DRY HEAT
Timothy Hughes | 602-859-4100 | thughes@pricegroup.com

1/27/12 General Comments : This morning I read an article by James Blanco in “The Big Picture”. There were eight charts which displayed the balance sheets of the largest central banks in the world. The European Central Bank (ECB), the Federal Reserve (Fed) the Bank of Japan (BOJ, the Bank of England (BOE), the Bundesbank (Germany), the Banque de France, the People’s Bank of China (PBOC) and the Swiss National Bank (SNB). The charts show the size of each respective balance sheet in it’s local currency. They are all exploding higher and most are still making new all time highs. They converted the balance sheets into dollars. The combined size of these banks has almost tripled in the last six years from $5.42 trillion to $15 trillion and rising. They have been buying bonds with newly printed money. They are collectively printing money on a scale never seen before. Where is private money forced to go when interest rates are forced so artificially low? The stock market or real estate? Bonds? Gold? It most likely will not end up well, unless you are too big to fail.

Corn : The test of $5.70 never happened this week and we are marking time between $5.76 and $6.60-$6.75. Wild world financial extremes and South American weather. I am waiting.

Soybeans: I am standing aside at this time.

Cattle: Packer margins reached even worse levels this week, up to a negative $125/head. Everyone is wondering how high beef prices can go domestically and the dollar will have a huge impact on exports. Weekly sell signals are in place. The yearly Cattle inventory is today and although it shouldn’t have a huge influence because the numbers seem well covered, you just never know. I am lightly short.

Treasuries & US$: This week the bonds/notes have broken a bit and rallied right back to the highs on the heels of the Fed announcing their plan for zero short term rates into 2014. The long rates can be affected somewhat but eventually will go where it wants and the Fed be damned. It is a matter of time. I am seller in the 10yr notes near the highs and will risk a weekly close above 132.07.

Questions? Ask Tim Hughes today at 602-859-4100