Friday, March 22, 2013

Futures Daily for March 22, 2013

Looking to buy coffee, sell corn, buy the Euro, sell the USD, buy crude.

Nat gas looking bearish, but not ready yet to sell. Wheat volume looking like it may turn over soon. Copper looking bullish despite ample supplies, especially in Asia.

Lean hog buy was confirmed.

Stocks Back Near Record Highs

Despite the ongoing European debt crisis, stocks closed near all-time record highs again.

German Business Confidence Drops

Thursday, March 21, 2013

ECB's Ultimatum of Plunder

If central bankers can get away with this in Europe, where can't they do it? It is just the "collectivization" of the fruits of all peoples' labors world-wide!

Wednesday, March 20, 2013

FOMC Minutes Boost Stocks

So what else is new?

Futures Daily for March 20, 2013

Today's big movers include cocoa, orange juice, cotton, copper, wheat (and other grains).

Tuesday, March 19, 2013

Commodity HQ: Great Commodity Professors

When it comes to commodities, most investors turn to the likes of Jim Rogers and George Soros, legendary gurus that have long held the spotlight in this asset class. And while their contributions to the commodities world have certainly helped shape the market we know today, there is one group of individuals that is often overlooked, though they have continually played a major role in the natural resources market: professors [sign up for our free commodity newsletter here].
These professors have not only helped our understanding of the often complex commodities market, they have also been pioneers in the field, allowing investors of all walks to look at the space from a different perspective. For those wondering who exactly is behind the commodity-focused academia scene, we highlight several accomplished commodity-friendly professors (in no particular order):
[If you're an commodity friendly professor, drop us a line and let us know a bit about your work; we'd be happy to add you to the list.]
charvey_sm1. Campbell R. Harvey
In addition to being a finance professor at the Fuqua School of Business at Duke University, Campbell R. Harvey is a Research Associate of the National Bureau of Economic Research. His blog Garden of Econ is a great resource for investors wanting a macro perspective.

  • University: Duke University
  • Specialties: Portfolio Management, Asset Allocation, Global Risk Management
  • Academic Work: The Golden Dilemma

pirrong_directory2. Craig Pirrong

Craig Pirrong is a professor of finance and Energy Markets Director of the Global Energy Management Institute at the Bauer College of Business at the University of Houston. Pirrong’s blog Streetwise Professor is packed with key insights every commodity trader should read.

dahlgran3. Roger Dahlgran

Roger Dahlgran is a professor at the University of  Arizona and is an expert of econometric modeling of futures markets, particularly agricultural markets. He has also received awards and recognition for his development and use of futures trading simulation software.
colin-carter4. Colin Carter
Colin Carter is a professor at the University of California, Davis and the Director of the Giannini Foundation of Agricultural Economics. Carter has done extensive research on China’s grain market and international trade, and has a new book out “Futures and Options Markets“.
  • University: University of California, Davis
  • Specialties: Commodity Markets, Agricultural Trade, International Trade
  • Academic WorkCommodity Booms and Busts

Ke Tang 5. Ke Tang

Ke Tang is a professor of finance in the Hanqing Advanced Institute of Economics and Finance and School of Finance at the Renmin University of China. His work in commodity markets and asset pricing models is well noted in both the academic and financial communities.

image002 6. Wei Xiong

Wei Xiong is a professor of economics at Princeton University and a Research Associate at the National Bureau of Economic Research. His work on the “Financialization” of commodities with Professor Ke Tang is widely referenced in many recent policy discussions and public debates of commodity futures markets.

steve7. Scott H. Irwin

Scott H. Irwin is a professor in the Department of Agricultural and Consumer Economics at the University of Illinois at Urbana-Champaign. He is recognized as a national and international leader in agricultural economics, and his works are frequently cited by other academic researchers, policy-makers, and the media.

david_bessler8. David A. Bessler

David A. Bessler is a professor of agricultural economics at Texas A&M University. Bessler is noted for his contributions in time series analysis of agricultural markets, out-of sample forecasting for model assessment and policy, and the use of algorithms on inductive causation.

975019. L. Alan Winters

L. Alan Winters is a professor of  economics at University of Sussex and former Program Director of the Centre for Economic Policy Research in London. He is one of the world’s leading specialists on empirical and policy analysis of international trade and development.

Alex Winter-Nelson10. Alex Winter-Nelson

Alex Winter-Nelson is a professor in the Department of Agricultural and Consumer Economics at the University of Illinois at Urbana-Champaign. The professor has done extensive research on food and cash crop marketing in Africa, as well as the relationship between agricultural technology and nutrition.

garcia11. Philip Garcia

Philip Garcia is a professor in the Department of Agricultural and Consumer Economics at the University of Illinois at Urbana-Champaign. Professor Garcia has more than 200 research publications focusing on agricultural economics, including 100 journal articles, 11 book chapters, and 90 published proceedings and abstracts.

Jian_Yang12. Jian Yang

Jian Yang is a professor of finance at the University of Colorado’s Business School in Denver. Yang’s work has been cited by the World Bank, the U.S. Commodity Futures Trading Commission, the Federal Reserve Bank of St. Louis, as well as many other notable names in the industry.

cfans_asset_20196513. Terry Roe

Terry Roe is a professor in the Department of Applied Economics at the University of Minnesota. Professor Roe has consulted various organizations regarding agricultural economics, including the World Bank, USDA/ERS, USAIS and the European Commission.

