The Debts of the Spenders: Argentina Wheat Planting Slowed by Drought

Argentina Wheat Planting Stalled On Drought - Ag Secy

Despite moderate rainfall over the past week, conditions are still too dry for farmers to make much progress on wheat planting, the Agriculture Secretariat said in its weekly crop report Friday.

“The rainfall continues to be insufficient to reverse the moisture deficit across most of the Pampas and to ensure planting,” the Secretariat said.

The Secretariat has not estimated wheat planting yet, but there are many signs that the area planting will plunge this season. According to the Buenos Aires Cereal’s Exchange, Argentina’s 2009-10 wheat planting will fall to just 3.2 million hectares (7.9 million acres), down 30% on
the year and the smallest amount planted since records have been kept.

With soil moisture levels still low despite recent rainfall, planted area may fall even further than the current estimate, the exchange said. In addition to the dryness, farmers are hesitant to plant the crop due to low prices because of government intervention in wheat markets, according to the exchange.

Farmers also face high financing costs and the economic strain caused by losses to the 2008-09 soy and corn crops due to drought.

Source: CME News For Tomorrow

The Debts of the Spenders: Fed Fund Futures Pricing in Inflation

Granted, this is not much change in the greater scheme of things but traders are actually beginning to price in HIGHER interest rates from a more hawkish Fed (e.g. rate hikes). I'm not quite sure how this fits in w/Bailout Ben's Quantitative Easing theory of pushing mortgage rates to <5%.


In fact, it's flying in the face of historical patterns where the fall is traditionally a bear market for equities (and inversely a bull market for bonds).

The Debts of the Spenders: Philippines Passes REIT Bill

The Philippines is an out of the way destination on the Asian roadmap for most travelers seeking more dynamic destinations in the Pacific. Still, there is a lot of promise in this former Spanish colony and American protectorate. For one thing, labor costs remain low and there has been a recent boom in optical wire laying.

Filipino businesses have been competing quite vigorously w/Indian contractors to attract back office development projects in office parks. The population is also (arguably) more English fluent. The credit crunch hit the Philippines just as hard as any other developing country last year but as an emerging market on the cusp of frontier status, the Philippines holds a bit more promise in terms of gain. Politically, things have certainly improved a lot from last year when rogue generals decided that walking out in the middle of their courtroom trial and commandeering a hotel for a coup de etat was considered normal business.

MANILA -(Dow Jones)- The Philippine House of Representatives approved Wednesday the Real Estate Investment Trust or REIT bill, which is expected to spur investment in the country.

The bill will be taken up by a bicameral committee involving the Senate, which approved its own version in March.

"The House' approval of the bill introducing REITs will soon pave the way for investors to become owners of various income-generating properties as well as to directly benefit from the revenues earned by these REITs," Philippine Stock Exchange President and Chief Executive Francis Lim said in a statement Thursday.

The Debts of the Spenders: Jim Rogers "I am Not Short Anything At this Point"

See video.

Except maybe T-bonds. That is an interesting discussion regarding the TIMING of the potential credit crunch that remains in commercial real estate and corporate bond defaults.

http://www.urbandigs.com/2009/06/
rogers_currency_crisis_ahead.html

The Debts of the Spenders: Temp Jobs Mask Governmentt Lies

I cannot claim to be the first one out there to tell traders not to fight the tape. But I hope this message gets out for further warnings ahead. There has been a consistent trend of Non-Farm Payroll numbers going to the upside. Even in this economy.

Kathy Lien, forex analyst extraordinaire, has a great piece on fading the NFP #s:

http://www.kathylien.com/site/non-farm-payrolls/
fading-non-farm-payrolls


But move away from trading for a moment, here's a closer look at the macro-fundamental reality:

_The 9.4 percent May unemployment rate is based on 14.5 million Americans out of work. But that number doesn't include discouraged workers, people who gave up looking for work after four weeks. Add those 792,000 people, and the unemployment rate is 9.8 percent.

_The official rate also doesn't include "marginally attached workers," or people who have looked for work in the past year but stopped searching in the past month because of barriers to employment such as child care, poor health or lack of transportation. Add those 1.4 million people, and the unemployment rate would be 10.6 percent.

_The official rate also doesn't include "involuntary part-time workers," or the 2.2 million people like Noel who took a part-time job because that's all they could get, plus those whose work hours dropped below the full-time level. Once those 9.1 million workers are added to the unemployment mix, the rate would be 16.4 percent.

All told, nearly 25 million Americans were either unemployed, underemployed or had given up looking for a job in May.

