DRY HEAT
Timothy Hughes | 602-859-4100 | thughes@pricegroup.com
9/30/11 General Comments:
I remember someone referring to copper as “Dr. Copper” because copper has a Phd. in world economics. Copper futures have fallen in price about 28% since August and 33% since January of this year. This isn’t as bad as the 70% drop in the debacle of 2008, however, it is predicting a declining economic trends in the future. Manufacturing data declines in China and Brazil’s central bank lowering economic growth estimates seem to be confirming Dr. Copper. As I have previously written, I am bearish the stock market, but going into the last three months of the year I am waiting for a rally. Over the last 65 years, the S&P 500 has gained an average of 7.2% during the last 90 days of the year. The so-called Santa Claus rally has sent stocks higher 4 out of 5 years since 1945. This bear will be careful going short right now.
Corn : The USDA corn stocks number at 1.128 billion bushels caught analysts by surprise but stocks are still below last year by 580 million bushels. The numbers suggest rationing of feed demand in June/August quarter even though there were more cattle and hogs on feed. Export sales showed increased interest yesterday with 32 million bushels of new business. Charts look negative but I am looking for a seasonal low within the next two weeks at least for a substantial bounce.
Soybeans: The USDA carryout numbers were a little bullish but not enough to overcome selling in corn and wheat. Export sales were very good yesterday with China taking 80% of the total. As with corn, I anticipate a harvest low in the next two weeks.
Cattle: The day to day tug –of- war between the packers trying to buy cattle, while their margins are thinning, and the cattle feeders who need to stay current (but see less supply ahead) goes on. This and all markets will always be influenced by the economic turmoil we see today. However, in my opinion, the overall character of this market is bullish. Rabobank released a report expecting “beef and other animal proteins to decline sharply through 2012”. Beef production in particular is expected to drop precipitously over the next 12 months”. This is a market to buy on breaks.
Treasuries & US $: Cash will continue to be king. Which cash would you rather hold if you were managing a multi-billion dollar fund? The Eurocrats, looking for a glue to hold the union together, keep coming up with new ineffective plans. The newest one included backing by the European Investment Bank. Unfortunately, the EIB immediately announced that it had no knowledge of their supposed participation. Will Ben Bernanke have the audacity to send more US taxpayer backed dollars to Europe. I don’t think so. Current US high office holders wouldn’t appreciate more negative attention in this election cycle. The dye is cast. US dollar and treasuries remain a safe port at least for the near future.
Have a great weekend.
Questions? Ask Tim Hughes today at 602-859-4100
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