to $47.06 billion. 

The full preliminary figure for the trade deficit in 2011 is up 11.6% from 2010 at a level of $558.02 billion.  That is the highest level since 2008.  The deficit with China also hit a new record with an 8% gain to $295.46 billion.

JON C. OGG

Effectively, the CME is lowering the cost to trade crude oil, gold, silver, copper, and a few other commodities. So far this has had no impact on prices of the SPDR Gold Trust (NYSE: GLD), United States Oil Fund (NYSE: USO), iShares Silver Trust (NYSE: SLV), nor in the iPath DJ-UBS Copper TR Sub-Index ETN (NYSE: JJC).

In the past, margin costs were raised on traders as an effort to curb runaway trading to the upside by making it more expensive for traders and speculators to trade energy and metals.  In short, driving up the cost of poker creates fewer gamblers. So what happens when they make it cheaper to trade?

The full details are here.

JON C. OGG

Demand for coal, both the thermal variety used for generating electricity and the metallurgical coal used in steel making, declined in 2011 as coal-fired plants have been shut down in favor of gas-fired plants and demand for steel has dropped.

In the US, gas-fired plants account for about 39% of total generation capacity, but these plants have traditionally been used to meet demand spikes because natural gas was more expensive than coal. With gas prices so low (about $2.49/thousand cubic feet today), coal miners have to lower prices or reduce production or both.

A quick look at coal mining companies’ valuations is enlightening.

Alpha’s share price at around noon today is $23.19 in a 52-week range of $15.49-$61.66. The consensus target price on the stock is $29.50, for a potential upside of 27%.

Patriot’s share price is $9.19 in a 52-week range of $6.92-$27.56. The consensus price target on the stock is $11.50, for a potential upside of 25%.

Peabody’s share price is $38.38 in a 52-week range of $30.60-$73.95. The consensus price target for the stock is $49, for a potential gain of about 28%.

Consol’s share price today is $37.34 in a 52-week range of $30.56-$56.32. The consensus price target is $50, for a potential upside of 34%.

Arch Coal’s share price is $15.39 in a 52-week range of $13.09-$36.99. The consensus price target is $22, for a potential upside of about 43%.

Market Vectors Coal ETF (NYSE: KOL) is down 0.4% at $37.17 and is 52-week trading range is $27.42 to $51.87.

Share price highs for all the coal miners is down by -24% to -64%, with Consol down the least and Patriot down the most. Our pick from among these would have to be Peabody, primarily for its strength overseas. The others are either closing shafts or soon will be.

The boom in shale gas production not only weighs down natural gas prices, but will continue to weigh on coal prices. About the only thing that can help here, is lower natural gas production, and that may be starting to happen.

Paul Ausick

The Fed Funds Futures are very different today from a week ago after Ben Bernanke and his minions at the FOMC predicted that rates would be “exceptionally low through at least the end of 2014.”  Prior to that, it was a mid-2013 promise.  The reality is the FOMC has no obligation to commit to any time frame and the late-2014 was a projection rather than a commitment.  Still, this was a ‘risk-on’ signal if there ever was one.

Fed Funds Futures are now showing a 100% chance of a rate hike in December 2013.  That is the first month where the price is under 99.75 and this is the first time in quite a while that a rate hike has been this close.  What is interesting is that there is still close to an 80% chance of a rate hike by August of 2013.  Should you panic?  Absolutely not.  The rate hike would just remove the 0.00% to 0.25% range up to a formal 0.25% Fed Funds Rate.

It is still all the way out to September of 2014 now before the Fed Funds Futures are calling for a 100% chance of a 0.50% Fed Funds Rate.

Daily rates can be seen here for Fed Funds Futures from the CME.

JON C. OGG

iShares MSCI Global Agriculture Producers Fund (NYSE: VEGI) targets the front end of the production chain (fertilizers or agricultural materials) while excluding exposure from companies at the end of the production chain (packaging and marketing). This is a bit similar to but nowhere near identical to the Market Vectors Agribusiness ETF (NYSE: MOO).
 
iShares MSCI Global Energy Producers Fund (NYSE: FILL) tracks the MSCI ACWI Select Energy Producers Investable Market Index.  This is similar to the ProShares Ultra Oil & Gas (NYSE: DIG), but without the leverage.

iShares MSCI Global Select Metals & Mining Producers Fund (NYSE: PICK) aims to track the MSCI ACWI Select Metals & Mining Producers Ex Gold & Silver Investable Market Index. This one is not identical to but has overlaps with the SPDR S&P Metals & Mining ETF (NYSE: XME).

iShares MSCI Global Gold Miners Fund (NYSE: RING) aims to track the MSCI ACWI Select Gold Miners Investable Market Index.  We consider this an alternative to the Market Vectors Gold Miners ETF (NYSE: GDX).

iShares MSCI Global Silver Miners Fund (NYSE: SLVP) aims to track the MSCI ACWI Select Silver Miners Investable Market Index.  We would consider its an alternative to the Global X Silver Miners ETF (NYSE: SIL).

As far as why these are different from some other ‘production’ ETFs, iShares explains that these include only companies at, or near, the initial phase of production of the commodity. Investors can target the front end of the production chain instead of including the back-end of the production chain to focus on the aspects more sensitive to fluctuations in the underlying commodity price.  Companies further down the production cycle are impacted by a number of factors in addition to commodity prices.

