RESOURCE ROUNDTABLE: Complimentary Trading Issue April 23rd, 2013

April 24th, 2013

Complimentary issue  of Resource Roundtable

Click link to download complete issue with charts

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Tuesday, April 23, 2013

 

Today’s trading ideas and investment themes:

 

Resource Roundtable Update:  Markets on the Edge

 

 

Energy:          Crude Setting Up to Test $90

 

Softs:             Sugar Trades Sideways

 

Indices:        Could a Flood of Easy Money Send Stocks Higher?

 

“Honesty is the best policy – when there is money in it.”
– Mark Twain

 

All enquiries to info@resourceroundtable.com

Tuesday, April 23, 2013

Resource Roundtable Update:

Markets on the Edge

 

The big news on Tuesday was that the broad stock market plummeted lower on a fake news alert sent over Twitter, the 140-character messaging service that is quickly becoming Wall Street’s choice for flash investment news. The Associated Press’ Twitter account was hacked and the culprit sent out a tweet saying: ““Breaking: Two Explosions in the White House and Barack Obama is injured.”

 

That’s absurd, right? Still, trading bots reacted to the news and sold, sold, SOLD! It was enough to send the Dow plunging more than 140 points, bond yields tumbling, and the yen soaring.

 

Then the news came out that the report was false. Within six minutes, the Dow recovered its losses and was trading with triple-digit gains.

 

We can look at this a few ways:

 

  • First, despite the protestations on CNBC to the contrary, it’s obvious that High-Frequency Trading (HFT) algorithms have too much power to move the market.

 

  • Second, many traders (or at least the firms  using HFT algos) are long the stock market and short the yen.

 

  • Third, this market is more nervous than a nine-tailed cat in a room full of rocking chairs.

 

There’s not much to take away from this event except that those traders who had bids under the market are happy and those who had disciplined stops in place are likely feeling steamed. Wall Street continues to lose credibility, and probably will until serious reforms are put in place.

 

Maybe this one-day “WTF” dip will put some steel into traders’ spines and some real conviction into a market that is wobbling without real direction lately.

 

The broad economic news is mixed. Europe was up big on news that governments there may be moving away from austerity programs and toward stimulus.  China sold off on news that its economy is not growing as fast as hoped or expected, but it’s still growing. Here in the U.S., home sales jumped while growth in U.S. factory activity is at a 6-month low and gasoline sales continue to slide lower.  Go try and make sense of that mess.

 

But as for market news – it’s pretty darned good.  Earnings are at record highs and important names are beating the street. And there are short-term trends developing that we think have real potential. We have some of those trading ideas for you tonight. Good luck, and good trades.

 

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**********Trade Entry and Track Record Process***********

 

Here are our general trading guidelines …

 

  • We recommend buying two contracts unless otherwise specified.
  • If/when you hit PT1, immediately sell half the position.  Move the stop up to your entry point and place PT2 for the second half of the trade.
  • If no stop-loss and/or profit target is included in the original recommendation, we’ll issue one in the next update.
  • All new trades are entered at the prevailing price at 7:30 am ET the morning after the recommendation.
  • We follow stops in electronic markets ONLY in the currencies, bonds and interest rates (generally speaking that’s CME, CBOT and Globex products).
  • When trade entry prices deviate from the recommended entry point in the issue, move stops accordingly. The stop should be increased by the same spreads as shown in the issue.
  • For agricultural markets, use both electronic and pit-traded prices side by side. Be warned, they can and have differed – that’s just a sign of the times were living in.
  • We recommend you close out trades only in the regular session (the previously mentioned electronic markets are the exceptions).  When you close out a trade, remember to cancel all open stops and/or profit targets.

 

Now, on to this week’s trades …

 

 

Important:

Resource Roundtable (RR) and Limit Up Publishing (LUP), LTD does not advocate auto-trading.  You should take the time to review and discuss these recommendations with your broker.

 

RR & LUP are strictly research publishing firms and do not provide individual investment advice to subscribers. These are merely trading ideas; you and your broker should make the final decision on entry and exit into a position, as well as placing profit targets and stop losses.  The information we publish is based on our opinions plus financial data and independent research – it is NOT intended to be used as customized recommendation to buy, hold, or sell securities, or engage in any trading strategy. Such recommendations may only be made by a personal advisor or the broker you select.

Investing involves risk of loss. You can lose money.  It’s that simple.  Make sure you consult your broker and are fully aware of the risks involved.

