Record Speculative Long Position in Silver Futures

There’s a thing about records. They continue until, they don’t. A string of record weather continues until it changes. Similarly, markets can be continually propelled until they aren’t. Such is the case with the current silver market. Speculators in the silver futures market have set net long and total position records in each of the last three weeks. This has led to a significantly overbought market that is due for a correction. Once a catalyst is provided, whether it be an FOMC announcement or some other data point, the speculative washout should be substantial.

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Euro Currency Finding Post-Brexit Support

The Euro has been range bound for nearly 18 months; stuck between $1.06 on the low side and roughly $1.17 on the high side. While the Euro remains stuck, now trading a little over $1.10, there has been growing interest by the commercial traders to own the Euro following the Brexit vote.

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Hoisington Investment Management – Quarterly Review and Outlook, Second Quarter 2016

By Dr. Lacy Hunt and Van Hoisington

The Separate Constraints of Deficit Spending and Debt

Real per capita GDP has risen by a paltry 1.3% annualized since the current expansion began in 2009. This is less than half of the 2.7% average expansion since the records began in 1790. One of the most persistent impediments to growth has been the drag from fiscal policy, a constraint that is likely to become even more severe in the next decade. The standard of living, or real median household income, has only declined in the 2009-2016 expansion and stands at the same level reached in 1996.

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Natural Gas Producers are Betting on No Hurricanes

There are two deeply conflicting sides of the natural gas trade heading into late summer. On one hand, we’re coming off a record setting El Nino that is translating into a La Nina late summer/fall weather pattern. The post El Nino, La Nina weather pattern is already bringing the expected heat that comes with it but speculators want more. They want more heat and they want the hurricane season to be an active one. These are the two bullish components of a fundamentally weak natural gas market. Natural gas producers are selling forward production at their fastest rate since the fall of 2013. The question here becomes a bit more ambiguous as producer selling can have as much to do with selling forward supplies to raise cash as it can the their expectation of current market prices versus forward prices. We’ll look at weather patterns, seasonality and the commercial trader vs speculator balance in the market to determine a proper course of action heading into this market’s critical seasonal period.

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Record Forward Selling to Reverse Recent Sugar Rally

Sugar has rallied more than 50% since the February lows, primarily based on supply concerns. There are current weather issues in South America and Southeast Asia as well as structural issues that will see the sugar market shift from surplus to deficit this calendar year. The common news reports regarding global El Nino issues combined with speculators increasing need to own something in a 0% yield investment landscape has led to a new large speculator record long position in the #11 sugar futures contract, according to the weekly Commitments of Traders report. We believe the record position is unsustainable.

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Gold and Soybeans: Speculative Bubbles Ready to Burst

A common question here would be, “What do gold and soybeans have to do with each other?” The short answer is that they are both the most speculatively overbought commodities we trade. The deeper answer is that both of these products come from the ground and the producers of these commodities have used this rally to lock in bonus money as there is no way they collectively subscribe to the inflation thesis suggesting structurally higher commodity prices in a near zero percent interest rate environment. Our experience has shown that the huge imbalance in positions between the commercial producers selling forward production and the speculators’ buying of anticipation typically resolves itself in the fundamental direction of the commercial traders’ collective prediction. The gold and soybeans rallies are about to find themselves lout of gas.

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Commitment of Traders Report Shows New Speculator Record Position in Gold

It’s one thing to hypothesize that a market is in a speculative bubble; it’s another to let the data write the story. According to the current Commitment of Traders report, large speculators just set e new net long record of 301,920 contracts. This eclipses their previous record of approximately 266,000 contracts set just this past May. We moved out to a weekly chart in order to provide some context for the current situation.

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