Market Update from Mike Kuta " The Squawk Trader "

May 08, 2013

Natural Gas Becomes Haven in Gold Plunge: Riskless Return. Natural gas, the worst-performing and most volatile commodity of the past decade amid a glut in supply, is replacing gold as a haven for commodity investors as the metal slumps. The heating and power-plant fuel produced the best risk- adjusted returns of 24 commodities in the Standard & Poor’s GSCI index over the last 12 months, rebounding from the worst ranking in the prior 10 years, the BLOOMBERG RISKLESS RETURN RANKING shows. Gold, the decade’s top performer, and silver tumbled as a stock market rally and a rising dollar curbed demand for the metals as a refuge. Power plants and factories are stepping up their use of gas after a surge in production of the fuel from shale formations pushed prices to a 10-year low last year. Rising demand may make historically volatile gas a haven, Jeffrey Currie, head of global commodities research at Goldman Sachs Group Inc. in New York, said in an April 16 research note. Banks from Goldman Sachs to Citigroup Inc. are boosting their forecasts for natural gas prices while cutting their estimates for gold. “Natural gas is emerging as a clear winner among commodity investments,” Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York, said in a phone interview on May 1. “The late-winter rally has fueled expectations that gas will outperform alternative investments in the sector.”
Gas Gains:
Natural gas futures for June rose 4.3 cents, or 1.1 percent, to $3.963 per million British thermal units on the New York Mercantile Exchange at 1:05 p.m. today. The futures have advanced 65 percent over the past year. Gold for June delivery on the Comex in New York climbed 1.3 percent to $1,468 an ounce. Silver for July delivery gained 0.4 percent to $23.905 an ounce. Gold is down 9 percent over the past 12 months and silver 19 percent. Gas has climbed a risk-adjusted 0.7 percent over the past year, followed by unleaded gasoline and corn, both with 0.5 percent, data compiled by Bloomberg show. Gas showed the best improvement by risk-adjusted return from the previous 10 years. The 24 commodities in the GSCI index had an average 0.2 percent risk-adjusted decline in the 12 months through yesterday. Silver had the worst reversal in risk-adjusted returns, followed by copper and gold. Gold, the best commodity by risk-adjusted return in the prior decade, fell to fourth from bottom. The risk-adjusted return, which isn’t annualized, is calculated by dividing the total return by the volatility, or the degree of daily price variation, giving a measure of income per unit of risk. A higher volatility means the price of an asset can swing dramatically in a short period, increasing the potential for unexpected losses.


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The risk of trading futures and options can be substantial. Trading foreign exchange carries a high degree of risk, and may not be suitable for all investors. All information, publications, and reports, including this specific material, used and distributed by Sweet Futures 1, LLC shall be construed as a solicitation. Sweet Futures 1 does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71. This website contains information obtained from sources believed to be reliable, but its accuracy is not guaranteed by Sweet Futures 1. Past performance is not necessarily indicative of future results.

CME Group Special Executive Report

DATE: May 8, 2013
SER # : S-6647
SUBJECT: Updated Status on the Declaration of Force Majeure at Corn and Soybean Shipping Stations due to Flooding on the Illinois River

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The current status of the Illinois River allows for a majority of the Corn and Soybean Shipping Stations to load barges. Therefore, the Force Majeure provisions that were invoked on April 25, 2013, in accordance with CBOT Rules 701 and 703.C.G(8) no longer exist, and shipping stations will be required to load at their daily rate of loading.
However, due to river conditions that still exist at some approved Corn and/or Soybean Shipping Stations, which may prevent these facilities from loading, Rule 703.C.G(8) details the responsibilities of these Shipping Stations in providing grain at an alternative location. For reference, the relevant portion of Rule 703.C.G(8) that applies to those facilities that are unable to load out Corn and/or Soybeans is provided below:
The shipper shall load water conveyance at the shipping station designated in the shipping certificate. If it becomes impossible to load at the designated shipping station for three (3) consecutive business days as a result of Force Majeure, the shipper will arrange for water conveyance to be loaded at another regular shipping station in conformance with the shipping certificate and will compensate the owner for any transportation loss resulting from the change in the location of the shipping station. If the aforementioned condition of impossibility prevails at a majority of regular shipping stations, then shipment may be delayed for the number of days that such impossibility prevails at a majority of regular shipping stations. If conditions covered in this rule make it impossible to load at the designated shipping station, the shipper shall notify the Registrar’s Office in writing of such condition within 24 hours of when the condition of impossibility began.

