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Possible Bull Market in Yeast Urine Ahead...By Jeff ClarkFriday, November 24, 2006 Call me a skeptic, but I don’t think the main course that Governor William Bradford carved up for his Indian friends back in 1621 was a turkey stuffed with a duck stuffed with a chicken. Nor, I suspect, did the Pilgrims have access to those little crispy onion things that go on top of a green bean casserole…
But the most glaring difference between today’s Thanksgiving and the meal served 385 years ago is the absence of corn…
No one eats corn on Thanksgiving anymore.
It’s true. Take a look at the November issues of the top food magazines – Martha Stewart Living, Gourmet, Better Homes and Gardens. Nowhere in their pages will you find any recipes for the number one staple of pilgrim dining – corn.
But tradition isn’t lost for a group of microscopic organisms in a tiny town up in Northeastern Iowa. For them, everyday is a corn feast.
And that feast is creating a booming ethanol business.
Everyday the workers at the VeraSun ethanol production plant in Charles City, Iowa introduce yeast to corn mash. The yeast feeds on the corn mash and then discharges carbon dioxide and ethanol.
It’s a little bit more complicated than that… but basically ethanol – the fuel of the future – the fuel that politicians are pushing into our gas tanks – the fuel that lobbyists claim will save the world from global warming – is nothing more than yeast urine.
And thank goodness it’s a bull market for yeast urine. Ethanol producers are experiencing huge gains in revenues and earnings. But the stocks haven’t gone anywhere – yet.
Oh sure, the whole ethanol sector ran up earlier this year as the hype surrounding ethanol as a replacement for MTBE climaxed. But those fast gains disappeared as quickly as Grandma’s pumpkin pie… and the sector has spent the past few months consolidating near the low end of its trading range.
This chart of ethanol producer Pacific Ethanol (PEIX) paints the entire picture:
 Now, however, the stocks are once again starting to show signs of life and we could be on the verge of a sustainable rally.
Not all ethanol stocks are created equal though. And, some companies are definitely better investments than others. But if we’re about to see another run on ethanol, then you need to get some exposure to this sector.
And, who knows? Next year, as you carve up the turducken and pass around the candied yams, you just might give thanks that you bought a few shares.
Best regards and good trading,
Jeff Clark
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Investment banks Goldman Sachs, Morgan Stanley, Bear Stearns, Deutsche Bank all at new highs amidst M&A explosion.
Microsoft up 36% from summer low.
Nearly every country-specific ETF sitting at 2006 high… Mexico, Germany, China, Switzerland, Spain, France, Singapore, U.S., Malaysia, Italy, Israel.
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