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Lot's of swings and misses, plenty of ground balls, and the occasional pop fly - I'm trying to reduce my dependence on the agricultural sector and failing miserably. I dumped about 40% of the exposure in last week's rally - and saved enough to benefit from the continued climb this week. It's rarified air to be sure - and the sector shows absolutely no sign of stopping.
If you look for it - there's a lot of press on the topic, both market generated and scientific. I pay more attention to the science as they don't have the vested interests that cause stock pundits to froth, and give better clues as to what's headed our way.
Asians don't care much for American rice - and with both Thailand and Vietnam ceasing exports, the price of asian rice has doubled in the last week, with even Walmart and Costco are limiting shoppers to a couple of 50 lb sacks. The Phillipines converted a lot of acreage to Palm for biofuel purposes (palm oil) and in the process became net importers of asian rice.
The American heartland has been the world's food basket for some decades, and with the biofuel mania, most of that surplus is being converted to fuel. Prices are on the rise everywhere making the obvious happen...
Marginal land is brought into production, and it must be fertilized to generate even average crops. Ditto for farmers that abandon the crop rotation scheme to replace soil nutrients, corn has to be heavily fertilized as it sucks the soil dry.
History buffs knew this - as corn and tobacco were what drove settlers west - after clearing forest and planting corn repeatedly, exhausting the soil, forcing them West to new soils and more de-forestation. It was the reason the natives taught them to put dead fish in the hole with the corn seeds, the fish would act as fertilizer.
Oil is $100 a barrel and I don't think it's returning to previous levels. Nearly 40% of the world's population is emerging from agrarian to industrialized (at the same time) and they want the same stuff you've got, so expect prices to increase on staples and exotics, as they covet an iPOD Nano as much as you do. Naturally it'll take a bit of time - they still haven't slurped all the MP3's off the Internet yet - but they will.
The Internet promised a lot of things and delivered on some of them, the "new economy" has emerged in part but it wasn't the revolutionary change we thought - more evolutionary. I feel the same thing is happening with current events and it's a new economy, evolutionary not revolutionary.
Prices will not return to prior levels, ever. Too many people are scratching for the same product, and if your kid doesn't like grits, some other kid does - and his Mom will buy them.
Market pundits point to the growth in earnings of DOW components, stagnant or falling in the US and rising rapidly outside the US. Prices used to fall when we hit harsh economic times and with this larger worldly economy, there will always be someone a little better off than we are.
The biofuel mania will play out and something will emerge, it won't be food based, more like cellulose or algae, or some refined garbage weed that can be grown in arid regions, but that won't diminish food prices back to the norm, it'll merely lower them somewhat.
Oil drilling takes many years to increase production, as wells must be drilled, pipelines laid, pumping augmented, and ships built to actually increase existing flow. That'll give these burgeoning industrial countries time to burgeon further - increasing the volume of demand as well as their population. They'll have their own class of educated young professionals yearning for BMW's and Faux Semblant sunglasses as we did - waiting for the bus slurping Mocha Latte Frappachino's and wolfing a Lemon Danish, they're just like us - and only a little ways behind in their tastes.
As oil climbs further we'll find something to offset it briefly or permanently, huge dollars will be available from these petroleum giants to solve the Oil Sands / Oil Shale issue - or some breakthrough in solar will be affected, but it won't be cheap. Any revolutionary change in energy sources will drive the petroleum companies into the mix instantly, they'll find a way to keep the price high while they retool to whatever emerges, and in the process drop the Saudi family like yesterday's newspaper.
In the US we'll be conserving fuel and championing "Green" products like the second coming of Jesu Christo. We'll be scolding neighbors for wasteful lawn watering and not seperating their paper from plastic. While we decry the awfulness of it all they'll be enjoying 500HP V-8's as the new status symbol in India and China, and slurping the petrol as we did. Naturally, we'll forget we did it, and complain about their wanton violations of CO2 and Mother Nature.
In the 50's your "carbon footprint" was the amount of rubber you could lay down before traction took hold, it was the days before "Posi-Traction" so we only counted the one tire...
Get used to it, these are the Good Old Days, and they're ... never ... coming back.
Portfolio Moves 4/11/08 - 4/25/08
Sold half of my holdings in POT and MOS, 33% of my holdings in MON, BG
- Locking in profits on the Big Four, nothing more. All of these are up over 20% in gains, and it's time to be prudent, not reckless.
Bought V - the Visa IPO
The most anticipated IPO of the year, and it's up 26% since my purchase. This was a "buzz" play, as everyone was headed for this beast with both feet. I will sell as soon as the momentum slows, as this is fundamentally a poor investment. Credit market problems are spilling into defaults on credit card bills, homeowners hanging on desperately to their homes using credit cards to make payments. It will get stung badly - I want out before it starts to snake downward.
Bought TSO and VLO
I like refiners and they should be running at capacity for years. They're beaten down at this point and I think they may claw back a bit over the next couple of months. They're cheap, and I like cheap. (rephrased: I like cheap if it goes up after I buy it, I don't like it if it continues south)
Bought ACI
Coal is king, especially to the newly industrialized nations bringing additional industry online. Coal is needed to make steel, and both are much beloved by Asia at the moment.
Bought UNG
I have been watching natural gas prices climb in lockstep with other fuels, as I'm not smart enough to know which company to buy in this industry, gimme the ETF
Bought IPI
This is knee jerk response to POT / MOS phenom, IPI is an IPO for yet another fertilizer company, great timing to debut when the industry is ablaze, I'm assuming it'll get a lot of fans as there aren't any "bargains" in the mix. If you want cow crap it's a simple case of buy high sell higher, same with this company.
I'm trying to diversify and am only partially successful, as I've added to FCX (Copper, Moly, Gold) with additional money. I'm still courting far too much risk for comfort, but am unable to see my way clear of it all.
Pass the Maalox, dammit...
KB
http://singlebarbed.com
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I've been largely standing pat over the last 30 days, somewhat convinced I've got a combination that goes up slightly more than it retreats. The moves made have been largely a trial and error process, not stemming from any conviction or facts - more of wonderment style of tinkering designed to lose you small amounts of money - and offer a fast exit.