http://sweetfutures.com/2013/cme-group-special-executive-report-ser-6647-updated-status-on-the-declaration-of-force-majeure-at-corn-and-soybean-shipping-stations-due-to-flooding-on-the-illinois-river/

The risk of trading futures and options can be substantial. Trading foreign exchange carries a high degree of risk, and may not be suitable for all investors. All information, publications, and reports, including this specific material, used and distributed by Sweet Futures 1, LLC shall be construed as a solicitation. Sweet Futures 1 does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71. This website contains information obtained from sources believed to be reliable, but its accuracy is not guaranteed by Sweet Futures 1. Past performance is not necessarily indicative of future results.

Market Update from Mike Kuta " The Squawk Trader "

May 08, 2013
Freddie Mac posts second-biggest profit in its history.
Freddie Mac, the No. 2 provider of U.S. mortgage money, posted its second-largest quarterly profit in company history in the first quarter due to rising home prices, falling mortgage delinquencies and increased refinance activity. For the first three months of the year, the government-controlled company today reported net income of $4.6 billion, up from $577 million in the year-ago quarter. It was the company’s sixth straight quarter of profits. Freddie Mac, which faced insolvency when it was seized by the U.S. government in 2008, paid $5.8 billion to the U.S. Treasury Department in the first quarter as a dividend payment under the terms of its government bail-out. It said it would face another $7 billion payment in June based on its current net worth. The profit for the first quarter allowed the company to avoid drawing more funds from U.S. taxpayers. Freddie Mac and its larger rival Fannie Mae, which together own or guarantee about half of U.S. home loans, have been sustained by taxpayer support since September 2008, when they were placed in a government conservatorship.
The return to profitability of the two state wards has taken the heat out of efforts to lay a new base for the future of the nation’s housing finance system. The Obama administration outlined three broad approaches in 2011, but has stopped short of saying which route it would prefer. Meanwhile, lawmakers in Congress – both Democrats and Republicans – think Fannie Mae and Freddie Mac should eventually be wound down, but there is no agreement about what should take their place or how large a role the government should play in making sure mortgage credit is available. The companies have drawn $187.5 billion from the Treasury since being seized. Freddie Mac has now paid $29.6 billion in dividends to the Treasury since conservatorship began. Fannie Mae, which has yet to post its first-quarter results, reported 2012 net income of $17.2 billion, its largest annual profit ever and the first in six years. Under new bailout terms that went into place this year, Freddie Mac and Fannie Mae must turn over most of their profits to the government. Previously, the two were required to pay a 10 percent dividend.
Bank loans drop, even as profits jump.
It was another good quarter for banks, but they’re not quite fixed. The credit crunch may be over, but we are crawling our way out. After rising for all of last year, bank lending dropped in the first three months of the year, according to FDIC data compiled by bank research firm Bankregdata.com. The drop comes as low interest rates are squeezing how much money banks can make from their traditional loan business. More bad news for student loan borrowers. That wasn’t enough to halt the recent rise in bank bottom lines, though. Banks earned more in the first quarter than in any three-month period since the downturn. Collectively, U.S. banks earned $40.3 billion. That was up $5.5 billion from a year ago. Profits rose, even as banks appeared to be lending less. U.S. banks had $44 billion less in loans at the end of the first quarter than they did three months before. There is some seasonality to the numbers. The biggest drop was in credit card borrowing, which normally falls in the first three months of the year. But home loans were off, too. That’s probably a result of higher interest rates in the first month or so of the year. Rates have fallen since, so mortgage lending could be rising again. Other categories of lending, though, were up. Business lending rose $24.2 billion. Consumers took out an additional $5.6 billion in auto loans in the first three months of the year.
 