 

We believe our data sources are accurate, but we do not verify their accuracy independently. Therefore, we cannot assure you that the information is accurate or complete. Nor do we guarantee the success of any investment decision you may make using our data, information, or recommendations.

We do not track the performance of recommendations.  Adjusting profit and stop-loss prices and exit points are up to you and your broker.  References to market price action are based on our observations of the general market and not intended to reflect your individual positions.

 

RR & LUP will not be liable for consequential, incidental, punitive, special, exemplary, or indirect damages resulting directly or indirectly from the use of or reliance upon any material provided by RR or LUP. Without limitation, RR & LUP shall not be responsible or liable for any loss or damages related to, either directly or indirectly, 1) any decline in market value or loss of any investment; 2) a subscriber’s inability to use or any delay in accessing the RR or LUP website or any other source of material provided by RR or LUP; 3) any absence of material on the RR or LUP website; 4) any kind of error in transmission of material; or 5) the use by a subscriber of any research to invest in any way which may be deemed unsuitable in accordance with certain industry standards.

 

In short, we make no warranty of any kind.  Use of any material provided by RR or LUP represents acknowledgement of these terms and agreement

 

 

 

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    Bombs Away: Have your yellowcake, and eat it too!

    April 22nd, 2013

    A solution for many of nuclear powers problems is right in front of us

    The disaster in Japan has reignited the ongoing debate over nuclear energy, its safety, and costs. As different groups argue over the issues, everyone seems to be missing one very important solution, and it happens to be right in front of our faces.

    Having your Yellowcake and Eating it too

    As the tragedy in Japan unfolded rapidly, the worst fears of nuclear watchdogs were realized. Reactors melting down, radiation leaks, damage to the environment and water table, as well as crops and animals.

    Not to mention the almost certain impact on human beings. The initial reaction by the markets was that nuclear power was doomed and share prices of leading uranium producers fell sharply, to say the least.

    So is Nuclear Power Dead?

    On life support maybe, but dead…not likely. However, there is bound to be a great deal of changes that take place in the industry and much tougher standards implemented going forward, and rightfully so.

    Countries that already have strong opposition to nuclear power, such as Germany, have made an historic decision for the gradual closing down of the country’s 19 nuclear power stations.

    It means that Germany has become the first leading economic power officially to announce its intention to phase out the use of nuclear energy.

    Nuclear energy is a very hot potato in Germany and with important elections on tap for Angela Merkel, one has to wonder how politically motivated this decision was. Elsewhere in Europe debate is raging too but while everyone is quick to condemn nuclear, answers on what to replace it with are sparse.

    While the decision may be popular with the European electorate, it may not be very practical. As the nuclear plants go offline and the voters suddenly realize they cannot fire up their laptops or get euros out of the ATM anymore, they may change their minds. Rolling blackouts, brownouts and rationed power are all possible.

    Germany alone gets about 30% of its electricity from nuclear power, and much of Eastern Europe, like Estonia, where I live, are 100% dependent on much of our energy from Russia, not always a friendly, reliable, or cheap relationship.

    The fact is that there are really no alternative energy solutions that are also economically viable that could replace nuclear altogether, at least not yet. Solar, wind, and others simply are too cost prohibitive based on the electricity they can create as compared to nuclear. Also solar and wind are dependent on two things, wind and sun, solar doesn’t work at night and windmills don’t work on days that aren’t windy…Clearly problematic.

    Out with the Old and in with the New

    Uranium based reactors, especially ones, as old as the plants in Japan, create safety concerns on many levels.

    First of all, placing the reactors in an earthquake prone country in the first place is problematic in itself, let alone right next to a Tsunami sea wall. Probably not the wisest decision, no matter how well the facilities are built.

    Regardless, even when a nuclear plant is placed in a more desolate area, without such risks, concerns still abound.

    Leaking of radioactive material, disposal of waste, and of course meltdown, are always worries. On top of all of that, the risk of weapons grade uranium getting into the hands of a rogue nation or terrorists is one of the biggest risks of all. And let’s not forget the cost, uranium is not exactly abundant, and therefore like any scarce commodity, it’s not cheap.

    But there is an answer…

    A 1000 Year Solution

    What if there was a substitute for uranium, an abundant relatively cheap, nuclear fuel. This element could create more energy with less waste and on top of it all it could not be used for weapons.

