Wow – what a crappy week in the commodity markets. The biggest one-week drop in commodities in the last 50 years took place this week – and it wasn’t even a full trading week!
I hope everyone is still relatively intact. I am taking some hits myself, but still standing and fortunately still profitable on the year. Thankfully my stops took me out of most markets earlier in the downturn, though, like a drug addict of sorts, I’ve tried sneaking back in early and have gotten burned accordingly. Stops are something I recently introduced to my strategy – I used to be more of a “buy and hold” guy. I’m really grateful for that, as using my previous strategy, I would have been completely wiped out during this downturn.
Rather than describing the selloff myself, I’ll defer to Agora’s Dan Denning, who summarized better than I could have in a Rude Awakening article entitled Cold Commodities.
Just for kicks, let’s take a look at some of these prices – it almost feels like Back to the Future:
(Please scroll down – not for dramatic effect, but because I couldn’t figure out my HTML :))
| Commodity | Price |
|---|---|
| Coffee | 130.90 |
| Sugar | 11.89 |
| Cocoa | 2299 |
| Cotton | 71.02 |
| OJ | 113.05 |
| Corn | 507 |
| Soybeans | 1207 |
Two words come to mind – holy crap! These prices – especially the softs – are flat out cheap!
When sugar was cranking up a few months ago, no way did I think we’d ever see it below 12 cents again. And if you were just kicking yourself earlier this year that you had “missed” the big bull run – well you’re in luck, opportunity is knocking once again.
I think the question for us now is not if we buy, but when do we buy. I don’t have a crystal ball, but pull up one of these charts and take a look – it’s not pretty over the past three weeks. I would love to see this selloff continue, proceeded by a nice long bottom, and a slow but steady rise back up. Of course, markets rarely cooperate with what we want 🙂
Just remember that billions of dollars have been lost trying to catch the exact bottom or exact top. I would be surprised if these prices are not significantly higher in the next 2-5 years (due to fundamental supply/demand issues that I outlined here).
We’ve got a lot of upside to catch here – so let’s dust ourselves off, be grateful for what we have left in our portfolios, and grab the horns for this bull’s next leg up.
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