Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Trying to Buy Coinbase Stock on IPO Day - Institutional Investors Freeze out Retail Investors - 15th Apr 21
Stocks or Gold – Which Is in the Catbird Seat? - 15th Apr 21
Time For A Stock Market Melt-Up - 15th Apr 21
Stocks Bull Market Progression Now Shows Base Metal Strength - 15th Apr 21
AI Tech Stocks Buy Ratings, Levels and Valuations - 14th Apr 21
Easy 10% to 15% Overclock for 5600x, 5900x, 5950x Using AMD Ryzen Master Precision Boost Overdrive - 14th Apr 21
The Current Cannabis Sector Rally Is Pointing To Another Breakout - 14th Apr 21
U.S. Dollar Junk Bond Market The Easiest Money in History - 14th Apr 21
The SPY Is Nearing Resistance @ $410… What Is Next? - 14th Apr 21
The Curious Stock Market Staircase Rally - 14th Apr 21
Stocks are Heating Up - 14th Apr 21
Two Methods in Calculating For R&D Tax Credits - 14th Apr 21
Stock Market Minor Correction Due - 13th Apr 21
How to Feed Budgies Cucumbers - Best Vegetables Feeding for the First Time, Parakeet Care UK - 13th Apr 21
Biggest Inflation Threat in 40 Years Looms over Markets - 13th Apr 21
How to Get Rich with the Pareto Distribution - Tesco Example - 13th Apr 21
Litecoin and Bitcoin-Which Is Better? - 13th Apr 21
The Major Advantages Of Getting Your PhD Online - 12th Apr 21
Covid-19 Pandemic Current State for UK, US, Europe, Brazil Vaccinations vs Lockdown's Third Wave - 12th Apr 21
Why These Stock Market Indicators Should Grab Your Full Attention - 12th Apr 21
Rising Debt Means a Weaker US Dollar - 12th Apr 21
Another Gold Stocks Upleg - 12th Apr 21
AMD The ZEN Tech Stock - 12th Apr 21
Overclockers UK Build Quality - Why Glue Fan to CPU Heat sink Instead of Using Supplied Clips? - 12th Apr 21 -
What are the Key Capabilities You Should Look for in Fleet Management Software? - 12th Apr 21
What Is Bitcoin Gold? - 12th Apr 21
UK Covd-19 FREE Lateral Flow Self Testing Kits How Use for the First Time at Home - 10th Apr 21
NVIDIA Stock ARMED and Dangeorus! - 10th Apr 21
The History of Bitcoin Hard Forks - 10th Apr 21
Gold Mining Stocks: A House Built on Shaky Ground - 9th Apr 21
Stock Market On the Verge of a Pullback - 9th Apr 21
What Is Bitcoin Unlimited? - 9th Apr 21
Most Money Managers Gamble With Your Money - 9th Apr 21
Top 5 Evolving Trends For Mobile Casinos - 9th Apr 21
Top 5 AI Tech Stocks Investing 2021 Analysis - 8th Apr 21
Dow Stock Market Trend Forecast 2021 - Crash or Continuing Bull Run? - 8th Apr 21
Don’t Be Fooled by the Stock Market Rally - 8th Apr 21
Gold and Latin: Twin Pillars of Western Rejuvenation - 8th Apr 21
Stronger US Dollar Reacts To Global Market Concerns – Which ETFs Will Benefit? Part II - 8th Apr 21
You're invited: Spot the Next BIG Move in Oil, Gas, Energy ETFs - 8th Apr 21
Ladies and Gentlemen, Mr US Dollar is Back - 8th Apr 21
Stock Market New S&P 500 Highs or Metals Rising? - 8th Apr 21
Microsoft AI Azure Cloud Computing Driving Tech Giant Profits - 7th Apr 21
Amazon Tech Stock PRIMEDAY SALE- 7th Apr 21
The US has Metals Problem - Lithium, Graphite, Copper, Nickel Supplies - 7th Apr 21
Yes, the Fed Will Cover Biden’s $4 Trillion Deficit - 7th Apr 21
S&P 500 Fireworks and Gold Going Stronger - 7th Apr 21
Stock Market Perceived Vs. Actual Risks: The Key To Success - 7th Apr 21
Investing in Google Deep Mind AI 2021 (Alphabet) - 6th Apr 21
Which ETFs Will Benefit As A Stronger US Dollar Reacts To Global Market Concerns - 6th Apr 21
Staying Out of the Red: Financial Tips for Kent Homeowners - 6th Apr 21
Stock Market Pushing Higher - 6th Apr 21
Inflation Fears Rise on Biden’s $3.9 TRILLION in Deficit Spending - 6th Apr 21
Editing and Rendering Videos Whilst Background Crypto Mining Bitcoins with NiceHash, Davinci Resolve - 5th Apr 21
Why the Financial Gurus Are WRONG About Gold - 5th Apr 21
Will Biden’s Infrastructure Plan Rebuild Gold? - 5th Apr 21
Stocks All Time Highs and Gold Double Bottom - 5th Apr 21
All Tech Stocks Revolve Around This Disruptor - 5th Apr 21
Silver $100 Price Ahead - 4th Apr 21
Is Astra Zeneca Vaccine Safe? Risk of Blood Clots and What Side Effects During 8 Days After Jab - 4th Apr 21
Are Premium Bonds A Good Investment in 2021 vs Savings, AI Stocks and Housing Alternatives - 4th Apr 21
Penny Stocks Hit $2 Trillion - The Real Story Behind This "Road to Riches" Scheme - 4th Apr 21
Should Stock Markets Fear Inflation or Deflation? - 4th Apr 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Agri-Food's Correct as Silver Stays in Fantasy Debt Fueled Bubble Land

