October 16, 2024

I got back Sunday from 19 days in Egypt and Turkey (a fantastic, historically oriented trip to the “cradle of civilization”), during which time I completely ignored/forgot the markets…And as has forever been the case when I have the opportunity to shut down my commodity brain for three weeks, I know I always return to the markets with the most open and objective state of mind that I ever do have…This certainly does not mean everything I think will be correct, but after breaks like this is when I think my opinion is at its best, as I DO get back in this chair totally fresh, with no preconceived ideas…and look, read, listen, and do my research to determine where I think I see potentially profitable opportunities. And while sometimes my pre-vacation opinions change and sometimes they remain the same, whatever trade ideas I do come up with are rigidly based on my not caring which way any market is going…but simply on whether or not I perceive that a substantial price move, in either direction, in whatever the market, is imminently ready to happen.

These are my conclusions…and where my own money is going right now.

 
Yes…Time to be short again in Corn and Soybeans

The last few months are what I would say was “the last rally”…the last opportunity for farmers to sell their still massive stocks HELD SINCE LAST FALL…and now the table is set for the enormous liquidation that, sooner or later, I believe HAS to happen…and as I’ve stated before, they will be forced into doing so in a panic as prices bust the old lows and farmer mentality becomes “Just sell it…now…at whatever the price is!” Truth be told, to have held on to Corn and Soybeans since last year has been a “losing trade,” and having seen “losing trade” scenarios a thousand times in futures, “Just sell it NOW! Just get me out!”, IS the way big losing trades DO end…And that IS the case when you consider that Soybeans are down $4.00 a bushel (29%), and Corn down $1.00 (20%), since farmers were harvesting them out of the fields a year ago. Those are BIG hits in both markets.

FARMERS HAVE GOT TO EMPTY THEIR NEAR RECORD FULL BINS (i.e. SELL!) TO MAKE ROOM FOR THE CROP THAT’S ABOUT TO COME OUT OF THE FIELDS…WHETHER THEY LIKE THE PRICE OR NOT…AND THEY ARE ALL IN THE SAME BOAT…AND FOR THE NEXT FEW MONTHS WILL ALL (I BELIEVE) BE SELLING AT THE SAME TIME…AND THERE REALLY IS NO TELLING HOW LOW IT MIGHT TAKE PRICES...

I’ve said all this before, but I still believe both of these markets will go MUCH further than any analyst or farmer thinks possible…That’s just the way the crazy ass futures markets work.

And yeah…Still Short Cattle

I am more bearish than ever…

Sometimes part of this game is just WAITING for something that you “KNOW” is going to happen…oftentimes MUCH longer than you would expect…And that is exactly where I am with being short the Cattle Complex. No, I don’t “know” what’s going to happen, but to me, trading IS all about calculated guesses, and perceived odds, and being positioned in situations I’ve seen before that I DO “know” can turn into big, big money (or lose it)…And that IS what I see here.

I continue to see the action for the past year as nothing but a monster top that WILL…and I’ll say it again…ANY DAY NOW START DOWN AND NOT LOOK BACK…FOR A LONG, LONG, LONG WAY DOWN…AND FOR THAT REASON, I WILL NOT BE OUT OF THIS TRADE…You never know when it’s gonna start…but in the context of what I wrote above,  you CAN “know” that it’s coming, and soon, and that ANY single down day can be the day that it starts…however small, or quietly, it happens…And for that reason, you put your money on the table NOW and keep it there.

I SAY THIS IS COMING. BE THERE NOW.

 To me…The LONG TERM looks just say one thing. Be Short NOW

One more time...what you see above, for the past year, is "nothing happening." When this does start down, moving 50 cents, in just a month or two, would NOT be surprising.

 
Popular ideas tend to lose money…

or in the words of one of the best traders ever,

“If it’s obvious, it’s obviously wrong.”

I STILL SEE GOLD AS A BLIND SHORT HERE…

In this mob psychology game, there are times when market opinion does become almost unanimously…and dangerously…one sided…with ALL the “logic” seeming to suggest, “Buy it now. You can’t lose.” And that, I believe, IS the Gold market right now…And to be clear, all this OBVIOUS bullish fervor was NOT there a year ago, when Gold was $800 lower, and just about every brokerage house on Wall Street was screaming, “Recession coming!,” and bearish almost every market we trade…But now? It’s a different story…with, from my listening post, “Buy Gold” being, by far, THE single most popular idea on the street today.

