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January 16, 2011

Apologies for pumping out so much info the last few days but after a solid month of research, I’ve come to the conclusion 2011 has some truly enormous opportunities and am simply trying to show you where (and why) I think they are. I will keep this very brief and keep it pretty much limited to a few more charts…

In essence, I absolutely, totally, unequivocally believe this is a year to be short a number of traditional commodities…I see this as a year in which any number of commodities will make tremendous downside moves while the brokerage houses and talking heads continue to tout, all the way down, the same stale story that “prices have GOT to go up due to overwhelming worldwide demand”.

Here are a couple of examples of such I picked up on Friday (with which I disagree 100%)…

“The rationing of pipeline minimum stock levels for soybeans and corn and the fight for acres for soybeans, corn, wheat, and cotton have many expecting grain futures to continue ratcheting higher. Initial price targets being talked about are $15-16 for soybeans and $7-8 corn. Wheat forecasts are not as forthcoming, but new contract highs as seen in soybeans and corn would suggest a price move in wheat toward $9.”

“Corn prices must climb past $8 per bushel to choke off ethanol demand given current gasoline prices Morgan Stanley says. It expects U.S. exports to increase due to a weak South America crop.”

 OF ALL THE COMMODITY BULL MARKETS I HAVE PERSONALLY WITNESSED, 100% OF THEM HAVE ENDED (AND USUALLY ABRUPTLY) WITH CRIES OF “STILL GOING HIGHER!!!” ALL OVER THE PLACE…AND AS EXEMPLIFIED BY NOT ONLY THOSE TWO EXAMPLES ABOVE, RIGHT NOW THAT IS PRETTY MUCH ALL I’M SEEING.

I MAY BE DEAD, DEAD WRONG ABOUT WHAT IS COMING BUT I HONESTLY LOOK AT 2011 AS HAVING MORE CUMULATIVE PROFIT POTENTIAL THAN ANY YEAR I HAVE SEEN AS BROKER. I THINK IT MAKES SENSE TO OWN A “PORTFOLIO OF SHORTS”, USING FUTURES AND/OR PUT OPTIONS AND THINK THOSE POSITIONS SHOULD BE TAKEN IMMEDIATELY.

Here are some longer term charts of commodities that I think are fantastic candidates for potentially enormous moves on the downside…

Start with this one…Soybeans (that are supposedly now headed for $16-$18 a bushel). I will repeat my observation concerning market tops and remind you that in EVERY one of the bull markets that ended so abruptly here (which IS a commodity market norm), 95% of the “expert” opinion out there was still firmly on the bull side…

 

I fully expect to see Soybeans at least under the $10 mark by late summer.

 

 

 

At a New Year’s Eve party, I actually overheard an auto mechanic make the statement, “Take all your extra money and put it in silver”. By no means to belittle the guy, I do know that he knows as much about investing as I do about rocket science…and yes, this is the old shoeshine boy story but it IS real. THERE IS NOBODY LEFT WHO DOESN’T KNOW THE GOLD-SILVER STORY…

Inflation is not coming….I may have my head totally turned in the wrong direction, and I may be about to lose a lot of money, but I think 2011 is going to be one the greatest “short years” in the history of commodity trading. Get short now. Put a few bucks here and there on 3 or 4 of these markets, define your risk,,,and then just let it happen.

Like my latest trading reminder says….WHEN IT PAYS, IT WILL BE BIG.

And I believe that…

Here are a few options to consider…

Many of these options are not cheap…but they are commiserate with the potential gains…The last thing I would point out is on COUNTLESS occasions I have seen commodity markets go from new contract highs to new contract lows in the space of a calendar quarter or two. These markets are NO different…Just because the atmosphere is being hyped as so bullish for all these markets, is, in my old hack opinion, all the more reason to expect gigantic moves on the downside. “The bigger they are, the harder they fall” is a very real concept in this business. Believe me. And I keep repeating this, but how many times do you have to see the talking heads be so totally on the wrong side of what is REALLY about to happen to not see what is probably coming next in the commodity markets?

 

 

 

 

I encourage you to immediately do SOMETHING with at least one or two of these ideas…

Ready to go….Pick up the phone and call me…

For an anthology of commodity shorts during the last decade or so, go to our 1-12-11 newsletter.

Bill

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