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Energy & Commodities

3 Reasons to Start Growing Your Wealth with Grains


Posted by Sean Broderick- Uncommon Wisdom

on Thursday, 12 April 2012 08:43

According to the U.S. government, our corn and wheat surpluses are going to be larger-than-expected this year. Normally, that increased supply would lead to a decline in prices. But that’s not happening this time and, in fact, grain prices are acting darned bullish.

Take a look at the iPath DJ-AIG Grains ETN (JJG). The fund tracks a basket of three commodities traded on U.S. exchanges: Soybeans, corn and wheat. As you can see, it recently broke out to the upside, and I think it could shoot up to $55, and perhaps even higher.

image

One reason for the rally is that other grain suppliers around the world haven’t been as successful as the United States this year. For example, while our winter was warm, one of Russia’s key growing regions was hit so hard with frost that big sections of it may be replanted. Meanwhile, drought is damaging crops in South America and withering fields across Europe.

You also have to take into account the other side of the equation. U.S. supplies may be rising, but so is demand, especially from China. Last year, China replaced Canada as the largest importer of U.S. agricultural products, bringing in $95 billion worth. That was up from just $12 billion in 2001, a year-over-year increase of 30% for a full decade.

China imports a lot of corn and beef from the U.S., but the No. 1 seller is soybeans. Last year, 60% of all U.S. soybean exports went to China and, this year, that number could be even higher.

But it’s not just China. There are now more than 7 billion people in the world, and many of them want to eat more and better food. The United Nations’ Food and Agriculture Organization confirms that food prices are rising, and will continue to rise.

If you combine all these forces, it paints a picture of higher prices going forward. Luckily, that may prove to be a positive development for America. Heck, we’re the Saudi Arabia of grain exporters, so higher prices should help our trade balance.

There are plenty of ways to invest in this sector, in everything from tractor and seed manufacturers to funds that track agricultural commodities and industries. But make sure to do your own due diligence before investing in anything.



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Stocks & Equities

S&P 500: Range Contraction Indicator Suggests A Deeper Correction


Posted by Seeking Alpha

on Thursday, 12 April 2012 03:50

On Tuesday the RCI (Range Contraction Indicator) closed at 1.125% for the cash S&P 500.

As mentioned in Monday's article, when the RCI closes back above 1.1% (after first closing below 0.9%), it suggests continuing daily range expansion - which usually, but not always - is associated with strong bearish moves.

Again this is an indicator, not necessarily an entry signal. But if asked where should a stop be placed if one were to use it as an end-of-day short entry, my answer would be either just above the high of the day in which the signal was generated (today's high of 1383.01); or for a more lenient stop, above the recent high (above the 1422.38 high).

2114931-13341761602039053-Craig-Coatney

As far as downside objectives, the 1286 to 1293 area figures prominently. From Tuesday's close of 1358.59 down to 1293 (the first significant support point), this would be just under a 5% decline - still a very reasonable correction given the near exponential rally from the mid-December lows.

The October 2011 high was 1292.66, and a confluence of retracement levels arrive from 1286.41 to 1290.52:

1290.52 = 50% retracement of the Nov11 low to the recent high.

1289.59 = 38.2% retracement of the Oct11 low to the recent high.

1286.41 = 61.8% retracement of the Dec11 low to the recent high.

The only Fibonacci retracement level that I feel has more significance than a flip of a coin is the 50% level. But when a number of retracement levels as well as other technical points cluster around a particular area, then that reoccurrence and reinforcement becomes noteworthy.

The S&P correction can certainly segue into a uniformly bearish trend and trade lower than 1286, but for now this level is one of the most significant near-term objectives/support level.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.



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Gold & Precious Metals

The Who, How & Why of Silver Price Manipulation


Posted by Peter Krauth via Resource Investor

on Thursday, 12 April 2012 03:45

No one knows the machinations of the day-to-day silver price better than Ted Butler.

Ted publishes bi-weekly commentary at www.butlerresearch.com, with a special focus on the silver market, which he's been closely following for over 30 years. Ted is an expert's expert.

So naturally, that's whom I turned to for an in-depth perspective on what's really going on with the silver price. As usual, Ted tells it like it is.

I think you'll be fascinated by Ted's tremendous insights...

Ted Butler on Silver Price Manipulation

Peter Krauth: Ted, you're widely recognized as the foremost expert on manipulation in the silver futures market. How do you define manipulation, and how are the main players benefiting from that?

Ted Butler: Manipulation is another way of saying someone controls and dominates the market by means of an excessively large position. So, just by holding such a large concentrated position, the manipulation is largely explained. In real terms, whenever a single entity or a few entities come to dominate a market, all sorts of alarms should be sounded. This is at the heart of US antitrust law. It is no different under commodity law.

Price manipulation is the most serious market crime possible under commodity law. In fact, there is a simple and effective and time-proven antidote to manipulation that has existed for almost a century, and that solution is speculative position limits. Currently, the Commodities Futures Trading Commission (CFTC) is attempting to institute position limits in silver, but the big banks are fighting it tooth and nail.