And just to remind you…as I wrote a month ago:  Gold does not move, at all, based on supply and demand…It moves on one thing, and from my perspective, one thing only….EMOTION…Talk all you want about it being an inflation hedge, or a safe haven when geopolitics get hot, or some sort of currency replacement, or all of the other hogwash “fundamentals” that get attached to it (and are still endlessly cited, even when Gold goes down for TWENTY years, from 1980 until 2000), but in the end, THE ONLY REAL REASON ANYBODY EVERY BUYS IT IS BECAUSE THEY THINK IT’S GOING UP…

And what makes them think it’s going up? Because Wall Street’s perennially wrong-way-hucksters, who are THE major source of opinion for 95% of all  individual investors, are saying so…with, for sure, all sorts “logic” to support their opinions…

And that current “logic” as to why you should buy it now (and not a year ago)? Well…here it is…Straight off of Google…It’s easy…Just read this and go get in on this purportedly “sure thing.”

 “Recent gains for the precious metal are largely credited to ongoing economic uncertainty, geopolitical tensions and strong demand from central banks around the world. If trends continue, analysts have bullish outlooks on the price of gold for the months ahead.Sep 25, 2024”

Again, believe me…That’s NOT what you would have read a year ago…

And what I’ll say next is anecdotal, and involves two different totally unrelated individuals…from two totally different parts of the world…Hawaii and Greece…And you may think what follows here is statistically meaningless…but I would argue it’s NOT…that it represents the absolute epitome of how the markets do work.

One…The week before I left for the Egypt and Turkey, I had a phone call from an old friend (sorry dude, you’ll remain anonymous) asking what I thought he should do with his stocks and bonds, then adding: “And I just bought a whole lot of Gold.” When I asked why, his answer was, “because of the Middle East and because I read that central banks (inference being , they must know what they’re doing) have been buying it.”

Two…Several weeks later, on a short hop flight inside Egypt, Dorka and I were seated next to a relatively affluent Greek lady, who, after the usual mutual tourist who-are-you chit chat, and having learned that I was in Futures, immediately asked me, “What do you think about Gold?” Quite honestly, I was a bit stunned, but sensed instantaneously why she was asking. I made some laughing comment like, “Hey, I’m on vacation and really don’t want to get into all that…but I think it’s going down from here,” to which she replied, almost with indignance, and in a tone implying that I must be an idiot, “Don’t you know that the central banks are buying it?” She then followed that with, “My son is in finance and he also says…” And with that, our conversation pretty much ended.

So…You can think, “Bill IS stupid. How could this possibly matter?”, and I’ll answer that OK, maybe it doesn’t mean Gold is going down right now (but I think it IS or I wouldn’t be in it), but when two totally separate people, 6000 miles apart, are repeating EXACTLY the same tagline, which IS everywhere right now…ANY time the subject of Gold comes up, it DOES help substantiate my argument regarding how the masses DO arrive at their conclusions…and beyond that, and more importantly, how ROUTINELY those masses DO end up on the WRONG side of the markets at PRECISELY THE WRONG TIME.

GOLD DOES MOVE ON EMOTION…AND NOTHING ELSE…AND FOR THE PAST 44 YEARS I HAVE SEEN IT SEMI-FREQUENTLY SUCK EVERYBODY BACK IN ON THE LONG SIDE…RIGHT BEFORE, OUT OF NOWHERE, IT DOES A CRASH AND BURN.

A 20%...NORMAL…sell off from here would take it down about $500…and it usually it happens in pretty fast fashion…And that IS what I think is coming.

One more observation…With my trip having been “in the neighborhood,” I was definitely keeping tabs on the Iran vs Israel situation, but was not checking the markets, so upon my return, I did find it interesting that with the missile attacks and talk of an escalating Middle East WAR, Gold was basically exactly where it was when I left Atlanta 3 weeks ago…and NOT higher…which I also think is telling…potentially meaning that EVERYBODY WHO WOULD BE A BUYER HAS ALREADY DONE SO?

From my 44 year experience, I know that not 1 in 100 of the people who read this will even THINK about shorting Gold…that IN SPITE OF AT TIMES HAVING SPENT ENTIRES DECADES GOING DOWN SINCE 1980, the media is either generally not talking about Gold at all (when it is a buy), or are loudly bullish at the top tick (like now)…but almost NEVER bearish…So NOBODY ever wants to short this market…meaning I know this recommendation is pretty much a waste of energy…For sure, Gold is higher today than it was 25 years ago, but it has also spent a LOT of time getting hit hard…And everything I know about how the markets…WHATEVER the market is…says GOLD IS RIPE FOR ITS NEXT CRAP OUT.

Give me a call if you anything here interests you…

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.

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, Cattle, Gold