Anyone who knows me knows that I am bearish about the second half of 2011 in the world stock, commodity and agricultural markets.
Since I’m not in the business of making market calls, I don’t offer advice on what to do about that, and since I’m not always or even generally right, that’s a good thing for humanity.
But there seems to me to be such an exceptionally long list of grave problems confronting every part of the world’s economy right now, and with “stimulus” government spending and monetary policy ending, I can’t understand how people can be bullish about H2’11. But that’s probably just because I’ve been a perma-bear since 2007, and read everything through that twisted set of spectacles.
However, today’s a nice day that demonstrates how the scary factors in the world’s economy can leap out and bite the markets in the backside – although luckily they haven’t knocked the crop markets today. In fact, ags are trading in their own world, and wheat’s up a bunch.
But let’s see what a bad day in the markets can mean for ag-related equities. Here’s Viterra today:
Here’s the S and P 500 for the last week. Check out what happened today (so far).
It doesn’t look as terrible on a one year chart like this:
But that’s got a sort of “topping and rolling over” feel to me.
Ag commodities have been flattish forever now, after the massive rise in the past year, but there’s a downish feeling there too, at least to me:
Perhaps everything’s just being pulled down, or held back, by all the worries about the Eurozone imploding, the U.S. government going into paralysis, China slowing, the four horsemen of the apocalypse being sighted at Tim Horton’s, etc. . . .
That would create room for an upside surge if all this stuff gets sorted out.
But as a bear, I can’t see that happening – not in time, anyway.
So it’s nice that ag commodities have generally held up well through all this awfulness around the globe. They have, on days like today, generally avoided much of the downdraft. But you’ve got to ask yourself the question: How much downdraft can the ag markets handle before they get dragged along?
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Decent fall prices can still be insured through put options on the main underlying crops. Talk to your broker about whether now is a good time to be booking some price insurance. Perhaps he’ll have a less dreary outlook than me. But a call will tell you. And it’s a good time to check.
