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I watched as a weak dollar seemed to keep the U.S. afloat with a strong rise in exports. And now as the dollar strengthens the economy is rising and anything with a hint of being commodity related is getting slammed. I am happy to see corn,wheat,and other commodities drop in price,but I never expected to see farm implement manufacturers,coal,and some of the other backlash from the rising dollar. As I said last week,coal companies such as Arch have already inked contracts at set prices on out to 2010 and the prices Arch and the others are going to receive is already set and won't drop. The farm implement manufacturers such as Deere and ArtsWay are getting hammered. ArtsWay was up 30% last week and a day or two later dropped by 20%.
A lot of times I am guilty of looking at individual stocks and not looking at the big picture. I spent the weekend looking at some charts and I was shocked at some of the pullback some stocks have suffered. And the main damage seems to have been in the Ag industry. Most of the experts say that investors were locking into commodities which trade in dollars to try and beat the inflation we are facing. If you look at this angle and in oil especially you have speculators,which by definition are buying contracts but will never take possession of the commodity. I heard the other day that about 50% of all the contracts on oil were speculators. Again,by definition a speculator is someone who will never take delivery of the commodity. Southwest Airlines controls jet fuel prices by buying options and they were very successful at doing this. But,if I buy options on jet fuel,I'm a speculator as I don't have a plane and will never take delivery of the jet fuel. So,we had a huge bubble in commodities and it has imploded and this will ease the inflation problem worldwide soon.
At this time as i said i wouldn't buy anything ag related. Deere's last 2 quarters were great and although they met their projections,a couple of brokers sales earnings didn't meet their expectations and Deere has dropped by about 30%. If you are a long term investor and can wait this correction out,you should do real well. Companies like Deere are doing just fine,I just don't know when this phase will be over.
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