DRY HEAT
Timothy Hughes | 602-859-4100 | thughes@pricegroup.com

2/3/12 General Comments : “May you live in interesting times.” A friend of mine, from the old days as a floor trader, used to say, “ If I only had tomorrow’s paper today.” Well, after reading the recently released disclosures of the Fed Chairman and Fed Governors, I think their personal investments should be released before every major announcement by the Fed instead of a year later. It would be the best leading indicator of the Fed’s intentions. Mr. Bernanke’s investments were not very exciting compared to some of the other Fed Governors. New York Fed President owned $1.45 million of Treasury securities that protect against inflation (TIPS). He is the same guy who played down inflation last year to an audience complaining about the rising cost of food. Then there is Mr. Richard Fisher, president of the Dallas Fed, who owns about 7,000 acres of US farmland and $1 million in SPDR’s Gold Trust (GLD). Two weeks ahead of the launch of QE2, in November 2010, Atlanta Fed Prez Dennis Lockhart put $289,000 into index funds tracking the Russell 1000 (IWF) and S&P 500 (SPX) and another $47,000 in a Vanguard emerging markets fund. A nice rally followed the announcement of the $600 billion stimulus plan. Isn’t the Fed supposed to protect us against inflation? Well if the Fed is able to keep printing long enough there will most certainly be INFLATION.

Corn : Same old, same old. There have been good exports, the eurozone is in crisis and we are still trading between important price levels. We are closer to the upper area of $6.64 but it seems to be stalling out. I am not playing here yet.

Soybeans: Beans look more impressive to me chart-wise. I am not involved at this time but a close over $12.40 should bring some follow through buying next week.

Cattle: The standoff continues between packers and yards. I still have a weekly sell signal in place and a lower close for the week will confirm that signal. Markets like this can be tough for me because of the bullish fundamentals and technical sell signals. I am very lightly short but as a hedger I would be fully hedged and keep it that way. On the bullish side we all know about the low herd numbers, but some other stories are; very low conception rates in southern plains because of the drought. Possibly as low as 40% in some places; during the Cattleman’s College at the Cattle Industry Convention in Nashville this week, a question was asked of cattle producers in the audience: “Do you plan to expand your herds in the next year to five years?” the response was immediate with 735 saying yes, 16% maybe and 10% saying no. Heifer retention at that percent, industry wide, would drive prices dramatically higher; and as unlikely as it would seem, Turkey is importing cattle from Mexico! Huh? 22,000 animals in the last two months, some 6000 for immediate slaughter and the rest to grow. These are some of the reasons I am a nervous short from a technical signal.

Treasuries & US$: We never got the close above 132.07 for the week on the 10yr. notes and are even breaking as I write. The break comes on the heels of the employment report being almost double what the estimates were. I am now getting an even better weekly sell signal. I will stay short for the time being.

Questions? Ask Tim Hughes today at 602-859-4100