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Extreme Weather and The Financial Markets: Opportunities in Commodities and Futures

ISBN: 978-1-118-14721-4
210 pages
January 2012
Extreme Weather and The Financial Markets: Opportunities in Commodities and Futures (1118147219) cover image
The positive effects of climate change on the market

Record-setting snowfall, cyclones in Australia, chronic drought in Russia, and other dramatic weather events are getting increased attention from scientists and the general public. The effects of climate change present challenges to many sectors, but also present major investing opportunities in the stock, bond, and futures markets. Extreme Weather and The Financial Markets looks at climate change from an investor's standpoint. The climate change debate is somewhat irrelevant to those in the financial industry, since we already live with more than enough extreme climate events to impact the financial markets.

  • To the extent that environmental scientists are correct and global climate change is real and getting worse, the more investment opportunities we have
  • The book presents investment ideas that will work under today's global climate condition and will become even more lucrative if global climate change continues
  • Written by Larry Oxley, an acclaimed author who has personally outperformed the index in the Basic Materials sectors (i.e. chemicals, metals, mining, and forest products) for each of the last five years—in both good and bad markets and throughout the global recession—in a portfolio of nearly $2 billion

Focusing on the investment opportunities during dramatic weather events, Extreme Weather and The Financial Markets offers advice on how to capitalize on global climate change.

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Preface xi

Acknowledgments xiii

CHAPTER 1 Commodities and Their Current Stories 1

Jackpot Commodities 5

Neutral Commodities 26

Big Problem Commodities 37

Other Limited Opportunity Commodities 40

CHAPTER 2 Where to Invest: Stocks, Bonds, or Futures? 41

CHAPTER 3 Global Climate Shock Number One: Excess Snow and Ice 51

Salt 51

Snow Blowers 53

CHAPTER 4 Global Climate Shock Number Two: Flooding Mines 55

Metallurgical ("Met") Coal 56

Iron Ore 59

Copper 62

Silver 64

Aluminum 66

Nickel 68

Platinum 71

Palladium 75

Rare Earth Elements 78

Potash 80

Mining Equipment Makers 82

CHAPTER 5 Global Climate Shock Number Three: Farmland Droughts, Floods, and Frost 87

Sugar 88

Coffee 89

Cotton 90

Cocoa 91

Corn 92

Soybeans 93

Wheat 93

Oranges 94

Tying Together All of the Agricultural Commodities 95

Fertilizers 103

Seeds and Agricultural Chemicals 105

Farmland Equipment Makers 108

CHAPTER 6 Global Climate Shock Number Four: Hurricanes and Tornadoes 111

Independent Natural Gas Producers 111

Oil 117

Remaining Stocks to Benefit in Widespread Hurricanes 119

CHAPTER 7 Global Climate Shock Number Five: Drought-Induced Timberland Fires 123

CHAPTER 8 Real-Life Examples: Execution, Results, and Timing 125

Hurricane Katrina Example 125

Floods in Eastern Australia Example 128

Russian Drought Example 130

Blizzards in Northeastern United States Example 132

Cocoa Bean Supply Shock in Early 2011 133

A Word on Corn 135

The Rules of Extreme Weather–Based Investing 136

CHAPTER 9 Playing Both Sides of the Coin 145

Met Coal Example 147

Iron Ore Example 148

Copper Example 149

Farmland Droughts/Floods Example 149

Additional Pair Trades 150

CHAPTER 10 Basic Principles of Commodity Investing 155

Basic Supply and Demand 156

Understanding the Mathematics of Stock Prices and Cycles 157

Secular Rotation 160

Fundamental Rules to Live by with Commodity Investing 160

CHAPTER 11 Opportunities in the Bond Market 165

Opportunities in the Municipal Bond Market 178

CHAPTER 12 Opportunities in the Foreign Currency Exchange Market 181

Canadian Dollar 183

Australian Dollar 186

Other Commodity Currencies 187

CHAPTER 13 Basic Principles of Futures Market Investing 191

Exchange-Traded Funds 197

Final Thoughts 199

About the Author 201

Index 203

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Lawrence J. Oxley, an acclaimed author, initially received his degree in materials engineering in 1991 from the College of Engineering at Rutgers University and later received an MBA from Penn State University in 2000 focusing on finance. In 2004, he became a CFA charter holder. He currently holds the position of Director, Global Research, at the MetLife Insurance Company, with a focus on the basic materials sectors (i.e., chemicals, metals, mining, and forest products).
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October 26, 2012
Extreme Weather and the Financial Markets: Opportunties in Commodities and Futures

Record-setting snowfall, cyclones in Australia, chronic drought in Russia, and other dramatic weather events are getting front page attention around the world, while politicians and scientists bicker over the causes and effects. But what about the impact of extreme weather on investing opportunities? Extreme Weather and Financial Markets presents a fascinating look at the ways in which opportunities in the stock, bond, and futures markets are changing with the weather.

Extreme weather has had—and will continue to have—a deep and lasting impact on a wide range of industries, regardless of whether it gets worse or the seemingly freak events of the last few years become the new norm. Looking at these conditions in detail, the book shows which investment opportunities will be the winners and losers of extreme weather events. Addressing specific global climate shocks—excess snow and ice; flooding mines; farmland droughts, floods, and frost; hurricanes and tornados; and timberland fires—this book presents a compelling, easy-to-understand overview of investment opportunities affected by dramatic weather.

Extreme Weather and Financial Markets outlines three fundamental tools essential for becoming a savvy extreme weather-based investor—a discussion of the financial markets and investment opportunities available, 17 key rules for extreme weather-based investing, and detailed action plan tables that provide information on practically every commodity in every location during any extreme weather event. In addition, a handy index that lets you quickly locate exactly the action plan you need in any given circumstance makes this book essential reading for any investor who wants to understand the real "financial climate."

With its wide-reaching geographic and geologic coverage, this remarkable volume offers a novel new resource for investors. As devastating as climate change has shown itself to be, its potential for new investing opportunities must not be underestimated. Unbiased in its coverage, the book doesn't seek to provide an explanation for climate change, just an understanding that to the extent the global climate condition worsens, the more lucrative certain investment opportunities will become.

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