Apr 03, 2009
Well the G-20 meeting is over. The talk has been that they would move in unison with the U.S. administration and attempt to stimulate the global financial system by selling bonds. The alterative strategy is that they are making plans for the IMF to sell 402 tons of gold to help out the poor countries but not actively seeking to float more bail out programs like the U.S. This in effect failed to force the 10 year notes to the 125 level and the U.S. bonds above 130 as we had wanted to be an active seller.
End Result: It appears foreign players are content right now to allow the U.S and China to do all the heavy lifting on uprighting the global economy. Granted we may come out of the recession by the end of 2009 but there are serious issues to how fast we can recovery if the world economy is still struggling. Additionally, I have big concerns that the U.S. consumer love affair with spending and debt has come to a screech halt. I would suggest the American consumer confidence has been hurt for all the government spending is simply replacing the lost consumer spending.
Implication: I still believe we have made a major high for bonds but I want to only participate in long term speculative program of protecting long term interest rates at 124 for or better in the June T-Bills or 130 or better in the June bonds.
As for the corn and bean markets: After yesterday’s strong run up, the market decided to take a break. In reading the comments from other analysts today there seems to be a growing sentiment that corn and beans acres will grow, the issue is how much? This puts a lot of pressure on the weather. Most weather outlooks suggest things will be very messy until the third week of April. Still early but will put a lot of producers under pressure. Right now I believe time is more important that price. Dec corn could move into the $4.50 to $4.75 level if cold and rain remains all the way into the end of the month. However, I know the ability of the producers, if given a solid two week window we can have most of the crop in the ground. So I continue to encourage producers to actively look at buying puts if we do see a price event. I would discourage selling calls until July and selling puts at this late date is no longer recommended. As for selling futures I would suggest margin risk still suggest to me one would not want to use this too to establish floor positions until we get into the late June time period.
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