As far as any benefits the manipulators may reap, it varies with each entity. But if you dominate and control a market by means of a large concentrated position, you can put the price wherever you desire at times, and that's exactly what the silver manipulators do regularly. This explains why we have such wicked sell-offs in silver; because the big shorts pull all sorts of dirty market tricks to send the price lower.

PK: Could you tell us when and how you got started researching this matter?

TB: It started around 1985, when a brokerage client asked me to explain how silver could remain so low in price (in the single digits) when the world was consuming more metal than was being produced. I accepted the intellectual challenge, and it took me more than a year to figure out that the paper short positions on the Comex were so large as to constitute an almost unlimited supply. It was this paper supply that was depressing the price.

PK: Who are the main players in this manipulation scheme? On average, what percentage of Comex silver contracts are "controlled" by these main players?

TB: Under US commodity law, the names of individual traders are kept confidential. However, it is no secret that the commercial traders are the big shorts. It is also no secret that these big commercial shorts are mostly money center banks and financial institutions. Based upon government data and correspondence, the largest such short almost certainly is JPMorgan Chase & Co. (NYSE: JPM), who inherited their big silver short position from Bear Stearns when JPM took over that firm in 2008.

Together, the eight largest commercial silver shorts on the Comex generally account for 50% to 60% of the entire net Comex silver market, with JPMorgan alone holding around 25% or more of the entire market. I would hold that those percentages of concentration and control constitute manipulation, in and of themselves. By the way, there is no comparable concentration on the long side; only the short side of silver.

....read more HERE

Unknown



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Energy & Commodities

It's hard not to be bullish on the Canadian oil sands: China's Ambitions


Posted by Keith Kohl Editor, Energy and Capital

on Thursday, 12 April 2012 03:35

Given the amount of rhetoric we're exposed to these days about U.S. energy independence, you'd think our addiction to foreign oil would be headed downhill — even if only at a snail's pace.

And to a certain extent, our imports have been declining...

According to the EIA, our crude oil imports from OPEC members declined by 358,000 barrels last year compared to 2010.

But there's one place we keep going for more crude.

Last October, we said our Canadian petroleum imports would soon top three million barrels per day.

It didn't come as much of a surprise when we hit that benchmark just three months later.

ca-imports

It's hard not to be bullish on the Canadian oil sands, especially considering it accounts for nearly the country's total production:

 large-canadian-pre

click chart to enlarge

Within the next two decades, that share may be well over 75%.

The only question is how soon it will be until they start shipping us four million barrels per day.

How about five?

Unfortunately, we may be taking our neighbor's energy for granted, because we're not the only ones eyeing up Canada's future barrels...

170 Billion Barrels or Bust

Extracting the 170 billion barrels of bitumen reserves beneath Alberta's soil seems like an immense task.

I have no doubt you've heard the horror stories.

The massive surface mining operations that can be seen from space are enough to keep environmentalists up all night. I've seen it firsthand, and it isn't a particularly pretty sight.

Buy we're still holding on to my bullish outlook.

Because we realize the future of the oil sands isn't from the trucks and shovels working day and night to dig up the bitumen.

It's in extracting the part of the resource that's too deep for mining.

oil-sands-production-growth

We've mentioned before that about 80% of the bitumen needs to be produced through in-situ methods. 

The choice for investors on where to put their money is far simpler than you might think.

They can play both.

How Investors Can Play the Field

Yesterday, Nick Hodge covered a broad spectrum of ETFs and ETNs to help diversify your exposure to the volatility inside the oil and gas industry...

This also holds true in the Canadian oil sands sector.

We've already seen the long-term growth expected in the oil sands during the next two decades.

The iShares Oil Sands Sector ETF (TSX: CLO) is one way you can play the field in Alberta.
 
The fund is set up to replicate the performance of the Sustainable Oil Sands Index.

Just some of their top holdings are among the strongest producers in the oil sands patch, including:

 

  • Suncor Energy

  • Imperial Oil

  • Cenovus Energy

  • Canadian Oil Sands Limited

 

It's interesting to note that most U.S. investors don't realize how close Canada is to adding China to their customer base. That's a billion new friends willing to buy Canadian crude.

This year, China is expecting to import an average of six million barrels per day.

china-consumption-imports-and-production

Now consider how the U.S. government is handling the Keystone XL Pipeline approval process...

Election politics aside, there's only so much our neighbors to the north will endure.

Canadian Prime Minister Stephen Harper has been making Canada's position very clear, saying:

Look, I'm a strong believer in the economic importance of our relationship, the security importance, and the importance of the United states and the World. But we cannot take this to the point where we are creating risk and significant economic penalty to the Canadian economy.

Truth is Canadian oil producers are selling their product at a substantial discount to Brent crude.

It's only a matter of time before they begin to ship their barrels across the Pacific.

And believe me — it's not just Canadian oil producers that will be taking advantage of the Far East...

Here's another way to play the burgeoning Chinese-Canadian relationship.

