March 9, 2022
Short Corn and Soy
Commodities have been moving up since March, 2020, when we were in the first pits of the pandemic and prices had crashed for everything…And to assume that the public was a rabid buyer of commodity funds back then would be the height of market ignorance…So, NO, they weren’t buying then. In fact, “nobody” was buying anything when I initiated my “Buy Everything” (March 18, 2020) campaign…with just about every “expert” on the planet bearish across the board.
So, here we are two years later, with commodities having been in bull markets ever since…and guess what the public is being hoodwinked into doing now?
The following article was published this morning…DO please read every word of it.
March 9, 2022 -- Investors are flooding commodity exchange-traded funds with cash on signs that shortages for energy, metals and grains will spark hefty returns. Commodity ETFs were injected with more than $4.5 billion last week, an inflow that would normally be seen over the course of a month. In a rarity, the money going into the funds topped flows into equity and bond ETFs, which pulled in $3.8 billion and $2.3 billion, respectively.
Agriculture ETFs racked up big investments, with the assets seeing an increase of about $468 million. Wheat prices are soaring, and futures on Monday settled at a record.
The Invesco DB Agriculture Fund, which includes a variety of agricultural commodities such as corn and soybeans, received about $270 million on Friday, the biggest-ever daily inflow for the ETF since it was launched in 2007.
Interest in agriculture is so fervent that Teucrium Trading on Monday said it suspended creation of shares in its wheat fund after selling all available shares, according to a securities filing.
Guys…That IS how this stuff works. You KNOW that the last thing you get at EVERY stock, bond or commodity top, with bullish headlines everywhere, is the whole frigging trading world comes SWARMING in on the bullish band wagon…And if those stats above don’t suggest that this commodity mania has reached its peak, I don’t know what ever will…Really, AFTER two years on the upside, the LEMMINGS are falling all over themselves to get long now? Classic.
And for a perspective that is pretty much indicative of what has happened in just about every major commodity market, take a look at this “then and now” chart of what we have seen in Crude Oil during the past two years…
I am screaming it: The war, and all the talk about Wheat, Corn and Vegetable Oil production losses…and Black Sea ports being closed…HAS BEEN PRICED INTO THE MARKETS…And similar to what happens at the top of every drought (that also virtually overnight reduces production) I’ve ever seen, the next thing you get is STRAIGHT DOWN.
I RECOMMEND IMMEDIATELY INTIATING, OR ADDING TO, SHORT POSTIONS IN CORN, THE SOYBEAN COMPLEX AND COTTON (which I will deal with in another newsletter).
CONSIDERING THE CIRCUMSTANCES, AND THE 50 YEAR HISTORIES I HAVE PROVIDED IN RECENT NEWSLETTERS, I LOOK FOR 30% DECLINES IN ALL OF THEM WITHIN THE NEXT 2-3 MONTHS.
Here are the options I would strongly recommend buying, right here…right now.
Many of you have heard my basic trading philosophy for years…that if I didn’t have to sit here and watch this damn screen all the time, I would find the big trades, buy the options, and go lose myself on the Amazon for three months…then come back and see what the positions were worth. And I mean that…BUY IN UNITS COMPRISED OF ONE PUT EACH IN THESE THREE (OR TWO) MARKETS…AND FORGET YOU OWN THEM FOR 60 DAYS…If Corn and Soy are going down now, I firmly believe they will do so in much bigger fashion than anyone even remotely thinks possible…and the best thing you can do is just “leave them alone and stay short until you just can’t stand it anymore.”
And just to note: Crude Oil and Wheat have been THE superstar markets directly, and realistically, affected the most by the war….
And Wheat has dropped $2.24 a bushel (limit down today) since Monday, while Crude Oil closed down $14.00 a barrel today, fully $22.80 below its high on Monday (2 days ago). If you want to suppose this is “just volatility,” go right ahead. My very definite take is that both of these markets, and others, shot their classic last wad on Monday following the weekend’s unceasing war news. How can there possibly be anybody left to get long?
GET SHORT. STAY SHORT.
Call if you want to talk about any of this…pro or con.
All option prices in this newsletter include all fees and commissions. All charts, unless otherwise noted, are by Aspen Graphics and CRB.
The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: Corn, Soybeans, Soybean Oil, Cotton