South American Farmland Co. Adecoagro is Soros' Largest Holding As of 6/30/2011

AGRO vs. CORN, CCI Index, S&P GSCI Commodities Index (StockCharts)
I've been tracking Adecoagro (NYSE:AGRO) since it went public in January and it is Soros Fund Management's largest holding as of 6/30/2011, worth $264.4 million (13F SEC Filing). The fund sold 2.62% of its shares during Q2, so we'll see if Soros dumped it or added to his position after June 30 (See AGRO's institutional holdings at nasdaq). The stock is down 26% from its post IPO high of $13.5 smackers. Is this action pricing in future food price declines from a global recession (if that's what markets are pricing in) and monetary tightening in China?

AGRO fell in tandem with the World Bank Food Index, S&P GSCI Commodities Index and Reuters-CRB CCI Commodities Index after the World Bank Food Index peaked in February 2011. The CORN ETF, on the other hand, is testing the June highs which is interesting. The recent USDA corp production report was bullish for corn, read more at AgJournal. In the World Bank report, China, Ethiopia, Guatemala and Vietnam saw huge food price moves. Ethiopian food prices are up 45% year-over-year and its currency depreciated against the Dollar. So, back to the original topic of this post. Adecoagro is a huge agricultural commodities play if the ag boom continues.

Joint Chinese-Indian Oil Tanker Patrols Possible? - Guest Post

Varyag - China's Aircraft Carrier (Wikipedia)
Guest post by John C.K. Daly of OilPrice.com

Joint Chinese-Indian Oil Tanker Patrols Possible?

Aside from cost, the major problem for oil importing countries is getting the purchases safely home. Essentially, there are only two options - pipelines and maritime transport.

Both are vulnerable to attack and this is increasingly preoccupying Chinese leaders, especially as, according to China's Ministry of Industry and Information Technology, China's dependence on imported oil rose to 55.2 percent for the first five months of 2011, surging to 9.61 million barrels per day.

What to do to secure uninterrupted supplies of 'black gold?"

Negotiate.

In a development with significant implications for the Pentagon's professed "full spectrum dominance," (i.e., quash all military opposition) the Hindustan Times reported that Beijing is cautiously sounding out India about the possibility of joint naval patrols in the Indian Ocean to safeguard tanker traffic.

Philadelphia Fed Manufacturing Index Falls To -30.7, Lowest Since March 2009

The diffusion index of the Philadelphia Fed Business Outlook Survey fell to -30.7 in August from 3.2 in July. Read the report here in pdf form. The survey covers eastern Pennsylvania, southern New Jersey and Delaware. During the past few weeks the S&P has been trying to price in this economic weakness. It is currently down 4.91% today. Here's an interactive historical chart of the index. It hit a high of 43.4 in March; nice volatility.

German DAX Composite Down 20.62% Since Beginning Of August (Chart)

The DAX is down 3.38% this morning. I can't believe it lost 23% in eleven days. A 20% price decline is considered a bear market.

German DAX Composite (StockCharts.com)
Related:

Morgan Stanley “Dangerously Close to Recession” – Lowers GDP Estimates (HedgeAnalyst)

German Bund Yield Slides to 11-Month Low Amid Concern Growth is Faltering (Bloomberg)

Germany's discouraging GDP data adds to fears (Bloomberg News/Deleware Online)

German Slowdown Sapped Euro-Zone Growth in Second Quarter (Spiegel)

It’s a Technical Mess All Over the World: Yamada (Breakout Video)

EUR/USD Formed New Channel, Waiting For Big Catalyst (Technical Update, Articles)

EUR/USD is waiting for a big catalyst that will force it out of a symmetrical triangle. Yesterday, EUR/USD spiked to 1.45173 after piercing through the 8/15 high (1.44772), but since then it retraced a bit and is currently trading at 1.44105 (where it's been for months). The top yesterday formed a new descending channel, and if you connect the recent downtrend with the major uptrend from June 2010/January 2011, you have a symmetrical triangle inflection point. The two recent highs, 1.45173 and 1.45358, are now important resistance levels to break if EUR/USD wants to proceed to 1.50 and beyond.

