2009

April 30, 2009 · Posted in Weekly Posts · Comment

Globally markets are showing continued signs of stability and recovery. Words coming out of Asia are also showing some real signs of economic recovery though still tentative. As we write this Asian markets are up once again. In the US today we saw a backing and filing day with stocks up in the morning but then coming back rather quickly towards noon. Chrysler’s bankruptcy announcement, after encouraging signs yesterday that they would be able to avoid that route, and Exxon Mobile announcing very poor results all helped drag the market lower. After a good run yesterday, this is not surprising and indeed it would not be surprising if we retreated again tomorrow. The key is whether the market stays under control. Retrenchment of 200 points is healthy if it is executed in a deliberate, controlled fashion.Monday sees the official stress test results and markets may well react if there is something unexpected there. Stay alert but watch out for the bears trying to run your stops.

What we would like, what would really make us very happy, is for this flu (formerly known as swine) to fully take on its new, official name as it is really disturbing our favorite stock FEED. The meat packing industry globally is having a tough enough time due to the economic crisis. Something as simple as applying an incorrect and misleading term to a potential pandemic has literally cost companies and farmers millions of dollars just this week. Rumors late day indicated that Egypt was set on destroying 400,000 hogs - these kind of silly actions just make the problem worse. There is no health risk from swine in all this. Every disease control agency world wide (that knows anything) has said so but governments do stupid things, often for political reasons. Frankly, we were surprised to find that Egypt, a Muslim nation, had swine herds at all but, well…we learn something new every day….

All kidding aside, investors need to be very alert to stupid government tricks during this period. There are apparently already calls for closing the border with Mexico. Please, ignore the fact that we have yet to manage to close the border without a flu problem and also ignore the fact that there are a lot of things we rely on that come from Mexico as part of the global supply chain. Governments will pander to the worse fears of the uninformed. The best way to fight it is to stay informed. The best data we have seen on the flu is on BBC (http://www.bbc.com). It is a sad state of affairs when Americans need to reach out to the BBC for the best news but our domestic portals, like CNN, just are not cutting it.

Coming up…we need to revisit the bond market situation and look at what it is telling us regarding the galloping insolvency of the US government. We also want to take a more detailed look at how we can expect our government to behave and evolve as it becomes apparent that the world will not be lending to us for ever. Both of these tie directly to our explorations on how a reserve currency can collapse.

We just published our Members Only post updating our views on commodities (oil, natural gas, and basic materials). We will be posting a look at the agricultural commodities in a day or two.

Commodities Update 04/30/2009

As of 04/30/2009 we are holding:

Long Brazilian mining and China growth through RIO

Long Sadia (Brazilian meat packer) SDA

Long Australian Iron Ore Supplies to China through Fortescue FSUMF

Long AgFeed Inc FEED

The following posts are relevant:

How the US Dollar Will Lose Reserve Status

Chinese Gold British Debt

Brazil

China Part 4 - Playing the Dragon

China Part 3 Global Hard Assets

Commodities

China: Part 2 - Bonds, Dollars, and Inflation”.

“The Fed and The Bond Market - Will Intervention be Effective?”

“The Coming Bond Debacle”

Fundamental Trends

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