    Sound too good to be true? Well it’s not, it’s called thorium.

    In America alone it’s believed that we have up to a 1000 year supply of thorium just waiting to be pulled out of the ground.

    Nobel laureate Carlo Rubbia at the European Organization for Nuclear Research, has worked on developing the use of thorium as a cheaper, cleaner and safer alternative to uranium. Rubbia claims that “a tonne of thorium can produce as much energy as 200 tonnes of uranium, or 3,500,000 tonnes of coal.” Other leading experts have stated that reactor cores are less expensive by up to as much as 20 %. On top of that savings, additional savings occur because the design reduces the storage of nuclear waste by up to 50%.

    Thorium actually produces 10 to 10,000 times less long-lived radioactive waste.

    The race for thorium is already on, and leading the way as usual, is China which has just announced it is moving full ahead with thorium as nuclear fuel. Ambrose Evans-Pritchard, of the British Daily Telegraph, suggests that “Obama could kill fossil fuels overnight with a nuclear dash for thorium,” and could put “an end to our dependence on fossil fuels within three to five years.” I agree.

    The bottom line is that thorium is a safer, less polluting, and an abundant source for nuclear fuel. Thorium could answer many of America’s problems and even the world’s. Thorium could eliminate or at least reduce many environmental concerns and lift the country out of our fossil fuels addiction that has helped cause the country so much harm. So if it’s so great, why isn’t thorium being used already instead of uranium?

    Bombs Away!

    The simple answer is that thorium didn’t serve the purpose of creating weapons like uranium did and so it has never gained as much momentum. DBI/Century Fuels, a company that has been developing a nuclear thorium fuel cycle since 1965, agrees that wars and weapons have contributed to the slow uptake in thorium power reactors.

    The company is quoted as saying that “Perhaps the main reason why thorium use for energy production has not made more progress over the past decades, is that thorium is not nearly as easy to weaponise. An international scientific symposium in 1997 on nuclear fuel cycles concluded that the principal reason why thorium had not been used more widely to date is that the ore contains no fissile isotope,”

    This approach may be changing rapidly though and suddenly thorium is being thrust onto the main stage as a possible answer to many of our current problems with nuclear energy.

    For investors in the alternative energy space, adding some solar, geo-thermal, coal, and others is a good idea, but consider adding into that mix any of the Rare Earth Metals producers who cultivate thorium, as well as companies who are involved in the technology and design of thorium reactors.

    In my recent documentary interview with the CEO of Silmet Rare Earth Metals, here in Estonia, we discuss thorium during the interview and the benefits and challenges. You can watch the full interview and tour of the facility here, free. http://vimeo.com/19113246

    Safety must always come first but at the end of the day we all like to be able to turn on the switch and have lights too, so something has to give. Safety and nuclear power can certainly work together.

    So while the nuclear debate rages and the emotional selling continues, it may be a good time to consider the long term outlook.

    Alternatives are the ultimate answer to the world’s fossil fuel addiction, and nuclear is a vital part of that, for better or worse.

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      Simply Put This is Panic….Don’t!

      April 16th, 2013
      “Simply Put: This Is Panic”
      Gold is taking a beating.

      Fear has clearly taken the driver’s seat, pushing greed completely aside… at least for now. Why? The reasons given by most analysts are nonsensical:

      • Gold is selling off because those ever-so-ethical and smart guys at Goldman Sachs say it’s heading lower. That this is patently silly hasn’t stopped it from becoming a self-fulfilling prophecy, for a time.
      • Gold is selling off because some technical analysts says that’s what should happen when certain support levels are breached. To the degree people believed this, regarding $1550, 0r $1450, it too became a self-fulfilling prophecy. But this is only a fancy form of momentum-chasing that exacerbates the situation; it does not cause it, nor explain it.
      • Gold is selling off with broader markets because surprisingly weak retail sales and consumer confidence numbers from the US, as well as weaker-than-expected numbers from China, have whacked stocks and commodities alike – but that should have been bullish for the safe-haven metal. That some economic data coming in weaker than expected is given as a reason for gold to drop just shows how few people understand gold at all.
      • Gold is selling off because of the now-denied news about Cyprus selling gold holdings to help bail itself out. Even if this were true, it would have no bearing on the fundamentals of the gold market, and would soon be nothing more than a wrinkle that was fairly easily ironed out.
      • Gold is selling off because of manipulation. If that were so, it would not change the underlying realities and would eventually have to be unwound.
      • Gold is selling because more and more people fear the peak was $1,900 in 2011, and it’s all downhill from here. That – again – is momentum.