EUR/USD - FreeStockCharts.com 8/18/2011

Euro zone news:

Finns Set Greek Collateral Trend as Austria, Dutch, Slovaks Follow Demands - Bloomberg

German Finance Minister, Wolfgang Schaeuble: No need to further strengthen the EFSF - Capital.gr (translated)

"Morgan Stanley cuts 2011 Eurozone GDP forecast to 1.7% from prev. forecast of 2%, sees material risks of outright recession" - Ran Squawk

S&P Confirms France's AAA Rating, Stable Outlook - WSJ

Markets give eurozone plan cool reception - Financial Times

Debt Crisis Could Leave Eurozone With No Triple-A Sovereigns - Euromoney

ECB’s Nowotny Says Italy Not Greece, Too Early for Euro Bonds - Bloomberg

George Soros interviewed at Der Spiegel: #1: 'You Need This Dirty Word, Euro Bonds, #2: 'You Can Count on China To Back the Euro'

Chavez is Nationalizing Venezuelan Gold, Rusoro Mining Chart, China Forecasts Cut (Links)

Rusoro Mining (RML) Courtesy of StockCharts.com
Chavez is nationalizing Venezuela's gold sector. According to Reuters, TSX listed Rusoro Mining Ltd. (RML.V), which is run by Russia's Agapov family, is the "only large gold miner operating in Venezuela and produced about 100,000 ounces of gold in Venezuela last year. The company said export limits by the Government hurt its ability to finance attractive mining projects. Rusoro's stock closed at $0.125 per share today, down 93% in 4 years.

Venezuela news:

  • Chavez to nationalize Venezuelan gold industry (Reuters)
  • Chavez Emptying Bank of England Vault as Venezuela Brings Back Gold Hoard (Bloomberg)
  • As Chavez Pulls Venezuela's Gold From JP Morgan, Is The Great Scramble For Physical Starting? CME Group metal depository statistics table - (Zero Hedge
  • Venezuela Plans to Move Reserve Funds (WSJ)
  • Venezuela moves reserves to BRIC nations (Reuters)
  • Venezuela expects $4 bln loan from Russia - Chavez (Reuters)
  • Pension scandal shakes up Venezuelan oil giant PDVSA - (Reuters)
China analysis:

  • China Forecasts Cut by Morgan Stanley, Deutsche (Bloomberg)
  • Bad Debt at China Banks Growing: Jain (Bloomberg)
  • Local Govt Loan Risks 'Under Control': CBRC - (China Daily)

Technical Views From Louise Yamada and Tom DeMark (8/16/2011)

Source: Flickr
Technical Analysis: Louise Yamada, founder of Louise Yamada Technical Research Advisors, believes a new cyclical bear market has been confirmed. Watch her three interviews on Breakout (Yahoo Finance).
  1. Market in Death Cross Mode: Stay on the Sidelines
  2. It’s a Technical Mess All Over the World: Yamada
  3. Gold, Oil & the Dollar: Correlation Breakdown Is Concerning
"We've finished the bull market, the cyclical bull, and we're in a new cyclical bear. Most of the global markets are down 20% or more. The New York Stock Exchange, the Russell 2000 are already at the bear market 20% threshold. And having in place our three momentum sell signals on a monthly basis for most of the markets except the U.S. at this point, suggests that we're in a cyclical bear market."

Tom DeMark, founder of Market Studies, thinks the S&P makes a new low during this sell-off and then breaks above the April high. Overall though DeMark said the "trend is down." Peter Lee, Chief Technical Analyst at UBS, also sees one more high in the S&P before it completes its cyclical bull run. Interesting.

