Thursday, August 6, 2009

The Best Way to Play the Bull Market in Copper...

Investor's Daily Edge
Thursday, August 6, 2009
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Freeport-McMoRan Is Off To The Races...

By Ted Peroulakis

I've been quite bullish on Freeport-McMoRan Copper & Gold Inc. (FCX) for some time now. In fact, the stock is up over 119% since I first recommended it to Investor's Daily Edge readers on February 12th of this year.

And I'm still recommending the company as a strong buy.

Freeport-McMoRan is one of the world's biggest copper miners, with 12 producing mines in Indonesia, North America, and South America, along with exploration projects in Africa. As of December 31, 2008, consolidated recoverable proven and probable reserves totaled 102.0 billion pounds of copper. As copper prices rise, the value of the ore they have in the ground increases, resulting in a higher stock price.

Freeport-McMoRan is well positioned to capitalize on rising demand for copper. The company's copper production totaled 4.0 billion pounds last year, while gold production totaled 1.3 million ounces.

I expect a full recovery in the demand for copper and much less supply. Copper is at $2.80 per pound and it could easily go over $3 per pound in a couple of months. Production of copper can't keep up with demand, as production at existing mines is dropping and a smaller number new mines start production. Falling scrap supplies are also leading to lower copper inventories.

Copper is one of the best conductors of electricity. It doesn't corrode easily and it's bendable and strong. Copper is used in every industry and is absolutely necessary to sustain our society. It's widely used in construction, coinage, electronics and automobiles, and the price is closely tied to economic activity. Economic activity is showing signs of a recovery and copper prices will benefit.

China, the world's biggest metals user, should also help revive copper prices with a new wave of government stimulus spending, leading to steady construction and infrastructure activity. Copper demand is already picking up in China during its peak construction season. It also appears that China desires to triple its government copper reserves.

Other countries are also increasing spending on infrastructure projects like roads and bridges as well, which will boost demand for the copper used in wires and pipes.

Worldwide government stimulus spending programs spur economic growth and encourage higher copper consumption. Copper will benefit from the "reflation trade", which is playing out due to central governments attempting to stimulate the economy by increasing the money supply. This "reflation" can cause inflation and benefit copper prices, and therefore FCX.


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Freeport-McMoRan (FCX) stock looks good from a technical perspective as well. The 50-day moving average is rising (a bullish indicator). Moving Average Convergence/Divergence (MACD) and relative strength is bullish. And the stock recently broke a double-top chart formation which is very positive, see the chart below:

I recommend you own some Freeport-McMoRan stock (FCX) as a long-term core holding for your stock portfolio. Also, I have my eye on a new round of call options on Freeport-McMoRan that have the potential to produce gains of 200% or more as the stock moves higher.

My Options Power Trader takes all the guesswork out of selecting the right options contracts. I will send you all the details on the options contracts that have maximum profit potential with limited downside. There are many opportunities in these fast moving markets for options profits. Click here to find out more about the Options Power Trader.

Best Wishes,

Ted Peroulakis

[Ed. Note: Ted Peroulakis, MBA has dedicated his life to the study of finance, economics and investments.  His passion is protecting and growing people’s wealth. His expertise is in showing investors how to invest and profit in natural resources, options, bonds, currencies, futures and stocks. But his real love is trading options. He finds options plays for his subscribers that have explosive profit potential.   Ted Peroulakis suggests you look into his Options Power Trader.  Click here to learn more...

Make your voice heard -- to let us know your thoughts on this article, you can click here and leave your comments for the IDE community as well as the editors.

Market Watch

How To Buy Short-Sale Properties

By Ted Peroulakis

I received a question on my recent article titled "The Golden Age of America" and I wanted to post my response for your benefit. Here was the question:

I would love to buy a piece of America now while prices are suppressed especially income producing real estate properties in the U.S. But, specifically, exactly how do you find and pick up some great deals on bank-owned and short-sale properties.

I would love to purchase a single family home in beautiful Palm Beach Gardens, Florida for only $65,000. I just don't think the vast majority of people -- myself included -- know how to find this type of property and then close the deal.

I guess I just don't know the right people.

I'll tell you how I got a great deal on a short-sale property. My wife and I looked at many homes on until we found a few properties that were good candidates for rental properties. One of these was a nice property listed for $99,000. This home was going for $250,000 a couple of years ago.

We called the listing agent directly and inspected the property thoroughly. I suggest you work with the listing agent directly. The listing agent will work extra hard for you because they will get the maximum commission by being the agent for both the buyer and the seller.

The owner of the single family home owed the banks $200,000 for his two mortgages. We offered a low-ball offer of $55K and he accepted, because the bank was going to take the hit in the short-sale and he just wanted to get rid of the property. The whole process took five months and the banks finally accepted $65,000 for the house.

An impatient person would have asked for their deposit back after a couple of months of waiting - and that's why most short-sales don't get completed. The key to getting a fantastic deal on short-sale properties is to have plenty of patience. Short-sales take time to close and can be frustrating at times, but you could truly get the deal of the century in today's real estate market.

Best Wishes,

Ted Peroulakis

We want your feedback! Click here to leave your comments.


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The Market Minute

Summer rally on hold... Investors took some profits after another 371,000 people lost their jobs in July according to the ADP Employer Services report issued yesterday. The market is anxious to see the Labor Department's jobs report, due to be released tomorrow morning. There have been recent signs of improvement in housing and manufacturing, but investors are concerned that mounting unemployment will hinder consumer spending which makes up two-thirds of U.S. economic activity.


Pressing colleagues to replenish the "cash-for-clunkers" program, Senate Majority Leader Harry Reid warned lawmakers they might miss their August vacation takeoff plans Friday if they don't quickly pass the $2 billion measure.

"If we don't work something out on the cash for clunkers," Reid said from the Senate floor Wednesday morning, he would file motions to close debate. Under Senate procedure, that could mean votes on both Friday and Saturday, when lawmakers would otherwise be scattering for their coveted summer break.

"We all acknowledge there's a significant majority that want to move forward with this legislation," said Reid, D-Nev.

It was the senatorial version of a parents' warning to bickering children: Work it out, or the car will be turned around instantly.

There was every indication that lawmakers would extend the popular program, which offers car buyers rebates of up to $4,500 for trading in their gas-guzzlers for new, higher-mileage models.

Reid had said on Tuesday that he had the votes to pass a $2 billion extension already approved by the House, the amount President Barack Obama says is necessary to meet a surging demand that would otherwise deplete the program by Friday. He said Wednesday there are estimates that as many as 300,000 vehicles have been bought under the program.


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Analysts / Editorial Contributors
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Andrew M. Gordon
Dr. Russell McDougal D.D.S.
Steve McDonald
Ted Peroulakis

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