The traditional British Christmas lunch has roast turkey and potatoes as its centrepiece, surrounded by mini pork sausages wrapped in bacon – the pigs in blankets of the title. This sprang to mind as sharply as the price of lean hogs on the Chicago Mercantile Exchange has rebounded recently. At 40 US cents per pound in October, more than two standard deviations below the mean regression going back to the early 1970s, lean hogs were patently too cheap. Observed volatility has picked up smartly, as has traded volume, so that we are back up to the 200-day moving average. Bullish momentum is expected to continue so that prices rally back to the long-term mean at 77 US cents.