DeMark Says Stock Rally May Begin in Weeks, Europe Banks 'Buys' (SFGate/Bloomberg)

"We're at the point right now where the next trip down will probably generate a buy signal," said DeMark, founder of Market Studies LLC. "Everything we follow is indicating the Dow Jones and the S&P should make a minor new recovery high, and probably the Nasdaq, too." (read article at SF Gate)

Prechter: Wave 3 is Broader and Stronger, Deflation Gaining Upper Hand Again

Robert Prechter, founder of Elliott Wave International, hasn't really changed his views since last year. Did QE2 backstop wave 3? The S&P is actually right back where it was before QE2 started. During his CNBC interview he said, "if the decline of 2007-2009 was the first wave down, under the Elliott Wave model the second decline, which we call the third wave, is usually a lot broader and a lot stronger, so that's why I was trying to position people for a really dramatic turn to the downside, and probably one that's going to last a while" (through 2016). He also said "deflation is gaining the upper hand again" and to stay in cash or short rallies. He thinks we are in the early stages of a depression, but sees one of the greatest buying opportunities ahead. I embedded the video from Elliott Wave's site after the jump (w/ EW's news feed).

Soros: US Markets See Recession Ahead, Not Shorting Euro (China Has Interest)

George Soros - World Economic Forum on Flickr
In a long interview with Spiegel on Monday, George Soros, chairman of Soros Fund Management, said the creation of euro bonds would save the euro zone, but "if the euro were to break up, it would cause a banking crisis that would be totally outside the control of the financial authorities" and cause a great depression. However, Soros is not shorting the euro because he sees China as the "mystery buyer" (the China put?).

At the end of last June, EUR/USD and equities rallied after Chinese Premier Wen Jiabao said China would continue to buy European government debt and support the euro (Bloomberg). I see EUR/USD as the next big trade once it gets forced out of the symmetrical triangle. Soros also said U.S. markets are predicting a double dip recession ahead... Read the full interview at Spiegel

Russian Pipeline Transiting North Korea Somewhat Unlikely (Guest Post)

Russian Gas Pipelines (Wikimedia Commons)
Guest post by OilPrice.com

Russian Pipeline Transiting North Korea Somewhat Unlikely

There apparently is something about building pipelines that causes otherwise rational oilmen to indulge in reveries that would give an opium addict pause.

Two of the most recent ideas for pipelines with a less than rational basis are Nabucco (less than 25 percent of the necessary throughput committed thus far) and the Trans-Afghanistan-India-Pakistan pipeline (running through a country wracked by 32 years of civil war), with the past decade seeing NATO fruitlessly attempting pacification.

Now a third surreal energy corridor has been added, a proposed Russian-South Korean natural gas pipeline transiting Kim Jong-Il's socialist paradise on the Yalu.

10 Year Treasury Note Yield Near 1941, 2008 Lows (1.95%, 2.04%)

The 10 Year Treasury Note Yield hit a low of 2.09% on August 10, 2011, which is 5 basis points above the low made in December 2008 (2.04%) and 14 basis points above the 1941 low of 1.95% (Robert Shiller's data pre-1953). The yield closed at 2.28% today. Mutlpl.com has the historical chart going back to 1881. The site also has the S&P 500 P/E ratio, dividend yield, earnings, inflation rate and more. A 10Y yield below 2% would be interesting to see.

Historical chart of 10 Year Treasury Note Yield (source table at multpl.com)