Until next time,

Keith Kohl Signature

Keith Kohl

follow basic@KeithKohl1 on Twitter

A true insider in the energy markets, Keith is one of few financial reporters to have visited the Alberta oil sands. His research has helped thousands of investors capitalize from the rapidly changing face of energy. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, the Haynesville Shale, and the Marcellus natural gas formations — all ahead of the mainstream media. For more on Keith, go to his editor'spage.





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Timing & trends

Boom Sayer: Bob Hoye's Perspective On Markets


Posted by Bob Hoye - Institutional Advisors

on Thursday, 12 April 2012 00:00

"Boom Sayers"

Some of them are still singing, but technically markets seem to have finished the hymns of praise.

Signs Of The Times

This Year:

"Dollar Turns Bearish amid Disappointing Housing Data"

– Forex, March 26

"Heavy hitters such as Goldman Sachs and J.P. Morgan are now actively adding equity exposure."

– Financial Post, March 27

"Betting On U.S. Homes Comeback"

– Financial Post, March 30

"The overall technical backdrop remains bullish so buy-on-dips is still the most profitable strategy."

– Technical letter, March 30

 *   *   *   *   *

Last Year:

"Stocks climbed as the better-than-expected data on confidence and manufacturing bolstered optimism on the economy."

– Bloomberg, April 15, 2011

"Flight From U.S. Dollar"

– Financial Post, April 21, 2011

"Don't Like a Weak Dollar? Might as Well Get Used to It."

– Breitbart, April 26, 2011

Concerns about the dollar were so wide-spread that Geithner stated "We will never embrace a strategy to weaken the dollar".

Our notes from then included someone else's description of the Geithner Bond. "No principle, no yield and no maturity".

The DX dropped to 72.70 as the good times ended on May 3rd and rallied to the 80 level as the panic about sovereign debt ended last fall.

On the recent surge to good times, the DX declined (accompanied by the usual bad press) to only the 78 level. The low as the bubble completed in 2008 was 71.33. The low on the speculative surge to March 2011 was 72.70 and the recent low at 78 sets a rising trend of important lows.

Against these, commodities (CRB) set a sequence of speculative spikes at 474, 371 and at 326 in February. Clearly, commodity speculators are not accommodating the Fed's implicit policy of dollar depreciation.

It is worth noting a plea for help during the troubles of September, only six months ago:

"Investors just want to know, even if it is a Band-Aid, that there is some cure that's going to be announced."

*   *   *   *   *

Perspective


Our list of "Boom Sayer" exclamations has been accompanied by technical readings of momentum and sentiment usually found at important tops. Last week, Market Vane's Bullish Consensus reached the highest reading since 2007. Also, as we have been discussing insider selling has reached significant levels.

We have been looking for a rolling top whereby not all sectors peak at the same time. This seems to be working out with cyclicals such as base metal miners and S&P Energy setting their highs in late February. Of Dow Theory importance, the Transports set their high in early February and the bounce seems like a failed test.

Overseas, the DAX, FTSE, Shanghai and Hong Kong set highs earlier in March and have recorded downtrends.

More recently, technical work such as yesterday's "Bearish Divergences" provides confirmation of a topping stock market from an unusual point of view.

Under such conditions it has been prudent to sell the rallies.

Currencies


The U.S. Dollar is in a technical pattern leading to an outstanding rally.  Historically, one of the features of the post-bubble condition has been a chronically firm senior currency. That's against most currencies and most commodities, for most of the time.

 

Commodities


In momentum and enthusiasm, the CRB has been replicating the action in 1Q2011, but at lower levels on the index and in excitement. This year's high was 326 set in the third week of February.  At 306 today, taking out 305 would extend the downtrend.

This would confirm that last year's high of 371 was, indeed, a cyclical peak.

Credit Markets


The action in longer maturities stopped favourable trends in mid-February.  Over the past two weeks, a turn for the worse has started. The price on the sub-prime mortgage bond has broken down.

This has serious implications, as does the action in sovereign debt. As an example, yields for the Spanish bond has been rising since early March, taking out technical resistance. Taking out 5.75% will be a serious event.  The chart follows.

Since the middle of March, yields and spreads for junk and high-yield have been moderately adverse.

Representing shorter maturities, the Ted-spread stopped narrowing in late February and the chart seems to be "bottoming" since.

And it is worth keeping in mind that after there has been joyous action in spread markets in the first part of the year, the seasonal reversal in May can lead to disaster in the fall.

INSTITUTIONAL ADVISORS

WEDNESDAY, APRIL 11, 2012

BOB HOYE

PUBLISHED BY INSTITUTIONAL ADVISORS

The following is part of Pivotal Events that was

published for our subscribers April 5, 2012.

 

Link to April 5, 2012 ‘Bob and Phil Show’ on TalkDigitalNetwork.com:

http://talkdigitalnetwork.com/2012/04/holiday-job-shocker/

 

 BOB HOYE,   INSTITUTIONAL ADVISORS

E-MAIL  bhoye.institutionaladvisors@telus.net">bhoye.institutionaladvisors@telus.net

WEBSITE:   www.institutionaladvisors.com



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