Focus: Agriculture and coal

I added KOL, ARLP and PCX yesterday and today. Both of ARLP and PCX are at record high.

The focus right now are two sectors:

Agriculture:

1. Agriculture commodities and companies. I think the flood in corn belt states will push corn and soybean to new highs in the months to come. If we have very hot summer, the yield will be lower, due to the late planting and the wet conditions produce shallow corps that are not strong. It's almost like a perfect storm, we have global demand issues, record low inventory in corn, and now the flood. Corn can hit as high as $9, some analysts already projected that.
2. Check the wheat's parabolic run early this year, corn is nothing close to that. So it's very likely we'll have higher corn, soybean and wheat later this year.
3. How to play Ag:
4. DBA and DAG. These two are based on corn, soybean, wheat and sugar. Of course, DAG is the double long of DBA.
5. MOO. This is the ETF for agriculture business, including fertilizers, seeds, and other agriculture business. I think over time, it should do better than DBA.
6. POT, MOS, AGU are the individual stocks, I like them since the fertilizer price is in the middle of a long term upward move, some predicted potash will hit $1000 a ton from $650 right now, and remember, in early 2007, it's less than $200.

Coal: This maybe the best way to play higher oil price.

1. Some analysts predicted coal price will double in the next year or 2010. And comparing to oil, coal is still very cheap.
2. Over 50% of US electricity is generated by coal.
3. Clean coal energy is being researched.
4. US has the largest coal reserve in the world, and China is changing from a coal exporter to coal importer. I think China's demand alone will drive coal price much higher.
5. KOL is the ETF for coal companies.
6. ARLP, PCX, ACI, ANR and FCL are some individual coal companies. They are all near record highs. But the lessons I learned, record high indicate the sector is strong, and I should buy strong stocks.

If US and global economy is strong enough to avoid a recession, I think inflation and energy cost will be the major theme in the next few years.

Focus on strong sectors and the strong stocks. I will do that from now on. Avoid sticking to old thinking, like gold. I still have GDX down the water, and I'll use it to balance my portfolio, but will reduce that when I have the chance.