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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: patron_anejo_por_favor who wrote (18888)	12/17/2004 7:38:56 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Snip from Pimco Paul A. McCulley Managing Director December 16, 2004 McCulley@pimco.com Very long article Includes a discussion on SS I like this discussion on Japan vs the ECB Mish ============================================================= In the fullness of time (my way of saying the long-term), the currently-emerging countries must receive the hand-off. That’s the way the world works in the fullness of time. After all, America was once an emerging country! The tricky thing is that time ain’t yet full. You are right, of course, that Euroland, at least so-called Old Europe, does not have the right stuff. It’s got many of the same demographic challenges as Japan, as well as the anti-demand pain of falling real wages for the young, as cradle-to-grave socialist policies, including employment policies, give way to the reality of global capitalist competition. What is more, Europe is shackled with decidedly un-Keynesian aggregate demand policies, led by inflation nuttery at the ECB. In this regard, Japan is a lot better off than Euroland, in that the BOJ is an enlightened reflationist, committed to printing Yen – including for the purpose of buying dollars – with no limit until the inflation dog finally comes home. In contrast, the ECB specializes in preaching the joys of deflationary pain and regrettably practices what it preaches, on its own score by refusing to print up Euros to sell against dollars, so as to temper deflationary appreciation in the Euro and one-step removed, in advocating that fiscal policymakers pursue pro-cyclical tightening in a deflationary lacuna. And if it weren’t so sad, I would laugh at the ECB’s latest self-tied knot in its Calvinist shorts: Headline inflation is above the ECB’s 2% target, rendering the ECB unwilling to ease (intervening against the appreciating Euro and/or cutting short rates), but the primary reason headline inflation is above the ECB’s target is administrated price hikes, as fiscal authorities put up taxes to try to appease the ECB’s call for fealty to the Growth and Stability Pact, which is fundamentally flawed in that it does not cyclically-adjust deficit structures. pimco.com

To: patron_anejo_por_favor who wrote (18888)	12/17/2004 7:49:23 PM
From: mishedlo	Respond to of 116555

Grain Report CORN Hi, this is Tim Hannagan its Friday Dec. 17 and this is my weekly review. Corn started Monday reports with our weekly export inspection report showing 38.8 m.b. were inspected for near term export off from 42.8 the week prior and four week average of 36. It was a neutral demand indicator at best. Thursdays weekly export sales report showed 636 t.t. were sold last week off 30% from the week prior and 28% under our four week average. Asian sales were 368 versus 717 the week prior. Again, another not so friendly near term export signal. Funds and large speculators came in this week heavily short ad began to buy back positions giving us a 2.074 high for the week basis March futures up 10 cents form the weeks prior low. Question now is was this adequate pre-holiday month and year end short covering to satisfy the trade. All the fundamentals of supply and demand suggest new lowest are coming but mechanics still leave a chance for one last short covering rally. If its going to accrue its more probable to happen Monday to Tuesday as large traders should look to start their holiday before Thursday our last trading day. Consider this. By a lower open Monday on March futures and a Feb. 2.00 put for 3 or 4 cents protection. Look to test 2.10 early week. BEANS Mondays first report came with our weekly export inspection report showing 25.6 m.b. were inspected for near term export down from, 34.4 the week prior and four week average of 39. Not a good demand signal for the week. It was off set by word China was in for 135 t.t. ahead of our Monday open. Thursdays weekly export sales report showed 871 t.t. were sold last week, 96%over the week prior and 11% over the four week average. Asian sales were 518 t.t. with China in for 406. It's a good demand signal off setting our inspection number. Other news in the market this week that looks to be supportive to prices longer term is the further spread of Asian rust disease in South America. Brazil found the yield killing disease in Sao Paulo this week bring the total to 6 regions effected Argentina has now found the rust in 2 provinces. With the rain their having it will make it hard to apply the chemical needed to arrest the spread of the rust. Moisture helps the rust grow and washes away chemicals. This looks to be something very costly to them in terms of spraying costs but we cant yet say production will fall below a year ago as planted acres are up significantly we got what we called for this week with funds buying back short positions ahead of the holiday and year end giving us a 30 cent rally off last weeks low to 5.514 basis March. Support lies at 5.30 and resistance 5.61 next week. Buy a lower open Monday and look for more short covering into Wed. and risk a close under 5.30 with stops. WHEAT Wheat's first report was Monday showing our weekly export inspection number showing 13.6 m.b. were inspected for near term export from the week prior of 24.6 and four week average of 18.7 Its viewed as a weak demand indicator. Thursdays weekly export sales report showed 394 t.t. were sold last week down 23% form the week prior and 11% under our weak four week average. We had poor sales under 3.00 so this year end short covering rally surely looks to abate demand further. Earlier in the week we saw a sale of U.S. wheat to major world player Egypt of 60 t.t. but 120 t.t. went to the French. We continue to get the tail of the sale. Its clear that after the holidays we look to move prices lower to find demand. We had a 10 cent rally this week off last weeks low before sellers entered. Funds continue to carry a hefty short position and may cover more shorts before Thursday. This could come as early next week sees our coldest temperatures of the year with assorted ice, snow and wind in our western plains wheat states. This could lend fear to wheat damage. March has support at 2.95. Buy a dip Monday and a Feb. 2.85 put for 4 cents or $200 downside protection. Get out of futures on a rally or on a stop under 2.95. First resistance is 3.10 then 3.20.