Direction Alerts Sunday Edition

[Direction Alerts] This Forgotten Commodity Has Made Serious Gains And there's still plenty of upside potential... Several weeks ago I introduced you to Sven Carlin, the author of our Investiv Daily newsletter. The deep-level, and deeply researched, analysis Sven includes in every issue of Investiv Daily is impressive, but something struck me this week as particularly remarkable about one of his posts so I wanted to take the opportunity to share it with you today. The article in question was published on September 1, and provides a great analysis on a commodity that I imagine many of you enjoy every morning, coffee. What’s so remarkable about this article is that coffee has gained some serious momentum since then. You can read Sven’s article [here]. His analysis then was spot on and the news this week confirmed it. [Bloomberg] reported this past Tuesday that arabica, the type of coffee bean used by Starbucks, had surged to a 20-month high amid growing global demand and export cuts by Brazil’s largest producer. Another variety of coffee, robusta, reached its highest level since October 2014 this week on export cuts from Vietnam’s bad weather. Uganda’s coffee exports have also dropped for a third year because of unfavorable weather. The recent string of bad weather has sent bean prices on a steady rise and left many wondering how much the price of their morning latte will go up. A recent report from the U.S. Department of Agriculture found that, on average, a $0.10 rise in bean prices per pound would send manufacturer prices—and prices at the register at your favorite coffee shop—up by $0.02. But coffee isn’t like gasoline. Coffee purveyors don’t adjust their prices daily on the fluctuation of the commodity, because unlike gas—which has a small profit margin for the gas station,—coffee is marked up and the fluctuations in the price of beans is already factored in. For a company like Starbucks, there’s a big margin on your $3 cup of coffee. Both Starbucks [(SBUX)] and Dunkin' Donuts [(DNKN)] raised prices on their coffee drinks this past Summer, but neither attributed their increases directly to the rise in bean prices, with Starbucks simply stating that their prices are a continual work in progress, and Dunkin’ pointing to minimum wage increases as the primary reason. However, that doesn’t mean that either company won’t raise their prices in the future precisely because of rising bean prices. The Climate Institute—an Australian nonprofit research organization—released a report in September that emphasized the threat climate change is posing on coffee farmers globally. The report states that “climate change is projected to cut the global area suitable for coffee production by as much as 50 per cent by 2050.” The coffee leaders of the world, including Starbucks, are already publicly acknowledging the risks to the world’s coffee supply posed by climate change, and recognize that the supply shortages will not only impact the flavor and aroma of your favorite blend, but will also send prices rising. And while strategies are being developed to help coffee farmers adapt to changing weather and to help preserve the diversity of the world’s coffee beans, the reality is that temperatures will continue to rise and coffee prices at your favorite shops will rise right along with them. This is all alarming news for anyone who can’t imagine how they’d manage to wake up in the morning without their favorite cup of joe, but let’s put that anxiety aside and talk about how you can capitalize on the situation as an investor. Reading about the surging prices of bean deliveries may send some investors running to the futures market. But for a somewhat less aggressive approach, I like the iPath Bloomberg Coffee Subindex Total Return ETN [(JO)], which has gained 10% since Sven’s article was published on September 1. That’s 10% in just under 2 months. An ETN is a lot like an ETF in that it tracks an underlying asset—in our case, coffee—has a lower expense ratio than actively managed funds, and is traded on the major exchanges, just like a stock. But while an ETF is more stock-like, an ETN is more like a bond. For more information on ETNs, [Investopedia] has a great article on them. Investors may also want to look at the big coffee companies, two of which we’ve already discussed, Starbucks and Dunkin’ Donuts. But while these companies are experiencing greater demand globally, they’re also facing rising goods prices and an uncertain future for coffee bean supply and aren’t the best bet right now, so if you’re seriously thinking about investing in coffee, take a look at [JO]. As for Sven, he writes regularly about specific sectors and how to best take advantage of them just as he did with coffee. He also writes about emerging markets, investing strategies, and macro trends. If you’re interested in receiving Sven’s articles direct to your inbox, Investiv Daily is totally free to join and you can add your email address to the list [here]. I hope you and yours have a ghoulish Halloween, and remember to savor that next cup of coffee just a little bit more. Trade Smart, Kristina Keene Marketing Director, Investiv The Direction Alerts service is owned and provided to you by [Investiv, LLC.] --------------------------------------------------------------- If you are having trouble reading this email, you may [view the online version] This email was sent to {EMAIL} by Investiv, LLC 3400 North Ashton Blvd. | Suite 170 | Lehi | UT | 84043 [Forward to a friend] | [Unsubscribe] Disclaimers Investing is Inherently Risky There are risks inherent in all investments, which may make such investments unsuitable for certain persons. These include, for example, economic, political, currency exchange, rate fluctuations, and limited availability of information on international securities. You may lose all of your money trading and investing. Do NOT enter any trade without fully understanding the worst-case scenarios of that trade. And do NOT trade with money you cannot afford to lose. 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