      What this is all saying is that gold is selling off for the wrong reasons, mostly amounting to speculative momentum-chasing.

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        New Corn Intel from Our Friend Bill at C & S

        March 22nd, 2013

        C&S Special #13 Sept Vs Dec Corn Spread In JuL-Aug 3-19-13…

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          Nat Gas Sleeping Giant….Kevin Kerr on Fox Business From London

          March 19th, 2013


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            Mortgage bonds: Private lenders despair over stricter regulations

            March 15th, 2013

            Mortgage bonds: Private lenders despair over stricter regulations

            Currently, the Federal Reserve of New York has bought mortgage-backed securities (MBS) worth of almost $21.55 billion. The central bank has purchased fresh bout of bonds in between March 7-13 that is more than $18.9 billion purchased a week ago. Alternatively, the Fed has also sold mortgage bonds worth $3.35 billion as mortgage securities that are guaranteed by the largest mortgage buyers in the country Freddie Mac, Fannie Mae and/or the Ginnie Mae (The Government National Mortgage Association).

            Moreover, the Fed reportedly sold around $600 million worth of MBS some weeks ago. However, on 14thSeptember 2012, the Fed embarked on a mortgage bond buying spree as a part of its quantitative easing 3 or QE3. The objective of this bond buying policy is to stabilize the housing market and ensure it quick recovery. This in turn will help the government to promote better local economy in the global financial markets.

            However, all the efforts of the Fed may go waste since the overall mortgage bond market isn’t conducive. This because financial institutions across the country are finding it difficult to trade in bonds amidst tighter regulation imposed on the quality of securities offered by them.

            For instance, a senior official of the J.P. Morgan Chase & Co. has given a public statement regarding the bank’s reported negotiation with a particular credit rating agency over the quality of the bonds issued by them. The bank has been trying to work out a policy where it’ll be less vulnerable to any sort of lawsuits in the future with regards to its loan underwriting practices.

            On the heels of a recovering private residential MBS, all the banks including J.P. Morgan want to incorporate fresh ways of issuing their bonds that’ll include time and various restricting factors. These restrictions are also known as representation and warranties that provide assurance to the investors about the quality of loans on which the bonds have been issued. Keeping cognizance of the mortgage market, Credit Suisse has issued bonds with limited time period beyond which investors won’t be able to claim any compensation from the bank or the lender citing faulty loans.

            The reason for doing so is that banks were made to cough up compensation worth billions of dollars due to lawsuits filed against them on charges of committing mortgage fraud. There were allegations that some of these banks were involved in breaching the reps and warrants on bad credit or sub-prime and various other non-guaranteed loans whose securities had been purchased by the investors.

            This happened during the housing bubble that ultimately resulted in the housing crash of 2008. So, the objective of including these clauses in the mortgage bonds are to safeguard their interest and to prevent themselves from being sued all over again, in the event of a market crash in the future.

            This skepticism can prove detrimental for the growth of the private MBS market. These bonds provide the necessary funds to the lenders that help them to originate loans which do not meet the credit requirements or the size as determined by the governmental agencies. For instance, loans that do not meet the standard set by the Federal Housing Administration (FHA), Freddie Mac (FMCC) or Fannie Mae (FNMA) are given out by the private lenders.

            Both the Obama Administration and the Congress are keen on increasing the amount of loan given out by the private mortgage lenders that in turn will boost the availability of credit for the homebuyers. However, it is increasingly becoming difficult on the lender’s part to originate loans amidst stricter regulations. In reality, they are struggling to mitigate the newer regulations and the growing competition from the federal loan programs that provide loans at highly competitive rates.

            About the author

            About the author

            Rikk is a Community Member of mortgagefit community and has been contributing his suggestions to the Community since 2011. He has also made notable contributions through various articles written on different subjects related to the mortgage industry.To get more mortgage related query visit: http://www.mortgagefit.com/refinance.html

             

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              Natural Gas: A Sleeping Giant

              March 15th, 2013

              I‘m quoted by Marketwatch today in this story…

              Natural gas: commodity market’s ‘sleeping giant’

              As the winter season draws to a close, the energy market should be getting ready for a slowdown in natural-gas demand, but prices have rallied instead.

