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A change from the last posting on oil. T. Boone Pickens, in a recent interview, noted that he had "long ago" closed his energy short positions and went long. Oil has touched $120 and is bouncing around. Recent market activity and the Fed's decision for what could have been one last 25 basis point cut, indicates a bear rally perhaps in tech and financials. We're not sure if that means raw materials mania is down due to spec money going to stocks, assuming some think a recovery of some kind is possible or if it means more demand for commodities assumed in the cash market.
We're mindful of the recent madness in Rough Rice, traded in Chicago, as spec money trading on the actions of the top consumer, the Philippines, and the top producer, Thailand. We rode it up and down, and began to sell but are cautious. We wonder if the next leg is down, and we're watching to see what happens after a 500,000 ton rice tender conducted by the Philippines will mark the end, as they already declared that they had satisfied immediate demand and were looking to stock up to maintain a 30 day supply (up from 15 days) going forward. We believe there could be a chance to start selling. We think it possible that a 50% decline from the mid-20s is possible, down to 12-15, but we won't commit to this guesstimate. Meantime, a recent bounce in Wheat after a seven week decline from 13-14 a bushel, could be halted but wheat trades at around a 50% percent discount to rice prices. It may well be new elevated market prices will be established, but maintaining this average price relationship, we're not sure. If Western Australia comes through, and no-one is bothered by their 19th century rail distribution network, and the global annual production figures are high enough, then the decline could continue. We are short, but may end up getting stopped out. Ouch, but necessary. Corn is still moving up, due to planting delayed by wet weather conditions (what's good for rice is bad for other grains), but if speculation returns to the equities market in force, this could draw funds away from the hot grains markets, taking corn down as well. A counter-argument about an economic recovery propping up ag prices is possible, in combination with further belief that Chinese and emerging market demand may persist, but our success is defined by price movements, like it or not. In other thoughts, we've been resuming buying of equities in China, modestly, after reports of the great declines in these securities from the highs of fall 2007 became widely reported. We'll copycat Jim Rogers, and we've been investing in Tourism, Power, Environmental (water) and Agricultural businesses. We've also coat-tailed and begun small investments in non-USD forex ETFs, but we sense a USD rally in the making now that the Fed has ceased rate cutting apparently. This maybe our chance to exit USDs at a better rate this year as a result into Yen, Swiss Franc and Renmenbi. Warren Buffett's increasing overseas investment search in Europe (Sweden at the right price, Europe, etc.) reflects this awareness that exiting future USD weakness is not a bad big picture strategy. Mr. Buffett's discussion about our USD woes is well documented and we're inclined to agree. In addition, we think we're in a long and dragged out, tiring down-turn, and that we're basically in recession at this point. So, we'll prepare to go long Natural Gas, having regretted exiting some of our equity related plays, and keep an eye on grain price movement to provide us clues. We'll also figure out how to get more Swiss Franc, Yen and Renmenbi exposure, while we, also keep an eye on Sugar (long dated is around 14 cents), Cotton (we've lost money but will keep an eye out as near term is about 70 cents/pound and would like to play it long dated), and possibly Palladium, Gold (around 800 USD possibly as per Marc Faber, a/k/a "Dr. Doom") and Silver. Near-term highly specs included USD mega cap, perhaps in combination with financials and tech (although we think the latter two are short-term risky speculations ).
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