THE HIGHTOWER REPORT
Prepared by Hartfield Management, Inc.
Stronger Industrial Commodity Prices Highlight Global Demand
(May 22, 2000) The CRB Index has continued to climb higher despite the growing weakness in the Agriculture markets. The fact that industrial commodities are mostly in favor highlights ongoing strong global demand. We have to site surging demand for energies, copper, cotton, cocoa and platinum just to make sure that the grain bears don't overestimate the downside potential in the grain markets. The type of demand being seen in copper and energies is "remarkable" it's safe to assume that going forward demand could improve further, as any U.S. lowing is more than made up by international growth. A couple of weeks ago the IMF suggested that the world economy was in very impressive shape with the biggest risk coming from a hard landing (a sharp slowing prompted by too many interest rate hikes) in the U.S. In the near term, it would seem that the actions of the Fed are not adversely impacting economic activity or sentiment in the least. In fact, even the Wall Street Journal has begun to take note of the rising price environment, which is a notable change for a publication that focuses on the equity markets.
Even in China there is a trend of rising prices, and that theme of rising prices is something very important to remember because we are still not very far removed from what was found to be extremely "cheap" historical prices. At the current junction it might pay to do a visual pass on the monthly price charts just to get a grasp of what is "cheap" and what is "expensive." In our opinion, being too bearish toward the grains with the entire growing season ahead is not a good idea. In recent letters we have presented the case for wheat, sugar, cocoa and cotton as markets capable of reacting to improving demand and potentially tightening supply factors resulting from depressed price levels. Wheat and cotton are beginning to move higher, but still appear relatively cheap, while demand and weather look to impact corn and cattle this coming month.
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May 22, 2000 The Hightower Report Hartfield Management, Inc. 141 W. Jackson Blvd., Suite 4002, Chicago, Illinois 800-662-9346
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