Parantap14. Parantap Basu

Parantap Basu is a professor of macroeconomics at Durham University’s Business School and is the Director of the Centre for Economic Growth and Policy. Professor Basu was also a member of the scientific committee for advising the European Commission during 2010 to 2011

thumb15. Helyette Geman

Helyette Geman is a professor of finance at Birkbeck, University of London and is the Director of the Commodity Finance Centre and John Hopkins University. Geman has published numerous books about commodities, and has been an advisor to major banks, energy and mining companies as well as commodity houses.

Stocks Continue to Sag

Soft Stocks

More Trouble in Euroland

I was particularly intrigued by Russia's righteous outrage. What pound of flesh will they seek to extract? If they do, they will be justified in their "criticism".
I was also struck by that little tiny "Europe's Debt Crisis" headline at the bottom right. It would be very easy to miss or even dismiss! 

Monday, March 18, 2013

Stocks Continue Obliviousness to Risks

After being down 150+ points, the Dow is now back to flat for the day. Central bankers have effectively eliminated all perception of risk from the financial markets.

Farmland -- A Better Investment Than Stocks!

A 10% to 15% increase in value every year has made farmland an enticing investment opportunity, especially when compared to an equities sector that's had trouble returning much of anything to investors. This dynamic has caused many investors to question which market's the safest place for their money: Land or stock.
Up until about the last 6 months, the last 5 years have been devastating to the stock market. But, the recession's faded and stock prices have rebounded. 
"Iowa farmland values have shown yearly increases for 11 of the past 12 years. The values remain at record high levels where they have been for the past 9 years. Iowa land values have increased by double digits eight of the past 9 years. This year marked the third consecutive year that values have increased more than 15%. The estimated land values have increased more than 2 1/2 times since 2003," says Iowa State University Extension ag economist and farmland values expert Mike Duffy. "The composite value of the stock market, as measured by the Standard & Poor’s Index (S&P) average, has started recovering from the disastrous 2008 year. Even though the S&P lost 34% of its value between 2000 and 2008, its overall record has been impressive since 1990. Stock values rose from 328.75 in 1990 to a December 2012 close of 1,422.29, an increase of over 300% in spite of the decline in 2008."
Investment variables
So, which is the best place for your investment dollars? There are a lot of moving parts to the equation, and it requires a few assumptions on price direction and how returns for both markets will be gleaned, whether through capital gains, dividends or other means.
"The returns to land or stock shares are composed of two parts. The first is capital gains or the in­crease in value. Obviously, this also could be a capital loss if values decrease. The second component is yearly returns," Duffy says. "Owning land has an unavoidable annual ownership cost not associated with stocks. Property taxes must be paid and should be included in a comparison of owning stocks or farmland. Additionally, if farmland is held as an investment and not by an owner-operator, there could be a professional farm manager involved and the fee for this service would have to be considered. There is also a need for some maintenance and insurance with farmland not associated with owning stocks."
All of these add up and, though land's still a strong spot for investment money, they chip away at total land returns, Duffy adds. "Land taxes, a management fee, insurance and maintenance are the only ownership costs considered for land. There is no ownership cost assumed for stocks," he says.
Wildcards looking ahead
There's been a lot of speculation over the last few months about whether land values have reached their tipping point and will start to decline soon, especially among the growing thought that today's high commodity prices -- the primary factor underpinning today's land market -- will slip based on expectations for a big crop this year.
"The value of land is determined by its income earning potential. For the most part, in Iowa, that means the returns to corn and/or soybeans. Returns will be influenced by a number of factors over the next several years," Duffy says. "Oil prices, ethanol prices, crop yields, costs of production, economic recovery, alternative biomass sources, and a host of other major issues will have an influence on the price of land."
THat could have land price implications in the shorter term; changing landowner demographics, however, could affect the viability of land as an investment vehicle in the longer term, Duffy says.
"In 1982, 12 percent of the farmland in Iowa was owned by someone over 75 years old. By 2007, this percentage had more than doubled to 28%. In 2007, over half, 55%, of the farmland in Iowa was owned by someone over the age of 65. How this land will be transferred from one generation to the next is not entirely clear at this time. It appears that the majority of it will be passed on to the children, usually in equal shares. This means there will be more landowners and more out of state owners," Duffy says. "Whether they will they want to continue to own the land or sell it is unknown. Too much land being offered for sale is not a problem at this time, but it could become one if the next generation doesn’t want to hold on to the land."
All the variability doesn't lie on the farmland side, though. There's just as much potential volatility in the equities, especially considering there's still a lot of economic uncertainty around the world.
"The performance of the stock market for the next few years is also not clear. The U.S. stock market will be impacted by what happens in the European Union and China among other places in the world. We are no longer insulated from the economic conditions throughout the world," Duffy adds. "The imbalance of trade is another area of uncertainty with respect to possible impacts on the U.S. economy and the performance of the stock market and the land market."
The verdict
All things considered, there's still a lot of promise in the farmland market for investment. It's been strong in the last few years, though there's a lot of uncertainty looking ahead -- much more so than in recent years, Duffy says. And while the answer's not clear-cut or simple, farmland will remain a strong contender for investment potential in at least the short term.
"Land and the stock market are different types of investments and assets. This simple comparison was based strictly on averages. There are a number of individual stocks that perform better than the S&P. But there are some that don’t perform as well. Anyone contemplating the question of which is a better investment needs to know his or her goals," Duffy says. "Land’s performance relative to the stock market over the past few years has been spectacular. Will this trend continue? Time will tell. Which is the better investment? As the old saying goes, timing is everything in the success of a rain dance."

Sunday, March 17, 2013

Fed's Easy Money Worries Economists

Fresh Turmoil in Europe Causes Stocks to Gap Lower

Dow is down 120 points in evening trading.