"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Friday, February 25, 2011

Hedgies run back into Grains - Up goes the CCI

For those of you who might have seen the original "Karate Kid" movie, you will recall that great scene where Mr. Miyagi, played by the now deceased Pat Morita in instructing his young student, Daniel LaRusso in the finer arts of waxing classic automobiles. His famous lines: "Wax On; Wax Off", come to my mind with increasing frequency these days in observing the wild price swings occuring in the commodity markets.

Take corn for example - Earlier this week the hedge funds were throwing it all away on the stupid notion that a rising crude oil price would force people to give up eating and somehow also suppress the appetite of livestock and poultry. WAX OFF

Today they are back in there loading up on the yellow foodstuff after end users bought every bit of what they threw away and reminded the world that human and animal appetites do not particulary care what the cost of crude oil might happen to be.    WAX ON

Tomorrow, who knows.

The result of all this buying across the food complex has been to push the CCI, the Continuous Commodity Index right back up against its recent all time high, setting up a very real possibility that the index will CLOSE at a new all time high price. Were it not for the current bout of weakness in the precious metals, the CCI would have gone on to make an all time high once again.

Maybe the bond market will eventually get the message and come out of its fairy tale, Fed-created La La land.

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