Wake Up Call - Crop on This

Major U.S. equity indices have opened generally higher this morning, we think just on short-term exhaustion from this week's slide. As it's Friday, and tensions with Iran remain taut, we would expect equities to slide by the day's end. We think there are too many risk factors active to hold stock through the weekend.

Asia:
Hang Seng Index -0.11%; Shanghai/Shenzhen 300 -0.05%; NIKKEI 225 +0.14%; Taiwan TAIEX +0.46%; BSE SENSEX 30 +0.71%; KRX 100 +0.16%; Ho Chi Minh +0.25%

U.K., Europe & Middle East:
DJ STOXX 50 Index -0.17%; FTSE 100 -0.11%; CAC 40 -0.05%; DAX +0.35%; Russian RTS Index -0.09%; Tel Aviv 25 NA; Tadawul All Share NA; DSM 20 -0.36%


Key Headlines:

• *** Wall Street Greek predicted months ago that food inflation would develop into a real thorn in the Fed's side and impact the cost of living of Americans significantly. We argued that the prices of corn and grain surrogates like soy bean and wheat would likely all rise due to increased use of corn for ethanol production. Although the president argued during his State of the Union Address that he would take it slow with alternative fuel expansion plans, so as to not burden Americans, that's easier said than done George. Today's crop report showed planting plans ahead of forecasts, while soybean is losing acreage as a result. Soybean prices would be expected to rocket this morning, but remember, the market is efficient and some of this may be priced in. Now, corn may not weaken as much as you might expect, since the USDA has reported stockpiles of corn are down significantly. We need a big corn crop, due to the decrease of stockpiles. It seems clear to us that our forecast for the agricultural space is playing out. Food prices should continue to rise across the board, from grains to proteins, since feed prices are rising as well. This creates an inflationary burden for Americans.
• *** Personal income and consumption were both reported ahead of consensus estimates this morning, with income rising 0.6% in February, versus expectations for a 0.3% increase, as compiled by Bloomberg. Consumption rose 0.6%, versus expectations for an increase of 0.3%. So, economic growth indicators seem favorable, however, a key inflation figure followed closely by the Fed, the Core PCE deflator rose 2.4% in February, year over year, compared to a rise of 2.2% in January (revised from 2.0%). Wall Street Greek expects the market will view the report negatively on the whole, as, on its own, it allows for the Fed to hike rates. Clearly, the Fed does not move on any one single economic metric, but this provides no positive benefit for equities in and of itself, in our opinion.
• *** Iran's '80s politics are not flying with Europe, as its parade of prisoners and forced letters of admission are poking a thorn in the side of Europe, and Europe appears about full of it. It's ironic, because Europe was once open to discussion and diplomacy. I will never forget a discussion I had with a French U.N. delegate a couple years ago, when the diplomat argued with me that Iran wanted nuclear energy for peaceful purposes. I was shocked at the naivete' that can result from overexposure to diplomacy, and the willingness some diplomats have to agree for the sake of agreeing. Many seem to operate on the basis that all men share ideological views, when in fact, most men operate on selfish interests. You have to admire the diplomat's hope though, but left to that fool, Iran would threaten the sanctity of the world, in our view.

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