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The risk of trading futures and options can be substantial. Trading foreign exchange carries a high degree of risk, and may not be suitable for all investors. All information, publications, and reports, including this specific material, used and distributed by Sweet Futures 1, LLC shall be construed as a solicitation. Sweet Futures 1 does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71. This website contains information obtained from sources believed to be reliable, but its accuracy is not guaranteed by Sweet Futures 1. Past performance is not necessarily indicative of future results.

DTN Morning Comments on Grains

Drier Forecast Pressures Corn Overnight

   Corn futures are lower, soybeans lower, and wheat lower at 6 a.m. CDT.
By Darin Newsom DTN Senior Analyst
6:00 a.m. CME Globex:   Corn 16 cents lower (July), soybeans 2 cents lower (July), and wheat 10 cents lower (July).
CME Globex Recap:   Corn contracts posted solid double-digit losses on the open of the overnight session, pulling wheat and soybeans lower as well. While corn extended its loss through early Monday morning, the other grains were able to stabilize. Outside markets saw renewed support with both gold and crude oil rallying. DJIA futures indicate US stocks should continue historic rally.

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The risk of trading futures and options can be substantial. Trading foreign exchange carries a high degree of risk, and may not be suitable for all investors. All information, publications, and reports, including this specific material, used and distributed by Sweet Futures 1, LLC shall be construed as a solicitation. Sweet Futures 1 does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71. This website contains information obtained from sources believed to be reliable, but its accuracy is not guaranteed by Sweet Futures 1. Past performance is not necessarily indicative of future results.

DTN Morning Comments on Livestock

Cattle Contracts Geared for Opening Bounce

   Live and feeder cattle futures should open moderately higher, supported by short covering and the large premium of cash feedlot sales. Look for lean hog contracts to start out on a mixed basis tied to light bear spreading and profit taking.
By John Harrington DTN Livestock Analyst
Cattle: Cash-$2 HR       Futures: 10-30 HR   Live Equiv $138.41  + 0.23* Hogs:   Cash 0.50-$1 HR  Futures: mixed      Lean Equiv $ 94.32   – 0.21** * based on formula estimating live cattle equivalent of gross packer revenue ** based on formula estimating lean hog equivalent of gross packer revenue

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The risk of trading futures and options can be substantial. Trading foreign exchange carries a high degree of risk, and may not be suitable for all investors. All information, publications, and reports, including this specific material, used and distributed by Sweet Futures 1, LLC shall be construed as a solicitation. Sweet Futures 1 does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71. This website contains information obtained from sources believed to be reliable, but its accuracy is not guaranteed by Sweet Futures 1. Past performance is not necessarily indicative of future results.

Market Update from Richard L Nunes

DXY-      82.179                +.054
EUR-      1.3103               -.0012
TYM3     132-29                +.02
RXM3    146.33                 +.018   (Bunds) 
SPM3    1607.40                -1.10
VGM3   2717.00               -8.0  (Euro Stoxx)
CLM3     96.06                    +.46     (WTI)
COM3   104.70                  +.51    (Brent)
XAU       1476.04                 +5.31

News and Data;

Asian equity markets were firmer for the most part overnight, boosted by Fridays strong US jobs report. The Hang Seng  was up 1.0%, the Shanghai Composite up 1.2%, and the Indian Sensex up 0.5%. On the flip the Kospi fell 0.2%, while the Nikkei was closed due to a holiday. Euro Stoxx are down .25%.
Treasuries are unchanged across the curve- 10-year yields at 1.73% and 30-year yields at 2.95%. In Europe, UK gilts and German bunds are both slightly to 1.72% and 1.23%, respectively. Spanish 10-year yields are up 3bp to 4.05%.
Australian retail sales fell 0.4% m/m in March. This comes on the back of strong gains in January and February.
Australian – ANZ April Job ads dropped 1.3% in April after a 1.5% decline in March.
Australian TD/MI Apr inflation gauge remained benign, up 0.3% m/m & 2.1% y/y (same as Mar)
Australian Treasury to lower growth forecasts for the next 2-yrs by 0.25% to 2.75% according to the Australian Financial Review.
Australian PM Gillard and Treasurer Wayne Swan commented over the weekend that declining tax revenue was the result of the high AUD.
China HSBC April services PMI tumbled to its lowest level in close to 2 years at 51.1 versus 54.3 previously.
Tiawan- CPI rose 1.04% y/y in April after a gain of 1.37% in March.