$TNX - 10 year Treasury Note Yield (2008, 2011 lows) - StockCharts.com

Linkfest For 8/15/2011

  • Google (GOOG) to Acquire Motorola Mobility (MMI) for $12.5 Billion or $40/share (12,000 patents) - Google
  • Supercharging Android: Google to Acquire Motorola Mobility - Google Blog
  • ECB buys €22bn in eurozone bonds - FT.com
  • Berlin braces against calls for common 'eurobonds' - Deutsche Welle
  • World Bank's Zoellick Sees 'New Danger Zone' in Global Economy - SF Gate
  • Mutual Fund Brokers Hurt By Lack Of ‘Cash On Hand’ During Down Economy - Inquisitr
  • Zulauf: Own Gold, Treasuries, No Debt & Get Out Of Equities - Pragmatic Capitalism
  • Next Week's Market Charts That Matter (Goldman Sachs) - Zero Hedge
  • Hong Kong Recession Risk is Global Warning: Forecaster - Bloomberg
  • H.K. Apartment Sellers Cut Asking Prices - Bloomberg
  • Singapore Prime Minister: Global Recession Is 'A Possibility' - WSJ
  • Fannie Mae and Freddie Mac's fire sales are crippling metro Detroit communities - Detroit Free Press
  • London House Prices Plunge on Financial Turmoil - Bloomberg
  • Japan's Economy Shrinks but Beats Expectations - WSJ
  • George Soros: Three steps to resolving the eurozone crisis - FT.com
  • Italian unions threaten strike over new austerity - AP
  • Sterling No Refuge as King Eyes Stimulus - Bloomberg
  • Satyajit Das: The Real Debt Crisis is in Europe – Part 1 – “Solvency But Not In Our Time” - Naked Capitalism
  • Denial In Germany & France Only Increases The Risks In Europe - Pragmatic Capitalism
  • German government no longer rules out euro bonds - report - Reuters (?)
  • Warren Buffett: Stop Coddling the Super-Rich - NYT
  • ECB is euroland's last hope as bail-out machinery fails to resolve crisis - Telegraph
  • Eurobonds needed "fast," says German export group - Reuters
  • Are You Ready To Not Fight The Fed…… Again? - The Macro Trader

Secular P/E Ratio Bears vs. S&P Earnings Yield-Treasury Spread Bull

A look at the bear market and 
monthly MA's from my previous post
Comstock Partners continues to believe we're in a secular bear market in their latest post titled "Lengthy Bullet Points on our Bear Case Regardless of Interim Rallys(8/4/2011):

"Although many on Wall Street believe the market is currently undervalued we disagree. The market expected the S&P 500 to earn $108 in early May of 2008 but due to the bursting of the bubble the earnings came in at $50 for operating earnings (excludes write-offs) and $15 for reported earnings (GAAP). The analysts that are using $100 this year and more next year for the S&P 500 and a P/E of 15 to magically come up with 1500 on the index are guilty of faulty reasoning. We believe we will trade at below 10 times depressed earnings which should take us down to the lows of 2009 or below. It is clear to us that there will have to be a global slowdown in the second half of this year and next. The reasoning for the slowdown is again the debt, but not just the sovereign debt, the private debt is even worse than the public debt." continue reading

John Hussman of Hussman Funds believes this as well. From tonight's note, "Two One-Way Lanes on the Highway to Hell":

Ukraine to Cut Gazprom's Umbilical Cord? - Guest Post

Source: Photobucket
Guest post by OilPrice.com

Ukraine to Cut Gazprom's umbilical cord?

Sometimes it's not easy being Russia's neighbor - just ask Ukraine. Ever since the 1991 implosion of the USSR, Ukraine's relations with Russia have appeared between coldly formal and outright hostility, with a major irritant being the increasingly high prices Gazprom charges for natural gas.

Gazprom in turn needs access to Ukraine's pipeline network in order to reach its profitable European customers. Faced with this symbiotic relationship, Kiev has been assiduously looking for ways to break out of its dependency on Russian energy imports, and now it looks as if this may in fact be coming true.

The head of Ukraine's state geology and subsurface resource service Gosgeonedr Eduard Stavitsky said, "Today, the state fund of subsurface resources is about 1.1 trillion cubic meters of gas and about 130-150 million tons of oil with gas condensate. In from seven to ten years, Ukraine will be able to fully supply itself with gas and oil, excluding the purchase of imported energy resources."