Commodities / Agricultural Commodities Feb 28, 2011 - 04:04 AM GMT

By: Ned_W_Schmidt


Best Financial Markets Analysis ArticleI said, "Scotty, Beam me up." However, the message was apparently garbled, and Scotty apparently beamed me back instead. Since it seems so much like 2008, it must be Scotty's fault. Or, is it possible that Bernanke's Lap Dogs are again distorting asset prices? Surely they must have learned something from making the same mistake over and over. Even a cat learns faster.

U.S. equities have now compounded at a 30+% compound rate for more than two years. Is the U.S. economy that much better off? Unemployment has not improved materially. Latest U.S. GDP revision was negative as state and local government spending plunged. Few of the state governments in the U.S. are now financially solvent if the accounting were true.

Yet, the stock markets continue to rise on free money being again provided by the Federal Reserve. Valuations for social networking sites, which produce nothing of economic value, are approaching the nonsense of the last internet bubble. Silver is in fantasy land, brought on by a debt fueled, mania-based rally. How large will be the losses in Silver this coming year? At the same time, commodity prices might be replicating the fund induced mania of 2008.

Agri-Food Index

Urged on by media reports of riots throughout the despot ridden Middle East, traders pushed Agri-Food commodity prices to record highs in recent times. Green line in above chart, using right axis, is our Agri-Food Price Index. Red line, using left axis, is a stochastic built on that price index. As can be observed, that measure has been pegged at over bought for some time.

In 2008 that stochastic was pegged at over bought for an extended period. That era is marked by the blue box on the left. That blue box on the right is the same size as the first one. While the length of time does not yet match that of 2008, it is working on it. While over bought does not make a market go down, it is often an importer precursor of such an event.

Why might Agri-Food prices develop some form of corrective process, and why should investors care? On the latter, the goal is to buy low. A correction in Agri-Food commodity prices should create an opportunity to purchase Agri-Equities at attractive levels. As to the first question, bullishness has recently reached excesses that seem now to be weakening. Commodity prices do not compound, for unlike stocks an economic response does develop from higher prices. Commodity price runs of more than six months have grey hair and painful joints. They rarely develop a second wind.

Agri-Equities have been influenced in an extremely positive manner by the strong move in Agri-Food commodity prices. In particular, Agri-Equity investments have been dominated by large investors with a preference for large capitalization, multi national Agri-Equities. Many such funds could not or do not buy corn, but they sure bought tractor stocks.

In the above chart is plotted the ratio of our index of Tier Two Agri-Equities divided by our index of Tier One Agri-Equities. Tier Two is at this time composed of Chinese Agri-Equities. These companies are directly involved in serving the Agri-Food needs of China. They are small, and their businesses are volatile. Tier One is comprised of large established multinational Agri-Companies, including names like DE and SYT.

If that blue line in the chart is rising, Chinese Agri-Equities are providing superior performance. If the line is declining, as it has been for the last year, the Tier One Agri-Equities are performing better. As is readily apparent, Tier One has ruled for the past year. In the year prior to that, the Chinese Agri-Equities were on top.

In the weeks ahead, this relative performance pattern may begin to shift as it has becomes over extended in one direction. Investors might be better served to read fewer reports on large companies, which are probably efficiently priced at this time, and do more research on Chinese Agri-Equities. While not able to predict which will win the 2011 race, Chinese Agri-Equities have the fundamentals to win the next decade. 1.3 billion people with wallets filling and a desire to eat better are a lot of fundamentals. Emergence of a strain of Jasmine revolt should only strengthen that trend as the government is likely to respond to such pressures as it has in the past. Prosperity is the Chinese governments most effective tool for appeasing the populace.

By Ned W Schmidt CFA, CEBS

AGRI-FOOD THOUGHTS is from Ned W. Schmidt,CFA,CEBS, publisher of The Agri-Food Value View, a monthly exploration of the Agri-Food grand cycle being created by China, India, and Eco-energy. To contract Ned or to learn more, use this link:

Copyright © 2010 Ned W. Schmidt - All Rights Reserved

Ned W Schmidt Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules