RICHARD RUSSELL: HYPERINFLATION? WHAT HYPERINFLATION?

by Cullen Roche

Few investors have been more vocal about the potential collapse of the US Dollar than Richard Russell.  But as the recovery builds strength Russell has dramatically toned down his commentary about any potential hyperinflation and collapse of the USD.  In his Friday commentary he said the market action simply isn’t even remotely displaying a hyperinflationary environment or even an eventual hyperinflationary environment.  And he’s dead right (via Dow Theory Letters):

Comment — I read a lot about “the coming hyper-inflation.” If hyper-inflation is in our future, I don’t see it in the market action.

The precious metals are hesitating, the CRB Commodity Index is in a bullish trend but is now hesitating, XLE, the widely-followed energy exchange traded fund has been in a bullish trend but is now moving sideways, oil has been declining, and March oil is now selling below 86.

And what’s most important (nobody seems to be noticing this) is that Chinese stocks are most definitely in a down-trend. China has been the monster buyer of commodities, and if China is slowing down, that will put a big question market in the hyper-inflation scenario.

One other item — if we’re heading for hyper-inflation Treasury bonds should be falling out of bed. Not so, below is a daily chart of the 30-year US Treasury bond, and it’s hardly falling out of bed. If there’s inflation coming and certainly hyper-inflation, the bond market will smell it. From the looks of this chart, I’d have to bet deflation over inflation.

When ever I hear a consensus view of what lies ahead, I always check with the market. If the market doesn’t agree, I remain sceptical. As for the current hyper-inflation forecast, I’ll remain sceptical as long as the market is sceptical.

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Mubarak resignation cools demand for gold

by Pham-Duy Nguyen

Gold fell from a three-week high Friday as an advance by the U.S. dollar eroded demand for the precious metal as an alternative asset.

The greenback rose for a second straight day against a basket of major currencies as reports showed the U.S. economy is improving and Egyptian President Hosni Mubarak stepped down. Earlier, gold gained as much as 0.5% amid mounting tensions in Egypt.

"Some of the dollar strength is hurting gold," said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. "If gold doesn't rally from here, it's going to trigger a lot of sell signals."

Gold futures for April delivery fell US$2.10, or 0.2%, to settle at US$1,360.40 an ounce. Earlier, the price reached US$1,369.70, the highest for a most-active contract since Jan. 20. This week, the metal climbed 0.8%, the third straight gain, after slumping 6.1% in January. In 2010, the price jumped 30%, the 10th consecutive annual gain.

Silver futures for March delivery declined 9.9¢, or 0.3%, to US$29.995 an ounce. This week, the metal gained 3.2%.

The tightest physical silver supplies in four years have tipped the U.S. silver futures market into backwardation this week, making near-term prices more expensive than more distant months.

Market watchers said that it has been more than 10 years since silver futures were last in backwardation, an unusual term structure associated with shortage of physical supply. Warehouse stocks have dropped to a four-year low on surging demand, while miners have hedged their future production.

Booming industrial demand for silver and record U.S. coin sales, combined with a surge in demand from mining companies to borrow the metal for their hedge programs have led to a squeeze in the physical silver market.

Palladium futures for March delivery fell $6.20, or 0.8%, to $814.70 an ounce on the New York Mercantile Exchange. This week, the price dropped 0.2%.

Platinum futures for April delivery declined $17.30, or 0.9%, to $1,813.50 an ounce. The commodity fell 1.7% this week.

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Critic blames ethanol for world food shortages

by DAN PILLER

Ethanol is again under fire as corn prices have climbed and food costs rise.

An anti-ethanol advocate accused biofuels of being a factor in global food shortages Friday.

The ethanol industry fired back, noting distiller grains are a cattle feed and that ethanol is the only nonfossil fuel available in mass quantities.

Meanwhile, corn's price rose again on the Chicago Board of Trade by 8 cents to $7.06 per bushel for the March contract. Corn's price has doubled since last June as domestic corn stocks have dwindled.
Nationally, about 37 percent of the corn crop goes to ethanol production. In Iowa, the amount is 60 percent.

Princeton University professor Tim Searchinger, a frequent ethanol critic, checked in with an op-ed piece Friday in the Washington Post essentially accusing ethanol of causing food shortages.

Searchinger didn't limit his criticism to corn-fed ethanol.

"Brazil's reliance on sugar ethanol and Europe's on biodiesel have comparably increased growth rates in the demand for sugar and driven up demand for vegetable oil," Searchinger said.
Growth Energy, the biofuels lobbying group put together by ethanol producer Poet and other biofuels interests, fired back with a statement and a news conference Friday in Washington, D.C.