              By Myra P. Saefong

              SAN FRANCISCO (MarketWatch) — As the winter season draws to a close and the energy market readies for a slowdown in the need for heating fuels, natural-gas prices should be falling. They’re not.

              Instead, prices have climbed over 9% month to date, with the market betting on a tighter supply and demand situation following a cold winter season, signs of a recovery in the U.S. economy, a drop in drilling rigs, growing uses for the fuel, and a shift away from coal-fired plants.

              Kevin Kerr, Kerr Trading International

              “Demand on a massive scale is coming,” said Kevin Kerr, president and chief executive offer of Kerr Trading International.

              “Supplies are getting tighter and demand is increasing,” he said, and that’s likely to happen dramatically in the next five years as new technology and usage comes online. “Natural gas is like a sleeping giant, waiting to be awakened.”

              On Thursday, prices got a good shake, with April natural gas  jumping nearly 4% to $3.81 per million British thermal units, the highest settlement since Nov. 27. The United States Natural Gas Fund  , an exchange-traded fund that tracks movements in natural-gas prices, has rallied 9.7% month to date.

               

              The rally followed a U.S. Energy Information Administration report showing a bigger-than-expected 145 billion-cubic-foot drop in weekly natural-gas supplies, which took total supplies below 2 trillion cubic feet for the first time since mid-May 2011. Inventories are down 440 billion cubic feet from the year-ago level.

              “Weather, of course, is a big factor and impacts prices weekly,” said Greg Renwick, president and CEO of East West Petroleum Corp. .

              Over the long term, however, natural gas is expected to be used in other industries, such as vehicle transportation, he said. Economic growth and prices of competitive fuels will also be key factors on the demand side for natural gas, he said, while production levels and volume in storage are key on the supply end.

              And in the U.S., analysts have seen overall improving economic conditions, bigger-than-usual production declines and total supply levels in storage at their lowest in nearly three years.

              Supply and demand

              So far, demand growth has at least been able to keep up with growing production in the U.S.

              “The market balance for gas demand and supply is beginning to come closer inline,” said Chris McGill, vice president of policy analysis for the American Gas Association. “Clearly, a rational response to the supply-long position we have experienced for the past three years.”

              Annual consumption climbed 11% from 2009 to 25.5 trillion cubic feet in 2012, while total annual well production, including those from shale gas wells, climbed about 14% from 2009 to 29.8 trillion cubic feet last year, according EIA data.

              Production will be the big thing to monitor in 2013, said James Williams, energy economist at WTRG Economics.

              “Production should finally start to reflect the low level of natural-gas drilling activity,” he said, noting that there are 40% fewer rigs drilling for natural gas than last year.

              But technological advancements have managed to help offset the impact of the lower rig count.

              Production is still on the rise, given the “giant technological strides made over the last five years surrounding hydraulic fracturing and the industry response to pipeline infrastructure requirements,” said Phil Van Horne, president and CEO of BlueRock Energy, a private energy service company based in Syracuse, N.Y.

              “Except for the lack of natural-gas supply and pipeline development in the Northeast corridor, natural-gas supplies have grown tremendously and are diversified over a much greater geographical area and natural-gas pipeline expansions have largely met the country’s natural-gas delivery needs,” he said.

              And the recent increase in prices should “help mitigate any further supply contraction on a national basis as many currently drilled by non-producing wells should fill the void of a slowdown in drilling,” said Van Horne.

              At the same time, however, demand’s set to grow too.

              Short term, weather will likely be supportive for natural-gas consumption.

              The market may see another hot summer in the Plains and upper Midwest, as well as through most of the Rockies, according to Dale Mohler, expert senior meteorologist at AccuWeather.com. Temperatures for the three summer months may be three to five degrees Fahrenheit above normal over much of this area, “increasing natural-gas consumption by 40%-60% above what is normal.”

              Already, winter natural-gas storage was “utilized this winter more so than last, leaving less natural-gas storage inventory to begin the 2013 injection season on April 1,” said Van Horne. That’s when supplies begin to climb in preparation for the summer cooling-demand season.

              Additionally, “there’s a pickup in the economy as the housing market has staged its greatest strength since the Great Recession began, and manufacturing businesses are gradually increasing production due to a weak dollar, low interest rates and lower natural-gas and power prices,” he said.

