Commodity Trends – EYE on Corn

Corn fell to the lowest in almost two months amid speculation falling energy costs will diminish the appeal of commodities as a hedge against inflation and as Japan plans to cut imports of the grain. In sympathy, wheat and soybeans also declined.
  • Japan, which imports more than 60 percent of its food requirements, the highest level among developed countries, wants to become less dependent on overseas grain supplies to protect it from soaring international prices and ensure long-term security of supply, Yuji Sawa, vice minister of Agriculture, Forestry and Fisheries, said in an interview.
  • South Africa, the biggest corn producer in Africa, may increase its forecast for this year's crop by 1.7 percent, according to a Bloomberg survey of grain traders.

Putin Getting A Headache...

Global stock markets are rising today, and Russia is falling. This is a very straightforward negative divergence that Putin cannot be enjoying. Since my “Fading Fast Money” (Commodities) note on 5/20/08, Russia has lost -15.1% of its value.

Long term support for the RTSI Index is 2133, and today we’re seeing that line broken. As a leading indicator, this does not auger well for energy prices.

It is global this time, indeed.
Chart courtesy of

Spanish Inflation Consensus

Make no mistake, the “global inflation” Trend is a consensus one. Spain reported their June PPI numbers this morning at +9% year over year. That was a 23 year high. Given that stocks are discounting mechanisms of future news, it should be no surprise to the revisionists out there at this point that the Spanish stock market ended up losing almost 1/3 of its value from its October 2007 peak (when inflation was not consensus).

The “Trade” here in global equities is that inflation is abating sequentially from its June 2008 peak. Yes, inflation remains elevated, but that’s not the point. The point is that once you’re reading the July inflation reports, they’ll have come down from June.

Jean Claude Trichet and the ECB are going to start to look a lot smarter by the day. They stepped up, raised rates, and quelled inflation… for now.

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.47%
  • SHORT SIGNALS 78.71%

Asian Central Banking: Ben Bernanke, Take Notes...

Weakness in Asian currencies was one of the stealth leading indicators of their 2008 economic growth slowdown. This week that “Trend” has started to reverse itself. The Indian Rupee has recovered, predictably, since Singh surviving a political confidence vote. Meanwhile the Philippine Peso had its biggest one day move in the last 7 years overnight, trading +1.3% to back up to the 44 level.

Central bankers in Asia have been proactively hawkish, fighting the good fight on the inflation front. With commodities correcting this week, they’re getting rewarded for their travails. The head of the Philippines central bank came out with explicit comments overnight that he needs to raise rates further. His domestic stock market and currency liked that, and rallied. South Korea’s new President has recently done the same. Korean equities traded up another +2% overnight.

Ben Bernanke, I hope you’re taking notes.



Las Vegas Sands will now try and open the Four Seasons Macau by October 1, 2008. The most recent date I had was August 28th, 2008. Hopefully, the impact of the delay on the budget is limited. No word yet on whether Sheldon’s August birthday party will still be at the property.

Four Seasons Macau under construction

CRI: Why Swing At Such A Bad Pitch?

The main reason I pulled a 180 and got positive on CRI on 6/12 was my view that a long-needed CEO change can get the senior team refocused on actually investing in its brands instead of robbing them of capital and realigning its org chart to facilitate growth – even if it is at the expense of near-term margin. I was pretty confident, in that regard, that new CEO Mike Casey would take advantage of his first quarter out of the box to take down margins by 2-3 points (a level where I think CRI needs to revert to in order to sufficient brand investment capital in place). The 2Q earnings beat certainly proves me wrong there, as Casey printed a decent quarter (and a solid one relative to expectations), when he could have easily tanked the quarter and/or outlook with little recourse.

Does this new team ‘get it’ that it has to play catch-up in investing in its brands to stimulate growth at a consistent rate? This raises an interesting decision tree for me.

If the answer is ‘Yes’ then the timing is still too early on CRI, as there is another guide down to come. Perhaps the sheer magnitude of the changes to come take longer than the 6 weeks since the change was announced. I’m in this camp, and can completely see why it should take time to build the plan – especially given that this plan is likely to not include several senior managers at the company (i.e. Casey needs to walk on eggshells while he cans some colleagues).

If the answer is ‘No’ then this story is back to one where it will rally repeatedly on false starts – only to fundamentally stall due to lack of horsepower to compete. I don’t think this is the case, but tonally – it is THE KEY thing to watch out for. If Casey’s agenda (regardless of how it is discussed on the call) is about ‘tweaks’ to the model instead of material changes in strategic direction, then I’m going to eat crow on this story and head for the hills.

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