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August 28, 2025
Same Story…
but A Bigger Trade
The fact that I have been wrong doesn’t change my opinion that the
Feeder Cattle market is one of the greatest short trades ever…nor that it
has become what I would call THE MOST OVERVALUED COMMODITY
MARKET I HAVE EVER SEEN…overvalued almost beyond comprehension.
Just to put in in perspective, take a look at Feeders
compared to their counterpart, Live Cattle, and tell me that Feeders are
not historically SEVERELY OVERVALUED relative to the animal that Feeder
Steers do become after 6 months on a feedlot.
This next chart is where you can DEFINITIVELY see how
big the presence of speculative fund buying has been…
You
do not have to be a genius to see that something is TOTALLY out of whack
from a “value” standpoint…that when you get down to it, mob psychology
speculative mania has taken Feeder Cattle prices to levels that have
actually become DETACHED FROM REALITY (see the Cattle vs
Feeder Cattle chart again)…And while picking that point at which the market
“flips the switch” from bullish MANIA back towards reality can be a real
ball buster, sooner or later it DOES happen…And for my money (which I have
lost a TON of), AT THESE LEVELS YOU DON’T TRY TO CUT IT TOO CLOSE…YOU
DON’T THINK, “I’M GONNA FIGURE OUT EXACTLY WHEN TO DO THIS.” YOU JUST DO
IT. YOU SPEND THE MONEY. BUY SOME TIME AND LET IT HAPPEN.
Do understand that the Feeder Cattle market represents
THE most speculative aspect of the cattle business…and IS one of the
reasons this market has a 50 year history of going
straight up…and straight down. In essence, investors (actual cattlemen or
simply speculative investors) buy loads of 700-800 pound
steers to feed in a lot for roughly 6 months, and then hopefully end up
with a profit when they sell them for slaughter…And the truth is, a
MAJOR percentage of those Feeder Cattle owners never have, and never will,
see those animals. It’s mostly all done on paper, and is one of those bets
that can work well…until it doesn’t…which is what happens when the next
INEVITABLE decline in Live Cattle prices begins…and catches all those
“cattlemen” with BIG bucks on the table (ONE truckload of Feeders today is
a $180,000 investment…BEFORE they go on the lot to be cared for and fed for
6 months)…and every single one of those animals start losing money…every
single day…which, I promise you, DOES lead to an avalanche of cattle buyers
having to, “Just SELL them! Today. No matter what the price!”
 
Here are a few put
possibilities…
I’d add that I do think that even further
out-of-the-money puts will work here…Ass I DO expect this decline to be
every bit as big as they have been for the past 50 years…and just a
relatively straight down…it would mean that puts that are a further 10-20
cent away would likely score large percentage gains as well…Obviously, as
always, if I am wrong here, you could lose 100% of whatever option you buy.
I CONTINUE TO SEE THIS AS AN INCREDIBLE BET.
Contact me if you want to know more about it…
Thanks,
Bill
770-425-7241
866-578-1001
All
option prices in this newsletter include all fees and commissions. All
charts, unless otherwise noted, are by Aspen Graphics and CRB.
FUTURES
TRADING IS NOT FOR EVERYONE. THE RISK OF LOSS IN TRADING CAN BE
SUBSTANTIAL. THEREFORE, CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE
FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. PAST PERFORMANCE IS NOT
INDICATIVE OF FUTURE RESULTS. THERE IS NO GUARANTEE YOUR TRADING EXPERIENCE
WILL BE SIMILAR TO PAST PERFORMANCE.
The author of this piece currently trades for his own
account and has a financial interest in the following derivative products
mentioned within: Feeder Cattle, Live Cattle
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