              And there’s the growing realization that natural gas is the long-term solution to the nation’s incremental energy needs over the next decade, Van Horne said, “as natural gas-fired power plants come on line and the manufacturing and chemical industries rebound while having to meet cleaner air-quality standards.”

              The coal factor

              Analysts point out that among the demand factors in play over the next few years, a shift away from the use of coal is a standout.

              Most new power plants being built now are gas fired, said Charles Perry, chief executive officer at energy-consulting firm Perry Management.

              Capital costs for a gas-fired plant are much lower in [dollars per kilowatt] capacity, he said. Plus, permitting of a gas-fired plant is much easier and quicker and construction is a lot faster.

              Power generation is also much more efficient compared with coal. The new combined cycle combustion gas turbine power plants have an overall fuel efficiency of about 65%, compared with coal-fired plants which have overall fuel efficiency of about 30%.

              At current prices, Richard Hastings, macro strategist at Global Hunter Securities, said coal is actually cheaper to use, but the emissions are a huge problem and very expensive to fix.

              “Coal-fired power plants have to invest into all kinds of emissions equipment and systems, and these are expensive,” he said. “By the time they finish with these, it’s too expensive” and financially better to just run a gas-fired plant.

              Coal power plants are being scheduled to close in big numbers, setting the stage for large expansion of natural gas-fired power plants, Hastings said. By late 2014, the first evidence will really kick in and by 2015, “the new period for natural gas will have started.”

              The EIA estimates that coal will lose 25.5 gigawatts of summer capacity between now and 2016, while gas-fired generators gain 36.6 gigawatts, according to Hastings — and those estimates may be conservative compared with independent ones, he said.

              “The retirements are overwhelming,” he said. “It’s starting to feel like the natural-gas market is trying to price-in the retirement future.”

              He said it’s possible that every 6 gigawatts of coal retirement could be equal to about 50 cents to 75 cents per million Btus in each front-month natural-gas futures contract.

              So right now, it looks like the May 2014 contract is trying to reflect some of the upcoming coal retirements, said Hastings.

              “But this is nothing compared to what we’ll see at this time next year and that, in turn, is nothing compared to the ramp up in natural-gas consumption across all sectors in 2015,” he said.

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                2013 is a bond picker’s market – The future of the mortgage masters

                March 12th, 2013

                We are pleased to welcome Rikk to the KTI economics and market team. Rikk’s posts will be featured frequently on our blog.

                By: Rikk, exclusively for KTI

                 

                According to recent reports, it has been studied that it was too easy making money through the hedge funds that specialize in mortgage bond investing in 2012. But things won’t be the same in 2013 and the mortgage debt traders are gradually alerting the investors to tempter their expectations. Reports said that the Brazilian investment bank BTG Pactual told the investors that it was closing some of the top-performing distressed mortgage hedge fund for the brand new investors in the month of January, 2013 due to the diminished opportunities in the market. The $271 million fund that invests in bonds backed by distressed and residential mortgages, was one of the best-performing hedge funds in 2012, rose by 48%. Nevertheless, BTG Pactual also informed the investors not to expect anything similar in the year 2013.

                The private mortgages aren’t guaranteed or insured by the government-sponsored giants like the Freddie Mac or the Fannie Mae. For most of the mortgage hedge funds, it will be tough to beat the performance of 2012, when the average fund in the particular group increased by 20%. After comparing, the average return last year for the hedge funds was $2 trillion was 6.5%. All those investors in mortgage funds were expecting the average returns to fall to the lower dual digit range in the beginning of 2013. During a recent bid for performance, there were so many real estate and mortgage managers who are looking beyond the plain vanilla mortgage securities in order to gain potentially better payoffs. However, if the housing market turns for the worse, the securities could fall sharply with the weakening of the underlying mortgages.

                With Federal Reserve’s efforts to keep the interest rates low pushed up the mortgage security prices, the mortgage funds benefited mightily in the year 2012. All the bonds that were backed by sub-prime mortgage loans performed exceptionally well as those securities rose in value as a recovery in the US housing prices began to gain momentum. This trade became so lucrative that the hedge funds which don’t specialize in mortgage trading also made money through it. A senior portfolio manager is also of the opinion that the investors who bought average mortgage bond made money as everything else went up and were in their favor. He also added that the investors need to be choose and more selective in 2013 as the bond prices as the prices of the bonds rose so fast that the trade seemed less obvious.