An ETF for just about anything… now competing ETFs for many more strategies.

JON C. OGG

Charles Biderman noted, “The U.S., Europe, and Japan are printing enormous sums to pay their bills and in turn are devaluing their paper currencies. I doubt that’s going to change because it’s much easier for central bankers to print money than it is for politicians to cut spending.”

Biderman went on to note that gold and silver prices are going to skyrocket from retail money chasing a limited supply of the metals. On silver he noted, ““The gains in silver could be particularly strong because the silver market is much smaller than the gold market. Silver ETFs have only one-ninth the assets of gold ETFs.”

The current unemployment data from today is signaling that the Fed Funds rate hikes could come toward the end of 2013 now rather than the end of 2014, but that is one-month data.

TrimTabs goes on to note that monetary easing by the Federal Reserve and the European Central Bank has helped push up gold and silver prices much more than stock prices.  He even noted that since QE2 was announced, the gold ETF is up 41% versus the 30% gains for the SPDR S&P 500 (NYSE: SPY) gain of 30% after including dividends.

The report even noted that in the past three weeks alone there has been a $1.4 billion inflow into gold ETFs by investors while silver ETFs saw smaller inflows. 

JON C. OGG

The EIA reported that US working stocks of natural gas totaled 3.1 trillion cubic feet, about 547 billion cubic feet higher than the five-year average of 2.55 trillion cubic feet. Working gas in storage totaled 2.57 trillion cubic feet for the same period a year ago.

Natural gas prices have been rising this week following an announcement by Chesapeake Energy Corp. (NYSE: CHK) that it would cut back production. Warmer winter weather and booming production from US shale gas fields have forced gas prices down by around -50% since last June.

Paul Ausick

Silver Wheaton Corporation (NYSE: SLW) is up 6.7% at $34.07, and the 52-week trading range is $25.84 to $47.60.

Pan American Silver Corp. (NASDAQ: PAAS) is still only flat at $21.85 but it was lower before the FOMC comments today. The 52-week trading range is $19.93 to $43.06.

Goldcorp Incorporated (NYSE: GG) is up 5.2% at $46.70, and the 52-week trading range is $39.93 to $56.31.

Newmont Mining Corporation (NYSE: NEM) is up 3.4% at $59.43, and the 52-week trading range is $50.05 to $72.42.

Kinross Gold Corporation (NYSE: KGC) up over 6% at $11.23, and the 52-week trading range is $9.96 to $18.25.

Agnico-Eagle Mines Limited (NYSE: AEM) up 8% at $37.23, and the 52-week trading range is $34.36 to $76.49.

ETFs are rocking as well.  The Market Vectors Gold Miners ETF (NYSE: GDX) is up 5.3% at $54.58 against a 52-week range of $49.22 to $66.98.  Market Vectors Junior Gold Miners (NYSE: GDXJ) is up 6.5% at $28.66 against a 52-week range of $22.58 to $42.97.  The Global X Silver Miners ETF (NYSE: SIL) is up 3.9% at $23.69 and the 52-week range is $19.05 to $31.34.

The logic is simple enough… This signals extremely low interest rates and low costs of borrowing.  It also signals that investors will have to look elsewhere yet again to seek higher returns than short-term and intermediate-term Treasuries.  As this means that rates will be low in the U.S. for longer than expected, that is going to drive a weak dollar policy as long as things remain static in Europe and in other major economic zones.  That is the perfect storm for gold and silver as they are often inversely correlated to the dollar.

JON C. OGG

The firm downgraded price targets of copper, nickel, zinc, and alumina as well as part of the broader macro-market call in metals.  As far as the gold target, Morgan Stanley cut the 2012 target by about 16% to $1,845 per ounce.  On silver, the call was down almost 30% to $35.50 per ounce.

Neither are hurting any market gains, but it was interesting to see that the cut in silver was the highest, followed by gold.  The other cuts in the other metals seen in the call were to the tune of about 3 percentage points to about 13 percentage points. These markets are reacting to currencies and economic data more than economist and price target calls.  Still, these were worth a closer look.

JON C. OGG

The Mosaic Co. (NYSE: MOS) is down by about 3.6% at $53.03 on close to 4 million shares, against a 52-week range of $44.86 to $89.24.  The larger rival and former takeover target of Potash Corp. of Saskatchewan Inc. (NYSE: POT) is down by 3.8% at $42.12 versus a 52-week range of $38.42 to $63.97.

CF Industries Holdings Inc. (NYSE: CF) is down by 3.7% at $161.00 and its 52-week trading range is $115.34 to $192.70.

Intrepid Potash Inc. (NYSE: IPI) is down the least with shares down “only 2.6%” on the day at $24.07 and against a 52-week range of $20.75 to $40.22.

Using an exchange traded fund can emphasize just how bad things are and the Market Vectors Agribusiness ETF (NYSE: MOO) is down 1.2% at $49.39 versus a 52-week range of $39.86 to $57.93.

With so much corn used in food for humans, ethanol, and animal feedstocks, corn unfortunately is a key driver for the fertilizer and potash markets. 

Sadly, things brings up the question… Just how much do the potash and fertilizer markets depend upon the taxpayer-funded farm subsidies in America?  Probably more than any of us care to think.

JON C. OGG