Tim Hughes’s weekly newsletter, Dry Heat, summarizes the week’s latest activities and potential opportunities in the markets that he follows. His focus is primarily on the agricultural sector - cattle and grain futures. Contact Mr. Hughes at (602) 859-4100
Timothy Hughes | 602-859-4100 | firstname.lastname@example.org
3/22/13 General Comments:
There is a new commodity to watch and it has been very active since news of the proposed “heist in Cyprus” came out. I am sure many of you already knew about this new “currency” but it was news to me. I am talking about Bitcoin. It is an online-only currency based on a decentralized network. They first appeared in 2009 and are linked to the global network of computers that supports the currency and it’s users. People generate or “mine” Bitcoins by participating in the network. A growing number of web stores and online firms accept Bitcoins as payment. A Canadian man listed his house online at an asking price of $405,000 Canadian or the equivalent in Bitcoins. They can be exchanged for “real money”, and they can be used to make transactions that are difficult to trace, offering privacy to their users. Since last Sunday, downloads of three Bitcoin related apps have surged. The value of one Bitcoin has surged 57% this week, to about $74 and that is 145% higher than a month ago. That some Europeans are investing savings in Bitcoin isn’t a sign of confidence in European banking.
Gold: The April gold had a nice rally from the low $1555 level back to $1616. Now what? The weekly chart is looking like a possible bottom and the daily looks like it may retest the recent low. Then you read stories about China’s accumulation of gold, Germany’s Bundesbank moving gold back home from New York and Paris and now even the University of Texas wanting to move the $1 billion of gold, it bought in 2011, to Texas and there appears to be a pattern. I respect the opinions of smarter men than me who say that gold will correct a great deal more, but the more distrust there is of the central banks, the more I believe that gold will have sharp rallies.
Corn: Brazilian corn exports more than doubled this year compared to last year and estimates for planted acres in the U.S. this year are the highest since 1936. World corn production may jump 9% this year and the U.S. has lost many export destinations to competitors. December corn rallied nicely to the 5.69 ¾ level and I believe it should be sold in that area. I still believe, given a decent moisture year, that we will see new crop corn closer to $4.50 by harvest.
Soybeans: Like corn, Brazilian production and exports are weighing on our markets. Their crop is a record at 15 million tons bigger than last year. I would expect the market to break toward $12.00, but with Nov beans at $12.636 already, a sale in the May or July option will require more caution.
Cattle: The USDA Cattle on Feed Report for March 1st was friendly based on a higher marketing number and a lower than expected placement number. 93% of year ago On Feed March 1st was at the low end of the range of guesses and the Placed on Feed in February number at 86% of year ago was slightly below the low end of the range of guesses. Marketings in February were 93% of year ago. The numbers are friendly and after the break from the record highs in January above $134, it feels like we may have bottomed. This week we touched weekly support at my trend line at $124.65. We may need to chop near the lows a little longer. I think that negative packer margins will lose out to tightening numbers soon. Some popular ideas are to buy October, but I would be tempted to buy June on breaks toward a retest of 1.20.
Stock Index & Treasuries: I have been proved wrong fighting the Fed. Controlled risk has kept the losses bearable and I am still looking for a sell point.
Questions? Ask Tim Hughes today at 602-859-4100
Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented is from sources believed to be reliable and all information is subject to change without notice.
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