Source: http://news.yahoo.com/s/ap/us_becoming_a_statistic

The Debts of the Spenders: European Corporate Bond Party Over?

Emphasis my own.

=DJ HEARD ON THE STREET: Easy Corporate Bond Gains Now Past

By Richard Barley A DOW JONES COLUMN

The party in the European investment-grade corporate bond market this year has been remarkable. Nonfinancial bond issuance in the first half looks set to top the current EUR200 billion record for an entire year. Meanwhile spreads have nearly halved, generating huge gains for investors. But the easy money has now been made.

True, investment-grade spreads are still well above what is needed to compensate for default risk. Since 1970, investment-grade bonds have never needed to offer more than 28 basis points of spread to compensate for defaults over a five-year period, assuming average recoveries, according to Deutsche Bank. Yet the Markit iBoxx euro nonfinancial index currently stands at 199 bps over government bonds.

But further major spread tightening is unlikely. Corporate bonds have always traded with a substantial illiquidity premium. The debate is over what the "new normal" should be. The best bet is that risk premiums will stabilize at much higher levels than in the past.

First, credit risk is still rising. Defaults are expected to reach the highest levels since the 1930s. Since October 2008, the ratio of global ratings downgrades to upgrades has not dipped below 7.6 to one, according to Moody's. And downgrades to junk, which can force investors to sell at a loss, are surging. Meanwhile, new issuance is increasingly from lower-rated, higher-risk companies, so average spreads should remain higher.

Second, new issuance is likely to remain high as borrowers seek alternatives to bank funding while investor appetite could start to ebb. That's partly because investment grade corporate bonds face renewed competition from other parts of the credit markets as they open up, but also because discounts on new issues have narrowed sharply.

Finally, the reduced competition from banks should mean bond spreads settle at a higher level. During the boom, banks used cheap loans as a way to generate high-fee corporate business, dragging spreads down. Now bond investors have more control over pricing.

That suggests investors can still make good money from bonds. But it will come via patient investing and careful credit analysis - and not the one-off capital gains achieved over the first few months of this year.

The Debts of the Spenders: CFTC's Gensler Calls For Sweeping OTC Regulation

About time. Hopefully the CFTC will be more alert than their colleagues at the "Insider Trading" SEC. Emphasis my own. Remember last summer's incredible run up in energy prices? Last but not least, let's throw some focus onto the CDS sector. Gensler also called for renewd insight into the muni bond market.

NEW YORK (Dow Jones)--The call by the U.S. commodities market watchdog for regulation of over-the-counter derivatives would clarify the government's powers to police manipulation.

Gaming prices in the $4.4-trillion OTC commodities market is often suspected but rarely prosecuted. The credit derivatives that help sink the financial sector were more a problem of bad risk management than fraud, though the Securities and Exchange Commission brought its first-ever case of insider trading in credit default swaps last month.

A proposal made Thursday by Gary Gensler, the new chairman of the Commodity Futures Trading Commission, would give the agency broad new authority to peer inside OTC markets, bringing with it the potential for more enforcement cases.

The fear that malign forces could manipulate futures prices regained attention in the past year as commodities hit record highs. Some worried that big players in the unlit corners of OTC markets were somehow swaying benchmark prices for oil, corn and other basic materials.

But until now the CFTC's powers to go after manipulation have been murky. Gensler's proposal seems set to clarify them.

Commission officials say past efforts to prosecute fraud in the OTC market have been handicapped by a lack of authority to oversee them. The kinds of information the CFTC routinely gets from commodity exchanges aren't currently available from OTC market participants, making it much tougher to detect malfeasance. Gensler's proposal would force more derivatives into clearinghouses, where their size and value can be tracked, or at least reported to trade repositories.

To clamp down on what the Commodity Exchange Act calls "excessive speculation," Gensler has proposed setting limits on commodity trading positions not only on exchanges, where they exist to some degree, but in OTC markets. Major OTC derivatives dealers have used exemptions from exchange-traded limits to let pension funds and other big institutional investors bet on commodity price indexes in the OTC realm - a practice that critics charge drives up prices.

"Position limits must be applied consistently across all markets, across all trading platforms, and exemptions to them must be limited and well defined," Gensler said in prepared testimony.

The proposal has already drawn criticism.

"While more clarity and information is always welcome, clamping down on speculative activity is likely to substantially reduce the liquidity that commodity markets require in order to operate effectively," commodity analysts at Barclays Capital said in a note Thursday.