Issue Date: December 04, 2009
The Wheat Market Rally Pauses
The wheat market trade continues near the middle of the trading range established over the course of the last few weeks. The market expected fund buying during the beginning of the month, but that has not materialized. Many in the trade expect funds to be decent buyers through December and early January. Some of it will be based on Index fund reallocation after the first of the year. Wheat is overvalued, but I do not recommend fading the possibility of additional fund buying. Buy puts to hedge current production.
The recent wheat trade has not demonstrated much in terms of direction. Unless another push of fund buying does develop, I expect the ambiguity of these markets to be removed over the course of the next couple days. The 20 day moving averages in all three wheat markets continue to provide support. The 20 day moving averages for the Chicago, KC and Mpls March contracts are 566 ¼, 560 and 573, respectively. Keep an eye on the March contract in Chicago.
By Brian Henry
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The Magical Carry Trade
Roll up, roll up for the magical mystery trade, step right this way roll up, roll up for the mystery trade. Roll up; roll up for the mystery trade. Roll up and that’s an invitation, roll up for the mystery trade. Roll up to make a reservation roll up for the mystery trade. The magical carry trade is waiting to take you away, hoping to take you away take you today. Actually the trade that is carrying us a way is not really a mystery but the trade that is really dominating the global economic landscape. It is a trade that is making many people a lot of money yet at the same time is raising fears will creating chaos when it ends! The trade is like printing money but could roll you over when it ends. It is a trade that has been created and encouraged by the US Federal Reserve to save the US banking system and the global economy at large. Should you get carried away on the carry trade?
By Phil Flynn
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Geopolitical Events and Stock Index Futures
Last Friday there was a substantial downdraft in stock index futures on reports that two of Dubai’s largest companies could default on their debt. Dubai is one of the seven emirates of the United Arab Emirates and is located south of the Persian Gulf on the Arabian Peninsula. Some analysts were calling the Dubai financial crisis the “son of subprime,” which makes reference to the root cause of the global bear market for stock index futures that started in 2007 and lasted through the first few months of 2009. Dubai said the government would not guarantee the debts of Dubai World, who had overall liabilities that totaled almost $60 billion, including those of units that were not part of the restructuring. Dubai asked for a six month repayment freeze on debt issues by Dubai World and its Nakheel Construction subsidiary, which are state conglomerates. Subsidiaries of Dubai World developed three palm-shaped island properties that attempted to lure wealthy expatriates and international celebrities. This default news was a wakeup call for investors who learned the hard way about the default risks of “quasi-sovereign" lending.
By Alan Bush
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