Growth Energy noted that the ethanol fermentation process removes the starch, but leaves the protein kernels to be used as animal feed.

"Ethanol is both a food and a fuel business. What is ignored in this piece is that every ethanol plant in the country turns out animal feed as well as fuel - we only take the starch out of the corn kernel but put all the protein, fiber and oils right back into the food supply as 'dried distillers grains,' " Growth Energy said.
Growth Energy added, as a reminder, that ethanol is the only biofuels game in town until cellulosic ethanol is developed further.

"There is only one commercially viable alternative to this country's dependence on foreign oil, and that is domestic ethanol," Growth Energy said. "Every day, foreign oil is getting riskier, costlier and dirtier to extract. On the other hand, with cutting-edge technology and innovation, domestic ethanol is getting cleaner, smarter and more abundant."

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Updates of Super Commodity Systems

SUPER COMMODITY OPEN TRADES
Soybean Meal - After a few days seems wants to break the trading-range with several divergences on daily chart.
Platinum - Nice trade, it is now on the first support. Here yowe can lightens the position.
Soybeans - The trade started well with several divergences on daily chart.

SUPER COMMODITY RECENTLY CLOSED TRADES
Gasoline - After a promising start the trade has been stopped at breakeven.
eMini Nasdaq -After closing with a good gain the previous long trade, the sell short reverse has been stopped with a small loss.

Survivor Trading System - Trades of 11 February

I trades di Survivor System del 11 Febrraio. I risultati real-time di Survivor e di alcuni altri nostri trading systems sono a disposizione al seguente link: http://www.box.net/shared/5vajnzc4cp

Trades of Survivor System on 11 February. Real-time results of Survivor and our some other trading systemsare available at the following link: http://www.box.net/shared/5vajnzc4cp

Gas Prices Hit Their Highest Level Ever For Mid-February

by Mike "Mish" Shedlock

U.S. gasoline prices have jumped to the highest levels ever for the middle of February. The national average hit $3.127 per gallon on Friday, about 50 cents above a year ago.

The price is about 6 percent higher than on this date in 2008. The next day, pump prices began a string of 32 gains over 34 days. They rose 39 percent over five months, eventually hitting an all-time high of $4.11 per gallon in July.

Although gas prices are expected to rise, most experts aren't expecting a reprise of 2008, when the price spike forced many drivers to join car pools and trade in gas-guzzling SUVs for fuel-efficient cars.

"It would be a mistake to think we're going to have that all over again," said OPIS chief oil analyst Tom Kloza.

He says oil demand will slide in the U.S. by May, as refineries slow fuel production while they switch to summer blends of gas. World oil consumption also may not rise as much as expected.

And Kloza contends that oil traders are more cautious now, after getting burned when oil plunged to $33 per barrel in early 2009, just six months after hitting $147 per barrel. Even the most bullish traders no longer think they can chase commodity prices higher without risk, he says.

Still, Kloza expects gas to reach $3.50 to $3.75 per gallon this spring because of the usual run-up in prices ahead of the summer driving season. That would mean an increase of 12 to 20 percent from the current level.

Crude Futures - Monthly Chart

Image: Mish's Global Economic Trend Analysis

Crude futures for now have stalled right at 50% retrace level of the 2008 plunge in spite of the recent turbulence in Egypt.

Unleaded Gasoline Futures - Monthly Chart

Image: Mish's Global Economic Trend Analysis

Unleaded gasoline futures and gas pump prices follow the price of crude as one might expect.

Note the seasonal nature of the moves. Gasoline prices (and crude futures) tend to rise from January until June or July in most years.

In 2007, there was a ramp from the beginning of the year that ended in April, followed by a pullback until July. From then it was straight up for a full year.

2009 was back to the familiar pattern of continued strength from the beginning of the year until July. 2010 had a July low instead of a high, similar to 2007.

Crude Futures - Daily Chart

Image: Mish's Global Economic Trend Analysis

Prices at the pump may be up, but crude prices are down since the start of the year as noted by the dashed line. Prices at the pump will head lower eventually if crude prices keep sliding.

Inability for crude prices to continue higher with events in Egypt and the Mideast might be meaningful. Moreover, interest rate hikes in China could start weighing on commodity prices in general, especially if those hikes come at a pace faster than expected.

There are a lot of variables in play, including seasonality, rate hikes in China, the extremely overbought reflation trade, Quantitative Easing, and price action weakness (except for a 2-day pop now taken back) in the face of events in Egypt.

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