                The New Year is still fresh and there are already signs that the gap between mortgage funds and the hedge funds are narrowing gradually. Within the first 2 months of the year, the mortgage-focused funds gained 3.40% as compared to a 2.7% for the broader hedge fund market. Reports also suggest that the yields on non-agency mortgage debt has decreased down since last Summer when the Federal Reserve announced that it would soon start buying $45 billion in government guaranteed mortgage debt in a particular month. Then, the private level mortgage bonds yielded between 5% and 6.5%. Yields usually fall when the price of a bond rises and this has been happening since the last few months.

                Due to the slimmer pickings in the mortgage trading market, the mortgage traders are being pushed at Pine River and other hedge funds to target all the other securities to enhance their returns such as the mortgage interest-only securities. Such securities are cobbled together from the interest payments on the mortgage bonds and they tend to perform the best when refinancing of the underwater home loans are at their lowest level. The mortgage traders are also wavering to bonds backed by the commercial real estate loans which offer favorable returns for a cheaper price than the private label residential mortgage debt. The Amherst Securities experts advise the investors in commercial mortgage debt to be highly selective in order to gain maximum returns.

                ======================================

                 

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                  Crop Report Estimates for today at 11am CST

                  March 8th, 2013

                  TABLE-USDA March crop supply and demand summary – RTRS

                  05-Mar-2013 12:14

                  March 5 (Reuters) – This table summarizes key production data from the U.S. Department of Agriculture’s supply/demand report, which will be released on Friday.

                  U.S. ending stocks are in billions of bushels, world ending stocks and production are in millions of tonnes.

                  The 2012/13 marketing year for wheat began on June 1, 2012, and will end on May 31, 2013. For corn and soybeans, the 2012/13 marketing year began on Sept. 1, 2012, and will end on Aug. 31, 2013.

                  ——————————————————————————

                  USDA 2012/13 U.S. grain and soybean ending stocks

                   

                   

                   

                  USDA March      Average of      Range of          USDA February

                  2012/13         analysts’       analysts’         2012/13

                  end-stocks      estimates       estimates         end-stocks

                  estimates                                         estimates

                   

                   

                   

                  Wheat        _____           0.704          0.670-0.754       0.691

                   

                   

                   

                  Corn         _____           0.643          0.560-0.695       0.632

                   

                   

                   

                  Soybeans     _____           0.120          0.100-0.130       0.125

                  —————————————————————————–

                  USDA 2012/13 global grain and soybean ending stocks

                   

                   

                   

                  USDA March      Average of      Range of         USDA February

                  2012/13         analysts’       analysts’        2012/13

                  end-stocks      estimates       estimates        end-stocks

                  estimates                                        estimates

                  Wheat         _______       176.548      174.500-178.000     176.730

                   

                   

                   

                  Corn          _______       117.793      116.000-120.000     118.040

                   

                   

                   

                  Soybeans       ______        59.448       58.000-60.600       60.120

                  —————————————————————————–

                  USDA world production

                   

                   

                   

                  Mar USDA       Feb USDA       Mar USDA    Feb USDA

                  2011/12         2011/12        2012/13     2012/13

                  estimate       estimate       estimate    estimate

                   

                   

                   

                  Argentina wheat   _____            15.50      _____       11.00

                   

                   

                   

                  Australia wheat   _____            29.92     _____       22.00

                   

                   

                   

                  Canada wheat      _____            25.29     _____       27.20

                   

                   

                   

                  EU-27 wheat      ______           137.23    ______      131.73

                   

                   

                   

                  India wheat       _____            86.87     _____       93.90

                   

                   

                   

                  FSU-12 wheat     ______           115.01      _____       77.19

                   

                   

                   

                  Russia wheat      _____            56.24      _____       37.70

                   

                   

                   

                  Kazakhstan wheat  _____            22.73       ____        9.84

                   

                   

                   

                  Ukraine wheat     _____            22.32      _____       15.76

                   

                   

                   

                  China corn       ______           192.78     ______      208.00

                   

                   

                   

                  Argentina corn    _____            21.00      _____       27.00

                   

                   

                   

                  South Africa corn _____            12.42      _____       13.50

                   

                   

                   

                  FSU-12 corn       _____            34.25     _____       32.18

                   

                   

                   

                  Ukraine corn      _____            22.84      _____       20.92

                   

                   

                   

                  Brazil corn       _____            73.00      _____       72.50

                   

                   

                   

                  Argentina soy     _____            40.10      _____       53.00

                   

                   

                   

                  Brazil soy        _____            66.50       _____       83.50

                   

                   

                   

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                    Sugar Moving Higher

                    December 18th, 2012

                    COMMODITIES

                    Updated December 17, 2012, 9:17 p.m. ET

                    U.S. Throws Gas on Sugar Market

                    By ALEXANDRA WEXLER

                    A resurgence of U.S. ethanol imports is shaking up the $1.6-trillion world sugar market.

