Long soya, short Shanghai

COMMODITY WATCH

The recent Chinese anti-satellite missile test got a lot of media attention around the world. People saw a space race. We at Or-phe-us saw something else.

The effort to be there on the moon is more than a belated attempt to have a Chinese have his share of moon-walking. It's linked more with the quest for an alternative.

Alternative fuel 'Helium 3' is considered as the perfect 21st century fuel. There is about 1 million tonne of helium lying on the moon and China roughly needs about 25 tonne to power itself for a year. So cargo ships are next in line to ship the fuel from moon.

Prosperity does wonders and a search for alternatives only happens in prosperous times, when we look at benefits for the mankind. Let's solve the oil crisis in one stroke, just with a single cargo ship. After all if the Chinese stop consuming oil, we can all heave a sigh of relief and short oil stocks.

The Chinese on the moon suggests that the country is near a prosperity extreme. The news about the Chinese space programme also came near the top of the Shanghai Index.

The launch date for the missile was Jan 11 and the SSEC index top was on Jan 24. If you think this is a coincidence, we can talk about the 'Man on the moon' of May 1961 and how it took the Dow Jones index more than two decades to unwind the prosperity excesses. For an economic history check, you can look at the bear market of the 70s in the US.

What we are trying to do is summarise three points. First, Man-on-the-moon, moon-station or a quest for a fuel alternative is a prosperity time event. Prosperity peaks are followed by an unwinding of prosperities and not an extrapolated road to riches and higher profits. Second, there is time till India gets helium from the moon.

At this stage, India is just planning existing helium enrichment and concentrating on bio-enriched fuels. Third, that what is conservative might still be a winner.

The conservative cooking oil can save the day for us. Ten years ago, cooking oil and its usage by masses was an indication that more Indians were coming above the poverty line. That same cooking oil is pushing India and the world on the bio-energy path.

In India, the 10 per cent ethanol doping in petrol has been compulsory in many states since 2003. And if we see the trend right, bio-energy consumption is going to more than double in the next few years.

This means that the chart on the right suggests a low risk entry time into bio-energy related sectors, make a bio-energy investment, or just take soya and corn more seriously as an investment. The second chart is the MCX spot soya oil.

Though the minor trend seems down, we expect immediate supports to come in near current levels. We are not even looking at Rs 420, which we think is too far down. And about the long soya strategy, it's advisable to do it on a spot basis, if you cannot time your investments.

(Contributed by Or-Phe-Us.com, a global alternative research company )