RF Posson & Company

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Market Commentary 10/23/08

¥ Weather-  RFP Chicago Precip index model allows for drier conditions in 2009. Chicago Temp index model offers chance for correction of global warming trend for cooler than usual winter.

¥ Trade-Final 2008 harvests under way. Weather to accommodate. Economy concern over done relative commodities. Trade sells for sake of selling. A crime really.

¥ Model summary- Bullish commodities 2009. Extreme under valuation.

Dow stock index models seek L2 or L1 intermediate trend bottoms now. If L2 then market should remain soft into November to December and place a long term 3yr business cycle bottom. If L1 then market may wait for long term bottom until early 2009. Both scripts allow for 2009 to be bullish year but within larger bear market. For years now we have mentioned that the business cycle bottom due early next decade should create 60% to 90% decline. For past few years we have mentioned that the structure this decade plus development of risk management practices plus global economy growth could easily write a new statistic of 40% to 60% decline.  The Dow has been within this range and we can now calculate chance for earlier than expected bottom. We think current bailout is to assist in creation of this new statistic.  For past 300 years man has worked to reduce these bear markets from 50 to 70 years to 2 to 3 years.  While not reducing the amount of decline which suggests risk of crash has increased along with probability for longer and more profitable bull markets. The next goal of man is to reduce the degree of the bear market as time can not be reduced. The BC3 program exited the stock market relative the Dow back in January. The BC1 program attempts to track model intermediate trends has been whipsawed with recent spike in intra-day and intra-week volatility while over all momentum has been in decline. Although turning short this week we favor the buy side of this indicator keeping in mind the long term implications.

We feel the US and global economies will recover during 2009. We feel next decade's boom trend will begin earlier than usual. We expect 8.5% GDP for China. These factors offer support for the bullish commodities  opinion.

Agriculture funds- Bullish for 2009 perhaps into 2010.

Metals- We believe the 3yr business cycle is up for gold.

Energies- The 3yr business cycle is to ideally bottom this month. Bullish for 2009. Cold winter for northeast? Seek bottom this week or next.

Agriculture Energy Markets-

Corn- The US should not have allowed corn to trade under 500. Irrational trade relating to over reaction of economy and financial news.  We believe the annual cycle trend is more true seasonal trend and is to bottom now. Bullish into summer 2009 and perhaps into year end 2009.  The seasonal is due to bottom now.  Our models have revised from a 2007 bottom for the 3yr cycle to a bottom this month. This adds additional fuel for the bulls.  Our studies show corn as same valued as 200 back in 2005. So extreme under valuation.  Ethanol industry is doing fine. In fact we recommended some ethanols stocks for first time.  Global and domestic demand is huge but has held back due to financial crisis. Their waiting worked! But also trashed the idea of orderly markets. Some thing we look to assist with next 10 years as free markets are due for an over haul and more to the benefit of producers of commodities than any one else. Meaning we must always work more as policemen to protect from lower price than higher and  we  do not mean in terms of hedging. We mean not allowing markets to commit suicide.  A floor price of zero should now be 400 for corn. We  expect short and intermediate trend bottoms now and a point and figure chart offers 490 MAR. Long term studies offer 650 to 730.

Wheat-Although at risk of early call by many months we now expect 3yr business cycle trend bottom to be placed this year. So long term trend is to be up into 2010. Much can occur along the way and for 2009. We expect intermediate trend bottom this month. Market is under valued perhaps extreme under valued.

Soyoil- Extremely under valued. Worth 50s not 30s. Due for 3yr business cycle bottom. Bullish for 2009.

Agriculture Protein Markets-

Soybeans- The 3yr business cycle is due for a bottom this month.  We can allow early November but prefer this month if not already in place. Trend should be up well into 2009 and allowed to extend into 2010. Extreme under valuation. Over reaction to economy news. We think demand has already improved in the cash sector and futures have been a slacker. Intermediate trend should be higher into November to Jan.  Annual and seasonal trend bottoms are due. Major retracement is in order.

Soymeal- Extreme under valuation. Over reaction to economic news. Due for similar business cycle reversal as soybeans. Worth 350 to 380 for next year. The 3y business cycle trend probably bottomed earlier this year and should trend higher into summer 2009 and allowed to extend into 2010.

Dairy

Milk- Extreme under valuation. Over reaction to economic news. Since this market lagged the bull market this decade relative other commodities we expect opportunity for out performing other commodities during the coming bull market –for 2009. Bull market is allowed to extend into 2010. The decadal and multi-decadal business cycle trends are still up. New record would be ideal.  The 3yr business cycle bottom is due now.

Three year business cycle bottom due now and next few months-

Cocoa, coffee, cotton, orange juice. Sugar should have placed such a bottom earlier this year but eligible for second chance at this time.  Livestock trends are similar to sugar.

Past results are not necessarily indicative of future results. This document is met for informational purposes only.

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