Before the Bell: The Ag Trade; Greenspan Glum
Farmers are in a Golden Age but the U.S. is "on the edge" of recession.
Morning Perspective: The Ag Trade
According to The WSJ, farmers are living in the "golden age" of agriculture, with grain prices surging to historic levels. Prices of corn, wheat, and soybeans are all trading 25% or more above their levels a year ago, due in part to increased demand from biofuel producers and the soaring demand from the emerging markets such as China and India. Further, economists expect net farm income to grow to $92.3 bln in the next year – a 51% increase over the 10-year average of $61.1 billion. Professor Ryan Krueger mentioned this long-term secular story back in November in The Ag-Trade.
From the Bull Pen: Bulls can play the upside in Monsanto (MON) with near-term sell-stops below $110. Another alternative is Deere & Co. (DE). Bulls believe the company will benefit with the increase in farming income. Sell-stops may be set below $81.50.
From the Bear Cave: Bears know these high prices are pressuring the margins of companies like Kellogg (K). Buy-stops may be set above $52.50 on downside attempts.
According to Bloomberg, Former Fed Chairman Alan Greenspan said the U.S. economy is on brink of a recession. At a conference with energy executives, Greenspan said the U.S. is "clearly on the edge" with chances being "50% or better." The statement is a stark contrast to his view a year ago when he said there was only a 33.3% chance the U.S. would enter a recession. Further, current Fed Chairman Ben Bernanke testified before Congress yesterday that downside risks to growth had increased with the job market and high energy costs taking a toll in spending. For context, read Mr. Practical's Minyan Mailbag: Fed's Fix.
From the Bull Pen: Bulls can look to Molson Coors (TAP) in a slowing environment. Near-term sell-stops may be set below $48.
From the Bear Cave: Bears see a short play in Caterpillar (CAT). Buy-stops may be set above $72 (above the double top) or $75 for those with a higher risk profile.
For more ideas, see Minyanville's Spotlight Stocks.
Quick Check Around the World
The week winds down into a three day weekend as Asia is mixed up and Europe is seeing red.
Asian trading closed with the Hang Seng +0.53%, Nikkei -0.03%, Sensex +1.96%, Taiwan +0.14% and Shanghai -1.21%.
A quick check across the pond finds the CAC -0.95%, DAX -0.35%, FTSE -0.59%, ATX -1.44%, Swiss Mkt. -0.79% and Stockholm -0.29%.
A Look At Commodities
Commodities are stronger. Crude oil is higher +0.45 to 95.92. Gold is up +2.70 to 910.10. Silver is higher +0.215 to 17.465, and copper is lower -3.75 to 348.80.
The dollar index is lower -0.146 to 76.006.
As of 8:45 AM EST, S&P futures are trading lower -12 points to 1339, and Nasdaq futures are down by -17 points to 1777.
On the Radar
Import Price Index m/m: 1.7% vs. 0.5% cons.
Import Price Index y/y: 13.7% vs. 12.7% cons.
Empire Manufacturing: -11.7% vs. 6.5% cons.
9:00 Net Long-term TIC Flows: $70.5 bln
9:00 Total Net TIC Flows: $67.5 bln
9:15 Industrial Production: 0.1% cons
9:15 Capacity Utilization: 81.4% cons
10:00 U of Michigan Confidence: 76.0 bln cons
Happy Friday, Minyans! Good luck!
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