August 25, 2020
On March 18th, with the markets severely in the pits of fear regarding the pandemic, my newsletter was titled: Buying “EVERYTHING”
And that is essentially where I still am…with my very definite focus now being specifically in BUYING the agricultural sector…
The basis for my recommendation has been my firm belief that the USA and World economies WOULD recover, that all of the FEAR had been built into the markets…but that furthermore, together with those recoveries, a monster bullish factor was also involved, which you can see on the first chart here…that being the unprecedented (which is an understatement) tsunami/avalanche of money that our Fed and other central banks have been pumping into the system.
Chart: St. Louis Fed
The most basic economy theory suggests that what you see above should be inflationary…and based on what we have already seen in a number of markets, I don’t think there is any question that the trend towards higher (and higher) prices for just about anything you want to name is now solidly entrenched in the system. I mean, really, when the Fed is now basically saying they WANT inflation…that they will lean towards letting it get out of control (!)…it would be foolish not expect something of the same in the agricultural sector…
So one more time, I’ll start with some examples of bull moves we have already seen in various commodities…followed by my VERY STRONG OPINION THAT I ABSOLUTELY THINK SOMETHING SIMILAR IS COMING IN THE AG COMMODITIES I CONTINUE TO RECOMMEND: CORN, COTTON, SOYBEANS, WHEAT, CATTLE AND HOGS.
When you get down to it, with computers very definitely DOMINATING the markets today (not people), I believe there are machines out there, RIGHT NOW, that are just funneling more and more capital into the commodity markets on the BUY side…and just like the basic trend following principles of the algorithms they use, my current perspective is that if a market looks like it is breaking out, if it looks like it is trending…you have to “know” that the machines are going with it…and that is exactly what I want to be doing.
To be clear: If it LOOKS LIKE IT’S GOING, I’M GOING WITH IT…AND EXPECTING/LOOKING FOR MAJOR SIZED MOVES.
No more talk…I urge you to check out the charts following…and if you agree with what I am seeing and thinking…Give me a call and get something on…SOMETHING.
STARTING WITH A FEW MOVES THAT HAVE ALREADY GONE BIG IN RECENT MONTHS….
There is nothing absolute or magical about any chart, but I have seen the “formation” noted on many of the charts following 1000’s (literally) of times during the past 40 years…And while they do NOT necessarily develop the same way every time they occur, to me, this “ascending triangle” is about the most reliable look there is…quite often representing a pause in a bull move…which then breaks out…and just GOES.
And yes…Stocks too…
When you get down to it, my guess is that there is more liquidity in the markets, by 10 fold, than in all of modern financial history. I firmly believe that what has been happening in stocks, and SOME commodities, is quite naturally about to happen in the Ags…almost EVERY one of which, in my opinion, is now breaking out and/or in some form of an UPTREND.
THERE ARE MASSIVE AMOUNTS OF CAPITAL LOOKING FOR PLACES TO BE INVESTED…and just as it does in stocks, “rotations” do take place in the commodity arena…and you don’t have to think too hard to understand that some of it IS moving into Corn, Wheat, Cotton, Soybeans, Cattle, and Hogs…I don’t give a damn how bearish supply side numbers (which represent a KNOWN in the markets) supposedly are. The markets are more about money flow (in and out) than anything else…and to me, seeing it now flood into the most undervalued asset class (agriculture) on the planet is just a no brainer…Maybe I’m dead wrong but I just can’t see it any other way.
Here are the markets I want to own…Here and Now…
I keep saying it…I have no idea in what order or magnitude any of these markets might go…So if at all possible, I DO want to own something in all of them…$5800 buys all six markets…Just do the math and figure out what the outcome would be if I am dead, dead wrong on all of them…If NONE of them go up at all…meaning you lose 100%...Or what happens if I am a just moderately right on a few of them…on up to where you could be if they all do go somewhere on the upside…which IS my bet.
I own all of these markets and the moves I’ve drawn in as possibilities are NOT just for the hell of it. All of them are in definitely in the realm of NORMAL, and right or wrong, those are the dollars I am looking to hit for…As I’ve written several times now, I THINK THE CURRENT ENVIRONMENT MAKES FOR THE BIGGEST OPPORTUNITES I HAVE EVER SEEN IN THIS BUSINESS…One more time, this does NOT mean I will be right…and when I am wrong, you will probably lose money, but that IS the way I see it.
Call if you want to talk…
All option prices in this newsletter include all fees and commissions. Unless otherwise noted, all charts are from Aspen Graphics.
The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: Cotton, Corn, Cattle, Soybeans, Wheat, Hogs.