October 29, 2012
Regarding the markets I discuss here, I am going to make some very strong statements. Before I do, I am obligated to be sure you understand that just because I fervently believe something does not mean I will be right…and when I am wrong, you will definitely lose money by investing in what I think.
Let’s go off the wall for a moment…
I run this business totally on my own. Alone I sit. Alone I think. Alone I make the guesses. I form impressions about the markets. I live and die, financially and psychologically, with the opinions those impressions generate. Sometimes this is a LOT of fun. Often it involves a lot of losing and cursing myself for not being “smarter”. It bends, to put it mildly, my self esteem. It has even broken me once or twice. But I’m still here and still looking for where I can see potential big profits. I am forever reading and researching, scanning 1000’s of charts, essentially trying to recognize market “set ups” I have seen in years before. Sometimes, opinions just jump off the charts at me…Sometimes I see trades that I think are better than anything I’ve seen in years, but often those realizations come when I am the most beat up. You see something fantastic, but you lack the enthusiasm to promote the idea. Nobody wants to endure more pain. You are scared to pick up the phone and ask people to follow you. To write that check…But I have been here before and I know the worst thing I can do is crawl in a corner. When THE trade is there, you have to take it. If nobody is on it when it happens, it does NO good to later be telling people who WEREN’T there, “I was right!”. In this stuff, you are only right when you make the money…
Several days ago I spent some time going through my commodity data base (about 75 years of history) looking at long term cash charts of all the commodities we trade…And when I came to the cash Corn, Soybean and Wheat markets, my instincts as a trader just went nuts. Every fiber of by being looked at the “pictures” that follow below and screamed, “Bill, you are an absolute idiot if you do not get every possible person you can, somehow, on the short side of these markets. Get short and stay short. There is NO WAY these markets will stay up here…and they all have MAJOR downside potential”… So, OK, this is only an old hand’s opinion, sometimes right, sometimes wrong, but what I want you to do is take the same look I’ve taken…and decide whether placing bets, and keeping bets, on the short side of these three markets makes as much sense to you as it does to me.
Just go back and note the eventual outcome to every bull market for the past 50 years…
I concluded on Friday that I think this is one of the greatest commodity “set ups” I’ve ever observed…and the bolded paragraph that follows is something I wrote to myself, kind of a self inspiring “mission statement” as to what I should do next in my quest to make people money.
I think there is enormous profit potential in being short Corn, Soybean Meal and Wheat over the next six to nine months. This should be my primary focus. Being there. Having people positioned there. Having farmers short hedged there. Ignore everything else?
The end result?
I continue to believe the Stock Market will trade substantially higher, but I am not go to spend energy in writing about it…Ditto the Eurocurrency.
I DO think Cotton is a major buy, as are Feeder Cattle, and I will be involved and occasionally writing about them…
MY MAIN FOCUS IS NOW GOING TO BE SHORT CORN, SHORT SOYBEAN MEAL AND SHORT WHEAT. I THINK THEY ALL SHOULD BE SHORTED IMMEDIATELY, EITHER WITH FUTURES OR THROUGH THE OWNERSHIP OF PUTS GOING AS FAR OUT AS THE JULY, 2013 CONTRACTS. I THINK THE ENTIRE COMMODITY TRADING WORLD, AND THE FARMERS WHO PRODUCE THESE CROPS, WILL ULTIMATELY BE AMAZED BY HOW LOW PRICES HAVE FALLEN BY MID-SUMMER OF NEXT YEAR…OVER THE YEARS, I HAVE PERSONALLY SEEN VERY HIGH PRICES, ACCOMPANIED BY TONS OF SUPER BULLISH “FUNDAMENTALS”, SOMEHOW TURN INTO PRICE DISASTERS TOO MANY TIMES TO NOT BE EXPECTING THE SAME IN 2013. IT’S WHAT 50 YEARS OF PRICE ACTIVITY INDICATE IS A DEFINITE POSSIBILITY…AND NO MATTER HOW MANY ANALYSTS YOU CAN FIND WHO ARE PREACHING, “WE COULD RUN OUT OF IT!”, I SAY, THIS TIME AROUND WILL BE NO DIFFERENT FROM ANYTHING WE HAVE SEEN IN THE PAST. THAT IS, OPINION WILL REMAIN ENDLESSLY BULLISH AS THESE MARKETS GO ENDLESSLY, DYNAMICALLY, LOWER.
GET SHORT CORN, SOYBEAN MEAL AND WHEAT…AND STAY SHORT.
Nothing is absolute in this stuff, but markets do often tend to go down faster than they go up…And believe me, any or all of these three following charts can (and I think, WILL) turn into straight down, classic commodity collapses…
As my self styled wall sign reminds me…YOU WILL BE WRONG. YOU WILL BE RIGHT...which is a true statement….Therefore, shorting these markets, at these levels, may end up being a loser...but I do think this is one of the best bets I have ever seen…Period.
Give me a call if you want to look at some numbers…I will be in the office tomorrow, Tuesday, but will then be out for the rest of the week. In my typical (stupid) contrarian fashion, I will be flying into New York City on Wednesday morning, renting a car, and heading for Connecticut to visit my elder son. Hopefully, Sandy will spare me.
Thanks. DO SOMETHING WITH THIS.