Which Way Wednesday – Wherefore Art Thou QE3?
by phil - July 13th, 2011 8:29 am
China is still rolling along and the Fed says "maybe" on QE3.
That was all it took to get us to yesterday’s highs but we took the money and ran at 2:24, when I told Members in Chat "DON’T BE GREEDY!" As I had mentioned in yesterday’s post, our Morning Alert to Members put us long on Dow Futures (/YM) at 12,400 and Nasdaq Futures (/NQ) at 2,350, which made vast sums of money of course with the Dow up well over 100 points at the time. During Member Chat yesterday, we took advantage of the early dip to go long on TBT, FAS, WFR and QQQ while killing our short positions on USO, EDZ and FXI (see Monday’s post) as they had a great run and WE ARE NOT GREEDY!
Of course we have our bull call spreads from last week so we’re pretty bullish BUT still cautious because our indexes are not holding their lines – especially the always-troubling NYSE, which did not hold the "Must Hold" line and when we name a line "Must Hold" well, it MUST be held!
The other thing I said to Members at 2:24 in yesterday’s Chat was:
Keep in mind this rally has 100 Dow points to go just to get us back to Friday’s close (12,660) so don’t be impressed with less (S&P was 1,344, Nas 2,860, NYSE 8,411 and RUT 852).
At the moment, we’re not even getting a 50% bounce of this morning’s bottom and Friday’s close was way below Thursday so it’s very easy to give us a "rally" by tanking the Dollar and floating rumors of MORE FREE MONEY but, for now – it does nothing to change the greater reality.
That’s good advise for today as well. A mere hint of QE3 does not change the cost of Italian debt, nor will it help our Treasury sell $21Bn worth of 10-year notes today at 2.9% (what kind of idiot would trust our Government to give them back Dollars with less than 3% interest to guard against inflation?), nor will it employ people and we ABSOLUTELY know that QE3, if done like QE2, is going to…
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The Commodity Bubble
by ilene - February 16th, 2011 7:29 pm
Courtesy of SurlyTrader
In the future they might coin this the “Bernanke Effect” or maybe the great commodity bubble of 2011. The truth is that commodity prices are rising…dramatically. You might have started to notice this disconnect in your grocery store shopping or in gasoline prices, but if you were to ask our government they would tell you that a basket of goods consumed (CPI) is rising modestly. How modest do these numbers appear to you?
Sugar and Corn? Those are luxury goods.
If the basic ingredients to food are skyrocketing, then prices of food will eventually have to keep pace which will directly hurt consumers.
Of the 853 ETF’s that I looked at, which unleveraged funds do you think had the greatest return over that same time period? It is not a trick question:
Are you noticing a theme?
My conclusion is simple: this time is NOT different. Commodity prices cannot go up forever and China will not continue to support the market regardless of prices. What is this “Bernanke Effect” doing to farmland prices? Well, according to a survey by Farmer’s National Company:
“non-irrigated crop land in central Kansas averaged $3,000 an acre, up 50 percent since June…
Crop prices have seen an extraordinary run since early July. A bushel of wheat priced about $4 a bushel on July 4 is now more than $8.50. Other crops have experienced similar increases.
As the land generates more income, it puts more cash in the pockets of the most likely buyers, nearby farmers. It also provides an attractive return for investors who then rent it out to farmers.
The result: Auctions are drawing twice the number of bidders as before, said area agents.”
As with all hot speculation, the commodity run will surely come to an end and will probably have repercussions for all financial markets. We should have learned by now that large financial dislocations tend to not occur in isolation.
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Just in case you were planning to eat next week…
by ilene - November 8th, 2010 4:59 pm
Just in case you were planning to eat next week…
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Courtesy of Joshua M Brown, The Reformed Broker
The next chapter in the quantitative easing drama takes place in the ag commodity neighborhood.
Over in Britain, the Guardian posted a full-scale freakout piece tying in Bernanke’s policies to a sharp spike in food costs…
UK food prices were 9.8% higher last month than a year ago, the biggest annual increase since October 2008, according to the Office for National Statistics. Imported food prices climbed 4.5% on the year, the fastest rate since October 2009, pushing up the price of bread and margarine. Prices are likely to be pushed higher in coming months, with refined sugar reaching a record of $783.90 a tonne today.
Greg White over at Clusterstock has a very worthwhile slideshow (can’t believe I just wrote that phrase) illustrating the food cost spike by commodity. Corn, for example, is just completely absurd and very scary if you are in the business of feeding large quantities of animals (or addicted to Crackerjacks) :
The agflation beat goes on.
Sources:
US Accused of Forcing Up World Food Prices (Guardian)
Here’s the Massive Commodities Surge etc. (Clusterstock)
Read Also:
Food Price Inflation No Longer Theoretical (TRB)
Pic credit: Jr. Deputy Accountant
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Burning the Food Supply
by ilene - October 30th, 2010 8:20 pm
Burning the Food Supply
Courtesy of Joshua M Brown, The Reformed Broker
Farmer Brown here…if no one else is going to tell this story, then I might as well.
We do some stupid stuff here in America – playing ultimate frisbee on skis, deep-frying Oreos, calling in to vote for televised dance show contestants…I could go on and on.
But of all the stupid things we do, one of the most dangerous is this ethanol nonsense, in which we gleefully burn up our corn supplies. For very little in the way of environmental impact I might add.
First, look at the December 2010 corn contract, then I’ll give you some insane stats on the demands of ethanol:
You wouldn’t believe it, but according to the most recent estimate from the USDA, corn use for ethanol for the 2010-2011 corn crop will be 37 percent of the projected total harvest. More than a third of our corn supply will be refined for energy use. We’re talking about 4.7 billion bushels of the corn that would normally go to animals as fodder and to our own diets.
And while yields and production are up, corn races to ever higher prices. There’s a good reason for that – industry experts say that we now need to produce 13 billion bushels each year just to keep prices restrained.
The stats above are mind-blowing and to me they represent the bull case for agriculture stocks and commodities in general.
They also represent a society that has become oblivious to the danger right in front of its face. I believe that resource competition between the developed and emerging nations is a given for the coming decade. While many believe this competition will center around oil, I’d be more concerned about the global demand for more and better food.
One of the most important determinants of animal protein prices is the corn fodder that supports production. And we’re mixing this critical element of the food supply into our gas tanks.
One might ask "but if it comes down to it, we can adjust in time, right?"
And the retort might be "if we’ve learned anything from the economic earthquakes of the recent past, it’s that we almost never adjust until it’s too late."
Stupid, stupid, stupid.
h/t David D
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site