Again to be clear, I think we're going to see in the next 1-5 weeks a series of writedowns (promising for the 9th time that really this is the kitchen sink quarter), and a bevy of Arabs and Asians running to our defense with boatloads of cash (cash we send them daily, so they are just returning it to us - how kind). All the while hearing the seals on CNBC clapping about how this is great news since certainly it cannot get worse than this (like they said in August, October, December, and January). But literally at any moment, an "intervention" could burn shorts. So it is sort of an unfair market in many ways, because without the risk of "the invisible hand" the path would be much more easy.
If something like that does happen, I'll let the Kool Aid run through the streets and then once that wears off re-attach myself to this ETF in a larger way. But for now I am cutting 250 of my 500 shares here around the low $112s. This takes it from a 5% position to 2.5% stake. I've taken small cuts to the other Ultrashorts as well today simply because I sense desperation in the air and a Plunge Protection team backed into the corner is a very dangerous animal. ;) I'll probably add these shares back first thing Monday morning if nothing comes down from the heavens this weekend. If we go into another round of full blown sell off there will be plenty of time to make money in this issue, as the chart below shows.
Other than that we're just waiting... on one side we have the government waiting to bail out something, anything, anyone, at any moment... on the other hand we have all the economic reality in states not named Iowa, Nebraska, Wyoming, Indiana, Texas, and Oklahoma. So it's just a big waiting game. As I keep saying, I believe much of the smart money is patiently waiting for that retest of January lows...
Long Ultrashort Financial in fund; no personal position
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re: China..
Following a brief pull back in the agriculture ETF sector in late January, the fundamentals are once again turning constructive for support in the grains commodity sector going forward as we start to approach planting season in the US for corn and soybeans. DBA is well positioned to take advantage of the current situation as it is equally weighted among four commodities: wheat, corn, soybeans and sugar. The global tightness in wheat stocks is not news anymore, and this is highlighted by a significant increase in planted acres (at the expense of corn and soybeans), but recent statements by the Food and Agriculture Organization that, despite the increase in wheat plantings are still expecting tight stocks into 2009 are making long wheat positions more attractive. As such, the acres have to come from another sector, so corn and soybeans are already facing pressure. Beyond the grains complex, India may not produce a sugar crop as large as previous estimates had thought. In addition to speculation about planting conditions in the US, the short term picture turns to weather. Here is what we are focusing on in some of the world’s major origins. South America: There were better rains in Brazil last week, as the active front brought moisture to much of Sao Paulo, northern Parana and Minas Gerais. For the current week, a pattern similar to last week is expected across much of the Centre-South; cooler temperatures expected for the end of the week. This pattern is beneficial for corn/beans. However, in Argentina, despite the good weather last week across Cordoba, (some areas receiving between 70-80 mm), this week will turn dry again as stalled high pressure will block flow from the west, allowing this precipitation to move into Brazil. The remainder of February will remain dry, and we still feel that this pattern will have a negative impact on the soybean crop. EU: Following some warm temperatures, a cool and dry week should dominate most of the week with no negative effects on dormant EU oilseeds. The pattern across Turkey will be near normal for mid February; near normal temperatures will transition to a cooler pattern for much of next week and precipitation will fall as rain. India: Central to southern India will be very dry this week as strong ridge diverts most moisture to the north and south; with pods being set, at this stage in crop, oilseeds could use more moisture over the next few weeks. Outlook going forward looks to remain dry until the end of February. China: While much of central China has seen relief from the intense snow that has affected much of the country in recent weeks, wheat and oilseed regions in northern/eastern provinces will likely see significant acreage losses as many fields were affected by the heavy snow and freezing rain. The most recent estimates from the Chinese Agriculture Ministry have placed over 4 million hectares of farmland in a category which ‘suffered significant damage’, and I feel that this number can increase. Next week’s vegetation maps will provide more insight on potential crop damage.
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