The Rude Awakening
Laguna Beach, California
Wednesday, May 2, 2007 ------------------------- - A commodity trader's view from the farm,
- Truth in investor's adages and traders mottos,
- The sound of popping bubbles and much more…
------------------------- Eric Fry, reporting from Laguna Beach, CA… "What do you see?" Kevin Kerr asked me late last week, while displaying the nearby photo. "Nothing," I replied. 
"Right," said Kevin. "That's exactly what a lot of corn farmers have been planting…Nothing! This is a picture I took just a few days ago, while on a fact-finding mission for my Resource Trader Alert subscribers. It's a corn field in Knox, Indiana." "Well, I'm not an expert on corn fields," I said. "But aren't they supposed to have corn in them?" "Right," said Kevin. "There's no corn in the field. But that's not the problem. There shouldn't be any corn in the field at this time of year anyway. The problem is that there's not even any corn SEED in the field. This field is still waiting to be planted. That's a big problem. The weather in the Midwest has been so wet that many farmers are late planting their fields. If the bad weather continues for much longer, they won't plant corn at all. They'll switch to beans. The farmers say that corn is supposed to be 'knee-high by July,' not knee-high by December!" "Sounds like you're bullish on corn," I remarked. "Absolutely!" Kevin declared. "This year's corn crop could be much lighter than most folks expect. The plantings just aren't happening. Not yet anyway. So I think corn's going a lot higher over the next few months. This is going to be a very volatile market, but I think it will work its way higher." A few days after my conversation with Kevin, the USDA confirmed his suspicions: Plantings are trailing well behind last year's pace: - 23% of the corn crop was planted, down from 48% a year ago.
- 3% of the soybean crop was planted, down from 9% a year ago
- .34% of the spring wheat crop was planted, down from 39% a year ago.
- 19% of the cotton crop was planted, down from 30% a year ago.
- 56% of the winter wheat crop was rated good to excellent, up from 54% the previous week.
This "surprising" news from the USDA triggered a sharp 3% rally in the corn market yesterday. Kevin was not terribly surprised by the report, of course. But he was pleased. "This is exactly the kind of report I was looking for," he declared yesterday. "This report should put some summer sizzle into agricultural commodity prices." "It might also take a little sizzle OUT of the ethanol craze," I replied. "Ethanol producers can't be too thrilled about the prospect of higher corn prices." "You may be right," Kevin concluded. "But I saw ethanol plants going up everywhere. These new plants might lose money making ethanol, but they're gonna be making it anyway…at least for a while. That's another reason corn prices might move higher. Should be an exciting summer!" ---- The Maniac Trader strikes it rich again --- High-Ho, SILVER! Those who heeded his call banked 400% in just34 days on this "sterling" options play - one of the 10 Triple Digit winners he picked in 2006… Join the Maniac's rampage and YOU could rake in even more than this - and faster - as the global commodities crunch escalates. Learn More Here. ------------------------------------------------ May is for Selling
By Eric J. Fry One year ago today, we cautioned: "The month of May has arrived, which means it's time to pay homage to one of our favorite Wall Street adages: 'Sell in May and go away.' For more than 50 years, according to the Stock Trader's Almanac, U.S. stocks have performed poorly between the beginning of May and the end of October. We are expecting a repeat performance in 2006." Our expectations proved MOSTLY correct. Over the ensuing two and a half months, the U.S. stock market stumbled, while the emerging markets and resource stocks plummeted. But by mid-summer U.S. stocks staged a modest recovery. The emerging market and resource stocks also trudged higher, but did not regain their May 1st levels until sometime around Thanksgiving. In other words, selling out of stocks in May of 2006 was not such a bad idea, provided that you
remembered to buy them back on November 1st. Since then, most major stock market indices have gained 10% to 20%. The Shanghai Composite Index, for its part, has soared a mere 107% since then. Perhaps, therefore, equity prices worldwide are better sold than bought…at least for a while. Perhaps, the trends that have been so friendly will turn suddenly hostile. Perhaps history will repeat itself…and Jeffrey Hirsch, publisher of the Stock Trader's Almanac has recorded much of the financial history that tends to repeat itself. According to Hirsch, the U.S. stock market tends to produce all of its gains in the six-month period between November 1 and April 30. Thus, for example, a hypothetical investor who placed $10,000 in the Dow Jones Industrial Average at the end of April each year since 1950 and sold at the end of October would have made no money whatsoever. But someone who bought at the end of October each year and sold out at the end of April would have reaped a bounty of $534,323. This time could be different, of course. But at least two seasoned market observes suggest erring on the side of caution. In a recent research note, Merrill Lynch Chief Investment Strategist, Richard Bernstein, warns: "We continue to view the spread of risk in the financial markets like popcorn popping in a microwave. While each kernel pops as an independent event, eventually the result is a bag full of popcorn. Rather than viewing the risk as simply being one major event, we believe risk spreads insidiously through the markets as a series of small events which investors generally consider to be immaterial. "We have been keeping track of the popping kernels…Number seven was the U.S. levying punitive tariffs on Chinese coated paper…Overall, it appears as though Washington wants to try to solve the U.S. economy's imbalances through the devaluation of the U.S. dollar and, increasingly, the adoption of trade barriers rather than sound policies…If the current course continues, investors should be careful not to be the last ones holding purely U.S. dollar assets." Jeremy Grantham, a legendary value investor, shares Bernstein's anxiety. In a recent letter to clients, Grantham observed, "From Indian antiquities to modern Chinese art, from land in Panama to Mayfair; from forestry, infrastructure and the junkiest bonds to mundane blue chips; it's bubble time! "Everyone, everywhere is reinforcing one another," Grantham continued. "Wherever you travel you will hear it confirmed that 'they don't make any more land,' and that 'with these growth rates and low interest rates, equity markets must keep rising,' and 'private equity will continue to drive the markets.'" "The bursting of [this] bubble will be across all countries and all assets, with the probable exception of high-grade bonds…Since no similar global event has occurred before, the stresses to the system are likely to be unexpected. All of this is likely to depress confidence and lower economic activity." During this particular month of May, the "popping corn" that worries Richard Bernstein's probably won't burst any of the bubbles that worry Jeremy Grantham. Probably. But if the sound of popping bubbles scares you, sell in May and go away. --- Introducing what market insiders are calling --- "The Only Stock You'll Need to Own Over the Next 10 Years" It's not a household name - I'd be shocked if you'd even heard of it - but holding it right now could be as smart as taking a time machine back 40 years ago… and snatching up shares in one of the greatest blue chip stock stories of our time…The Full Report Here: | 