                     

                    Commodities investors increasingly are betting that rising U.S. demand for sugar-based ethanol will reduce supplies of the sweetener and curb a decline in prices, which recently have fallen to 28-month lows.

                    Imports from Brazil, which distills most of its ethanol from sugar cane, have risen nearly ninefold this year through October, compared with the same period in 2011, according to the U.S. Department of Agriculture. U.S. demand for foreign-made ethanol jumped after an import tariff that had been on the books for three decades expired in January. U.S. ethanol imports are expected to surge again next year, with the vast majority coming from Brazil.

                    The sugar market is starting to feel the effects. Both sugar ethanol and corn ethanol, which is produced mainly in the U.S., have a similar chemical composition and are blended with other fuels to create cleaner-burning gasoline used in cars.

                    View Interactive

                     

                    Bloomberg News

                    Commodities investors, analysts and ethanol producers say the opening of America’s ethanol market and rising demand for sugar-based ethanol in the U.S. andBrazil could end the recent slide in sugar prices. Futures prices have fallen 17% this year because many traders are expecting a big sugar crop out of Brazil next year.

                    Brazilian ethanol has flooded the U.S. market before, only to drop sharply later.

                    Analysts and investors say the latest ramp-up in ethanol imports is likely to be sustained. Ethanol output in the U.S. is declining, and federal regulations require that gasoline manufacturers boost their use of a category of renewable fuel that includes sugar ethanol but excludes its corn counterpart.

                    The more sugar cane that is diverted to ethanol production, the less that will be crushed to make brown, granulated raw sugar, reducing supply and potentially pushing prices higher.

                    “Demand [for ethanol] is sucking away more and more of the sugar supply,” says Kevin Kerr, president of commodities consultancy Kerr Trading International.  He has placed bullish bets on sugar futures stretching through 2013.

                    Sugar futures on Monday jumped 2.1% to 19.41 cents a pound, the highest level in over a week, on worries about poor growing conditions in Brazil. A recent period of dry weather in the top sugar-cane grower sparked concerns that next year’s harvest could disappoint.

                    Others say Brazil will have plenty of sugar to go around. The South American country will harvest a record 580 million metric tons next year, according to the International Sugar Organization. About half will go toward ethanol production.

                    With the ISO forecasting a 6.2 million metric-ton global sugar surplus next year, “sugar prices are probably going to be suppressed for a while,” says Sterling Smith, a futures specialist at Citigroup C +3.53%in Chicago. He calculates that if Brazil produces a record crop next year, there will be more than enough sugar cane to meet increased ethanol demand.

                    Whether or not Brazil grows enough sugar cane to satisfy the demand, the stepped-up presence of the U.S. in the market for the renewable fuel complicates the outlook for sugar, analysts say.

                    Brazil‘s shipments to the U.S., which totaled roughly 336.7 million gallons (1.27 billion liters) in the first 10 months of 2012, are displacing ethanol produced domestically from corn. U.S. ethanol output will fall by 10% next year to about 12.6 billion gallons, according to Department of Agriculture and U.S. Department of Energy estimates.

                    Historically high corn prices have eaten into profits of domestic ethanol makers this year, prompting production cutbacks. And although corn prices have fallen 13% since they hit a record in August, many traders are worried about the lasting effects of this past summer’s drought.

                    “With the prices of corn as high as they are, there’s more pressure to import Brazilian ethanol,” says Fain Shaffer, president of commodities brokerage Infinity Trading Group in Medford, Ore. He recently placed bets on rising sugar prices.

                    Another factor traders are eyeing is Brazil’s own consumption of ethanol. Brazilian officials have said the country plans to increase the amount of ethanol blended into its gasoline to 25% from 20% next year, which will increase internal demand for sugar cane ethanol and could further reduce sugar supplies.

                    Kona Haque, commodities strategist with Macquarie in London, predicts higher sugar prices in 2013, saying everyone “is going to start looking more closely at what’s happening in ethanol.”

                     

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