Good morning folks, today we will jump in and Skype with kevin Dixon around 9:30 AM, I am pretty sure he will be reviewing the trades from the last show we did together, so lets see how he grades us! In the meantime, here is an interesting situation you may want to explore and I will be talking about this a bit today. Investors seeking alternative investments with a low risk profile should always consider short term Treasury products, T-Bills with less than 6 month maturity. As attractive as the story is to buy gold for a safty play, there is no guarantee of safety, prices can and do fluctuate wildly as occurred in October 2008. Prices tumbled around 250 per ounce in less than 14 trading days. Again as recently as December 2009 we saw Gold decline nearly 180 per ounce into February from peak to trough. While Gold has recovered since then these wild swings can give the faint of heart investor lees comfort than what they are looking for. Taking into to consideration that now is not the best time to buy precious metals, at least from a seasonal perspective; investors may want to wait for a larger correction headed into the Summer doldrums. Just take a look at the price of Gold and Silver lately. Since May 15th, Gold is down just 30 per ounce while Silver has shed nearly $2.00 an ounce in value, or close to an 8% loss.
One arena to enter this time of year that has a stellar performance is in fact within the agricultural complex, that market being Wheat. Winter wheat begins harvesting in late spring through early summer. Under normal weather years, without late spring frost scares and ideal dry harvest conditions, we see sharp price breaks in late May until early June. It is this price decline that traders can take advantage of by entering long positions. According to my research in the Commodity Traders Almanac, John Wiley & Sons 2010, one of the best seasonal long trades for Wheat begins in June. Traders can look to enter a long position around June 8 and exit near November 4. Out of past 39 year history this trade has worked 22 times for a 56.4% success rate.
Stock investors may want to look at two companies that should see good performance during this same time period, General Mills, Inc. (GIS) and Kellogg Company (K). What is interesting is that as the overall year to date stock market returns measured by the S&P 500 as of June 7th it is down 4.5%, Kellogg is unchanged on the year and off it’s highest level in over a decade by just under 6.00 dollars per share. On the other hand General Mills just made the highest weekly close and is up just less than .05% year to date. From a relative strength standpoint this sure goes to show that companies that deliver food products are surviving in this economic climate.
The global economy might be in question, but there might be some solace in knowing that not all stocks are in the tank, humans need to eat, so this is one sector that investors may want to explore as an alternative place to get money back to work, at least for the next 60-90 days.
All the best,
John L. Person
President,
Nationalfutures.com
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