Sugar Futures Poised to Climb - Weekly Commodities Report

Sugar is quietly staging an impressive rally off its October lows, when it briefly dipped below the 11-cent mark.  Since then, we can see that sugar prices are clearly moving from the "lower left to the upper right," recently hitting a 5-month high.

Is it time to buy sugar?  I think so.  Fundamentally, there are a number of bullish factors lining up:

• The global sugar deficit is expected to rise this year
• India, the world's 2nd biggest producer of sugar (after Brazil), will have lower output than forecasted, and may need to import sugar this year

What could dampen demand for sugar?  Low crude oil prices could reduce the demand for sugar to be converted into ethanol.  Sugar into ethanol is profitable at about $50 oil.  So while a rally in oil could send sugar prices higher, continued low oil prices may weigh on sugar.

Also important to note that President Obama does not appear to be in favor of sugar based ethanol for our energy needs.  Obama did very well in the Midwest, including his win in Iowa in the primaries, and appears to be set on finding energy solutions that can be harnessed right here in the USA, such as ethanol from switchgrass.

Other potential trades to watch:

• Short the Japanese Yen - looks like the Carry Trade has officially unwound

• Long the Australian Dollar - Aussie and Canadian dollar could rally if commodity prices start ticking up

• Short long dated US Treasury Bonds - sound like a broken record here, but it appears a downtrend may have (finally) started

• Short the Euro - as disastrous as the US dollar is, the Euro appears to be circing the bowl at a faster rate

• Buy and hold gold stocks 

Open positions

Date	Position	Qty	Month/Yr	Contract			Entry Price	Last Price	Profit/Loss
02/26/09	Long	1	MAY 09	Corn			373 1/2	360	($675.00)
02/27/09	Long	1	MAY 09	Sugar #11			13.79	13.73	($67.20)
Net Profit/Loss On Open Positions									($742.20)

Account Balances

Current Cash Balance	$30,648.02
Open Trade Equity	($742.20)
Total Equity	$29,905.82
Long Option Value	$0.00
Short Option Value	$0.00
Net Liquidating Value	$29,905.82

---------------------------------------------

Cashed out: $20,000.00
Total value: $49,905.82
Weekly return: 0.4%
2009 YTD return: -41.3% :(

Prior year's results:
2008: -8%
2007: 175%
2006: 60%
2005: 805%

Initial stake: $2,000.00

Fiat Currencies are Toast - Weekly Commodities Review

Gold & Silver Up - Everything Else Continues to Circle the Bowl

Gold, silver, and - of course - the US dollar - continued to rally this week. They were about it, as the stock market swooned, commodities got whacked, and every asset class continued to circle the bowl.

Stocks have now gone nowhere in the last 11 years (check out the chart below, courtesy of Agora Financial). I expect they'll go nowhere for at least 5 more. Bear markets in equities typically last 15-20 years. This bear market started in 1999 - just 10 years ago. This bear has got some room to run.

Plus, bear markets rarely start from valuations this high. Although stock prices have been slammed, earnings - or the "E" in P/E, have been falling even faster. In fact, collective stock market earnings are now lower than they were 11 years ago!

Bull markets always start with price-to-earnings ratios below 10 - sometimes closer to 5. We're still north of 15. DOW 3000 anyone?

Meanwhile gold continues to rock and roll, spurred on by a fantastic display of money printing across the world, and a possible end to the fiat currency experiment as we know it.


While everything appears to be lining up in gold's favor, it's important to remember that no asset ever goes straight up. It's very possible that gold could correct from here - quite significantly - and a correction back down towards $700 cannot be ruled out.

However, it's also possible that gold could hit the "mania" phase quite soon, as described in this Financial Times article.

My take is that you should seriously consider having some of your core holdings in gold. In the medium term, today's price should be an attractive entry. However in the short term, you may get a better price to initiate some holdings, and may want to considering keeping some dry powder.

Though if I could time the gold market myself, I'd be drinking a Mai Tai in a hot tub somewhere, instead of blogging from my living room right now.

And don't forget silver - which doesn't typically perform as well as gold in a deflationary environment. In fact, silver often suffers in recessions because of reduced industrial demand. Maybe the recent price action in silver suggests inflation is closer than our wonderful government officials believe.

Silver is historically more volatile than gold - and it could really start to move if the trend of cashing in paper currencies for precious metals continues to accelerate.

Open positions

Date	Position	Qty	Month/Yr	Contract	Entry Price	Last Price	Profit/Loss
01/16/09	Long	1	MAR 09	Corn	374 3/4	355 1/4	($975.00)
01/20/09	Long	1	MAR 09	Corn	397 1/2	355 1/4	($2,112.50)
Net Profit/Loss On Open Positions							($3,087.50)

Account Balances

Current Cash Balance	$32,886.73
Open Trade Equity	($3,087.50)
Total Equity	$29,799.23
Long Option Value	$0.00
Short Option Value	$0.00
Net Liquidating Value	$29,799.23

---------------------------------------------

Cashed out: $20,000.00
Total value: $49,799.23
Weekly return: -5.1% :(
2009 YTD return: -41.3% :(

Prior year's results:
2008: -8%
2007: 175%
2006: 60%
2005: 805%

Initial stake: $2,000.00

Ah well - easy come, easy go...

Silver Smash Commentary by Analyst Ted Butler

A very well written piece by Ted Butler regarding the recent demolition of silver.

Ted make a very compelling case that the margin of safety at current prices is significant, as he believes the current price is below the cost of production.

I'm very tempted to buy now, but I hate the thought of buying something that is hitting yearly lows. On the sidelines for right now, but watching with great interest.

GoldMoney: More Solid Gains for the Precious Metals

If you're a precious metals fan, GoldMoney's James Turk is probably a must read for you.