| Commodity ETF Jumps As Wheat Hits Record
The market may have lost its appetite for stocks, but it's hungry for commodities, especially wheat. Wheat soared to a record Friday as the Agriculture Department forecast that supplies will drop 40% from last year to a 60-year low in May. It already has more than doubled in the past year. Corn, soybeans, gold and platinum have also soared to new records. "We're in an inflationary cycle that's heating up, so things such as commodities are becoming more valuable than paper assets," said Adam Harter, director of operations at Financial Enhancement Group, with $200 million in assets. "People in developing economies are seeing incomes rise and are able to buy more and that's putting a pressure on the demand side of the equation." Trading Futures In lock step, PowerShares DB Commodity Index (DBC) broke out to a new high Friday.
DTN analyst, USDA official square-off on reports
Last Friday, USDA's World Agricultural Outlook Board (WAOB) cut its estimate of U.S. corn ending stocks by 359 million bushels compared to its estimate of a month before. The move set off a bullish shockwave that pushed corn futures at the Chicago Board of Trade over $5 a bushel in successive limit-up trading sessions.In its World Agricultural Supply-Demand Estimates (WASDE), USDA attributed the drawdown in corn stocks to an increase in feed and residual use. But DTN Senior Market Analyst Darin Newsom, in an article published Wednesday, expressed skepticism about USDA's supply-demand report, comparing USDA's report process to the Bowl Championship Series' method of selecting a national college football champion. And Newsom told Brownfield an increase in livestock feeding is almost certainly not the real reason there's less corn on hand.
What Now?
It's an easy short against the dollar. You can also short sterling against the euro or the Swiss franc. Over the longer term, when the interest-rate differential between the U.S. and the U.K. in real terms has been less than 1% to the advantage of sterling, sterling always has weakened against the euro. Now it is at 70 basis points in real terms. [A basis point is one one-hundredth of a percentage point.] You can sell sterling short against the dollar in the futures market. Faber: It may be easier to short a British-pound ETF, CurrencyShares British Pound Sterling Trust [FXB]. Zulauf: On the long side, Fred already talked about gold [in last week's Roundtable installment]. I have recommended it several times over the years. Now it's $850 per ounce. The most important thing driving the price of gold is low real interest rates.
Australian dollar stonger at noon
THE dollar was stronger at noon, rising above $US0.8700, as healthier share market performances outweighed expectations of another interest rate rise. The market is still divided on whether the Reserve Bank of Australia (RBA) will act next month, even though annual core inflation is at its highest level in more than 16 years. At 12.00pm AEDT, the Australian dollar was trading at $US0.8721/26, up from yesterday's close of 0.8657/65. During the morning, the domestic currency traded between a low of $US0.8688 and a high of 0.8745. The Australian share market has climbed 2 per cent during the morning session, moving upwards with US equities, following an emergency American rate cut of three-quarters of a percentage point yesterday. Easy Forex senior dealer Francisco Solar said a recovery in the domestic share market, after this week's longest run of slides in 26 years, was a bigger driver of the Australian dollar than interest rate rise expectations.
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