November 9, 2020
We are now sidelines in
Corn, Wheat and Soybeans
This past Friday, we liquidated 100% of our long Soybean positions…and have actually been out of Corn and Wheat for several weeks now…but expect to be buying all of them again at some point in the near future. When, and at what price, remains to be seen…After reading and hearing virtually every agricultural analyst in the country steadfastly recommending the bearish side of these markets for months on end as the row crops have done nothing but rally, last week’s trade seems to have them all now FINALLY talking in terms of reduced production and increasing demand…and they are NOW all seemingly reversing themselves from bearish…to QUITE bullish. With my often expressed belief that it is mob psychology that drives the markets, my guess is that it now time for SOME sort of setback.
I DO BELIEVE ALL OF THE ROW CROPS AND A NUMBER OF
OTHER COMMODITIES ARE STILL IN THE BEGINNING STAGES OF MAJOR BULL MOVES, BUT
EVEN THE BIGGEST BULL MARKETS DO EXPERIENCE SEVERE CORRECTIONS…And that
is what I believe we are about to see (or already seeing) in these three
markets…especially as we head into a now important USDA report tomorrow…with the
overwhelming majority of commentary I am seeing expecting a “bullish” report…And
guys, this is a BIG change from they were saying. Maybe I’m wrong…and
maybe I’ll be feeling stupid a few days from now but we have done quite well
here…and I simply prefer the sidelines, at a minimum, going into this next
We continue to Buy Cattle and Cotton
On the other hand I think that Cattle and Cotton are both trying to LIFT OFF from current levels and I have therefore been stepping up LONG positions in them during the past week…and continue to do so.
On a macro note, I FIRMLY BELIEVE THAT, WITH THE APPARENTLY GENUINE VACCINE NEWS FROM PFIZER, AND THE IMMINENT DEPARTURE OF DONALD TRUMP (who by my reckoning, has represented nothing but a 4 year negative for world economy and trade (I STILL have no idea what the “trade war,” not just with China but everybody else in the world, has been about, or what it has accomplished), I SEE THE PLANET AS NOW COMING OUT FROM UNDER TWO GIANT DARK CLOUDS…AND THAT THERE IS NOWHERE TO GO BUT UP FROM HERE…TOGETHER WITH THOSE TWO DEVELOPMENTS, and WITH THE PRICE OF MONEY (INTEREST RATES) BEING ALMOST NIL, and WITH THE CONTINUING EXPONENTIAL EXPLOSION IN TECHNOLOGY (WHOLE NEW INDUSTRIES AND PRODUCTS ARE BEING LAUNCHED EVERYWHERE), and WITH MY LONG HELD OPINION THAT WITH THE 1990 COLLAPSE OF THE SOVIET UNION AND CHINA’S EMBRACEMENT OF CAPITALISM (THUS ADDING MAYBE 2-3 BILLION NEW CAPITALISTS/CONSUMERS TO THE GLOBAL ECONOMIC EQUATION), WE HAVE BEEN SEEING, AND WILL CONTINUE TO SEE, A MASSIVE GLOBAL EXPANSION OF CAPITALISM, CONSUMPTON, AND ECONOMIC GROWTH BEYOND ANYTHING EVER WITNESSED IN MODERN HISTORY (OR EVER). With all this in mind, MY VERY REAL VIEW IS THAT THERE IS NO TELLING HOW STRONG 2021 WILL BE FOR STOCKS AND THE ECONOMY…AND THAT ALL OF THE ABOVE WILL BE VERY BULLISH FOR COMMODITIES…
The Cattle contracts can sometimes get really crazy in how big and fast…and straight up, or down, they can move…ALL I have heard from livestock analysts this year is “consumers won’t be able to afford beef” and “all the restaurants being closed is bearish for cattle.” The point is, ALL I have heard from the supposed “experts” is, “BE SHORT!”, while the fact is, all three of the meat contracts made their lows back in April and have been nothing but sideways to higher ever since. Bottom line is that this overnight VERY REAL news regarding a vaccine is a true game changer for the public’s future behavior (to be able to go out, and SPEND, with less fear)…and I might be dead, dead wrong but I DO think that the Cattle contracts are about to truly explode on the upside…And ditto for Cotton, which is now some 20+ cents off its lows and STILL, all I hear there, from every analyst I am aware of, is nothing but bearish nonsense.
In a nutshell, these two markets CAN be BIG MOVERS…and that is precisely what I am immediately looking for…Cattle were pushing limit up today and Cotton was up a solid 1.5 cents…and I look at their recent action as nothing but extremely bullish. As always, and I mean it, I might be dead wrong here but I AM A STRONG BUYER OF BOTH MARKETS…and very definitely looking for moves similar to what I have penciled in on the charts.
And BUY COTTON
And BUY SUGAR
And I am still long Sugar….
As always, I recommend owning all three of these as a unit…$4511 gets the Feeders, Cotton and Sugar…Just do the math as to what happens if just one of them does what I am looking for…and the other two go to zero…Or what happens if all three make any sort of run at all…And yes,be aware that if I am dead wrong about all three, you could lose 100% of what you invest.
As a final note, I would remind you that the Fed has been absolutely flooding the markets with liquidity…and that some percentage of those funds ARE being directed towards agricultural commodities, which I consider to be the most undervalued asset class on the planet…And in my opinion, this massive flow of funds can ONLY result in MUCH higher commodity prices…I would also say that this unprecedented fiscal stimulus is just getting started (for a matter of months really) and is NOT going to end any time soon…ONE MORE TIME, I THINK ALL OF THESE BULL MARKETS ARE STILL IN THEIR VERY EARLY STAGES.
Give me a call if you want to talk about any of this…Let’s go guys…It’s NOT too late to get on.
All option prices in this newsletter include all fees and commissions. All charts, unless otherwise noted, are by 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: All of them