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February 25, 2005

Buy Cotton

Cotton settled firmly higher for the week (up 2.59 cents, or $1295 per July futures contract) off of no particular news whatsoever....As to be expected, I have already seen several commentaries along the lines of, "Cotton is higher this week but huge supplies overhanging the market should limit any further significant advances", or, "This rally is not justified by the market's bearish fundamentals"....I can honestly say I have NEVER seen the beginning of a major bull market that was accompanied by anything other than "bearish fundamentals", or "It can't go up much",and I therefore want to see all of the doubt there could possibly be.....every cent of the way up.

Cotton opened the week by closing 1.50 points higher on Tuesday, then rocked up and down for the next few days before beginning to climb again early this morning (Friday). I suspect, this was a week in which a lot of farmers were feverishly selling their cotton following the recent 4 to 5 cent rally....Cotton farmers everywhere are pessimistic due to all the "bearish fundamentals", and are scared to death the market is going to collapse on them again. It seems like it is always like that. The growers hold on and hold on and hold on while the market is dying (like it did for the past year), then when it is ready to go up, they are so despondent and fearful they sell it to the pro's (big cotton merchants) who will market it (abroad mostly) and make the real money off the crop....Short term opinions are much more of a coin toss than longer term, but my guess is all the cash cotton selling that took place this week may not be there to restrict the market next week...If so, this, I believe, leaves the door open to action more along the lines of up, up, up days (as opposed to the chopping around we saw this week)....but, again, this is a very short term (highly subject to error) opinion.

I remain a buyer....I think all we've done is confirm a bottom and the market has a long, long way to go....If you have been reading my case (starting with the Jan. 31st newsletter) for a bull market in cotton, think the idea makes sense, and have not yet taken a position, give me a call Monday.....I strongly believe this thing is just getting started....And to get a better idea of what cotton can do, I would encourage you to go our newsletter archives, , on the website and skim through all the research on cotton.

And on the chart following, when I say I see July getting "at least" to the mid 60's, I mean it.....I have seen hundreds of markets that look like this (on their ass)....that then end up making new contract highs...In other words, to me, getting into the 70's is not at all out of the question.

2-25-05july05cotton.gif (14527 bytes)


Buy Treasury Bonds

Bonds went sideways for the week and buying this market is still considered a lunatic idea. The analytic community can talk all they want to about this market going down, but I still believe, in the real world, there are MANY, MANY more people buying bonds than wanting to sell long term paper yielding them 6,7, or 8% guaranteed by the U.S. Government....As evidence, on Wednesday of this week, France rolled out 6 Billion Euro's of 50 year Bonds and got bids for three times as many Bonds as they were offering. This news was met here by rumors the USA was going to resume selling 30 Year Bonds, with the idea being touted this extra supply would be bearish for our Treasury Bond market, which, aside from being a rumor, is, to me, ludicrous logic....If an offering in France, whose long term yields are about 1/2% lower than ours, was 300% overbid (in a currency that has has inflated tremendously the past few years...meaning currency depreciation risk), this tells me the demand for new 30 Year U.S. Treasury Bonds would blow the roof off....The USA had been selling billions of dollars worth of Treasuries, every quarter, until several years ago, and bond prices have continued to rise (and long term rates decline) all the while, for the last 25 years.

I continue to believe bond prices are going much higher and continue to recommend buying this market.

2-25-05june2005treasurybonds.gif (19576 bytes)


Give me a call....and if you think this research is worth reading, or know anyone who might have an interest in the futures markets, please do either forward them this newsletter or send them to the website, .


Bill Rhyne



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