Newsletters: May 2010
The Dow Jones dropped nine per cent in the last two hours of trading on Thursday May 6th - stop losses triggered across the board, investors forced out nursing hefty losses. The same market bounced back nearly four per cent the following Monday. Welcome to the Magical Mystery Tour.
Back to black Thursday for a moment, a suspected trading glitch and fears of a new credit crunch in Europe threw markets into disarray. Some shares briefly fell to nearly zero with erroneous trades sending the system into total meltdown (the trades were later cancelled by the NasdaQ).
The Dow suffered its biggest ever intraday point drop -- 998.5 points "We did not know what a stock was worth today, and that is a serious problem," said Joe Saluzzi of Themis Trading.
Indices recovered some of their losses but by the end of the week, stocks wiped out much of their gains for the year. The financial sector index was the worst hit, tumbling 4.1 percent.
Investors had been on edge throughout the trading day after the European Central Bank didn't discuss the outright purchase of European sovereign debt as they had hoped. Instead the ECB gave verbal support to Greece's savings plan instead, disappointing the market.
Yesterday, after watching Bloomberg and listening to a studio full of economists all saying different things about how the investment world is shaping up, it dawned on me that it is all becoming something of a lottery. Where to put your hard earned cash is proving hard to fathom. Are there any safe havens about? Listening to the experts, there seems to be no clear road ahead.
Areas under discussion by the panel:
Gold? Possibly. Having just topped $1,200 an ounce, approaching a record, the expert panel had some reservations. There is a pervasive fear in stock markets now, so they concluded that movement into gold could be expected.
Commodities? Overvalued now apparently. After being the darling of investors for years they have now fallen out of fashion.
Stocks - after a great run they have hit the buffers lately as we have seen. A unanimous "steer clear" from the panel on this one.
The Euro - On the brink, volatile, worrying. A euro dominated portfolio needs extreme vigilance.
To put some perspective into the euros decline over the last 18 months from our viewpoint at Greenwood Management - At the beginning of last year one Brazilian Real cost around €O.30. Now one Real costs about €O.43 - about a 40 per cent drop in the euro/real rate.
Despite the apparent strength of the Brazilian currency over the last year or so, there still remains a very bullish outlook on the Brazilian currency.
"International investors are becoming the most bullish on Brazil's Real in almost two years".
The market is said to be a snapshot of sentiment. If that's the case then sentiment is clearly flagging for Europe in comparison with other parts of the world, notably Brazil. Economists squabble over whether the economic growth in Brazil will touch 4, 5 or 6 per cent.
Despite churning equity markets and currencies, charcoal prices have stubbornly stayed in a fixed up trend all year. If "the trend is your friend" as the market saying goes, then long may it continue.
In our financial projections for the eucalyptus/charcoal projects in Brazil, Greenwood Management set a base rate forecast for 2010 at 86 Brazilian Real. Despite numerous enquiries, we will not be upgrading our forecasts for the year. We like to stay on the conservative side at all times. Rumours abound of further price strength the system, but we don't want to get ahead of ourselves.
Why the price hikes? Supply and demand provide the standard explanations. Too many people chasing too little charcoal.
Will it continue? Nothing goes up in straight line, and the rises of 5, 10, 15 per cent a month we have been witnessing are unlikely to be sustainable. Nevertheless, in the long term, and against a background of financial chaos in Europe and the States, combined with a severely weakening euro and a strengthening Brazilian Real, the case for our investment model gets stronger by the day.
Naturally we will keep you informed of events as they develop and we keep updating the gwm-tv site with the most recent charcoal prices in the region.
You might be forgiven for thinking that was enough good news for a humble newsletter, but there's just a little more.
The 2010 ABRAF "statistical yearbook" http://www.abraflor.org.br/estatisticas.asp is highly respected within the forestry investment world and provides very detailed analysis of Brazilian forestry markets. The document is split into 5 separate chapters, with analysis of forestry species in commercial forestry plantations across Brazil.
Particularly interesting was one small paragraph in chapter 2, which unearths a fact that is very relevant to our projects in Minas Geris, Brazil.
Quoting from the report:
"It is noteworthy to mention that a new investment of iron and steel industry in Minas Geris is under way, resulting from a partnership of multinational corporations, to build manufacturing plant of seamless tubes, based exclusively on charcoal consumption from planted forests, with production to be started in 2016."
In the short term we already have a rising, strengthening market in charcoal as reported, but the ABRAF report now confirms, the medium term charcoal demand (the focus of our projects) will be driven by multinational iron and steel producers in our own back yard.
Greenwood Management are delighted to have appointed two further Agency Representatives, contact details are listed below:
Dipli.Volkswirt. Wolgang Koehler
Telephone: 0049 (0)33397/21296
Mr Chris Vadevoulis
Telephone: 0030 2431 022200