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The risk of trading futures and options can be substantial. Trading foreign exchange carries a high degree of risk, and may not be suitable for all investors. All information, publications, and reports, including this specific material, used and distributed by Sweet Futures 1, LLC shall be construed as a solicitation. Sweet Futures 1 does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71. This website contains information obtained from sources believed to be reliable, but its accuracy is not guaranteed by Sweet Futures 1. Past performance is not necessarily indicative of future results.

Market Update from Mike Kuta Part 1

May 06, 2013
Fund manager: Now’s the time to buy bonds.
With Treasury yields near record lows, one contrarian fund manager says now is the time to buy. While investors around the world are voraciously hunting for higher returns than the 1.7% currently offered by 10-year Treasury notes, that’s a misguided approach, said Jeffrey Gundlach, founder of investment fund Doubline Capital.  He acknowledged that “bond yields are painfully low,” but said there are plenty of reasons for those yields to move even lower. Speaking at the Altegris Global Conference last week, Gundlach said he’s convinced the Fed won’t raise rates or end its bond buying program, known as quantitative easing or QE, anytime soon. (Federal Reserve sticks with stimulus) By buying bonds, the Fed’s stimulus moves push up U.S. Treasury prices, which in turn depresses yields. Bernanke has said that he sees no negative consequences from the Fed’s actions, so worrying about the end of it is a waste of time, Gundlach said. “Let’s face it, QE travels right through the central heart of the U.S. bond market,” Gundlach said. Last week, the Fed said it would continue buying $85 billion a month in mortgage-backed securities and Treasuries.
Buying up Treasuries probably won’t make investors rich, Gundlach admitted, but in a world fraught with investment risk, it’s still a relatively safe place to find steady returns over the long-term. Even if investors opt to just keep their cash in banks right now, there are no guarantees they’ll remain safe. Just look at Cyprus, he said. Beyond Treasuries, Gundlach thinks corporate bonds could be interesting too, but investors should avoid bond index funds. He reminded investors that General Motors and Ford made up a large portion of investment grade index bond funds ahead of the financial crisis. Investors in those funds who thought they were taking on minimal risk experienced steep losses in 2008 and 2009. How low could bond yields go considering 10-year Treasury yields are already hovering below 2%? “I’m starting to think that all bond yields will converge down to 1%, if central banks truly are going to do whatever it takes,” Gundlach said. If Gundlach is right, and yields move even lower, investors who buy now, could still net a nice profit. 
Survey: 87% of Americans ‘Not Confident’ About Their Retirement.
Despite the Dow recently hitting all-time highs, millions of Americans still have a dismal outlook when it comes to their own ability to retire, a new survey reveals.   Conducted by the Employment Benefit Research Institute, the survey reveals a startling fact: A mere 13% of workers are “very confident” when it comes to having enough money to retire. More than twice that number, 28% of respondents, said that they were “not at all confident” about their ability to retire comfortably (triple the number from three years ago). More than a fifth of respondents — 21% — said they were “not too confident” and 38% said they were “somewhat confident.”  So why, in the great prosperous country of America, are 87% of those facing retirement lacking confidence? Many who took the survey pointed to a rising cost of living and day-to-day expenses as the reason they are worried about or unable to save enough for retirement. And many also noted that rising healthcare and long-term care costs will have a major impact on their ability to afford a comfortable retirement. Adding insult to injury is the fact that the once mighty dollar no longer goes as far as it once did as a result of the loose monetary policies from the Federal Reserve. And current yields on safe investments, like CDs, bonds, and money markets, pay 85% less than what they did just six years ago. The impact of President Obama’s tax increases isn’t helping matters either. 

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The risk of trading futures and options can be substantial. Trading foreign exchange carries a high degree of risk, and may not be suitable for all investors. All information, publications, and reports, including this specific material, used and distributed by Sweet Futures 1, LLC shall be construed as a solicitation. Sweet Futures 1 does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71. This website contains information obtained from sources believed to be reliable, but its accuracy is not guaranteed by Sweet Futures 1. Past performance is not necessarily indicative of future results.