Food Stocks – Stocks and Social Mood

Legendary global investor and chairman of Singapore-based Rogers Holdings, Jim Rogers said the lack of supply in agricultural products is especially concerning.

As he sees it, “most agricultural products are still depressed on a historic basis.” “The story is not over, not for a while,” he said. “I don’t see any reason it’s going to be over for a few years because no one is bringing new supply on stream.”

“A catastrophe is looming,” he says. “The world is going to have a period when we cannot get food at any price in some parts of the world.” – Jim Rogers

Wheat World: The Long, and Short Of It

I often come across news items in the mainstream channels that read as follows:

“Skittish Grain Markets Waiting For Harvest For Direction.” (December 3 Stock & Land)

It’s the typical handiwork of fundamental analysis, which says that broad trends in financial markets are created as a reaction to certain outside events in a clear and consistent manner. They aren’t. While the news can and often does create volatile price spikes (although not always in a “logical” direction), it has no effect on the larger trend.

Case in point: One day after the above headline published, wheat prices got the “harvest” data it was supposedly “waiting for.” The report was decidedly bearish and included these stats: U.S. winter wheat planting advanced to 90% versus 86% last week; conditions showed 64% of the crop in good/excellent condition; AND, export sales were down 3% from a week earlier, “way behind” 2008’s sales profile. (December 4 Associated Press)

YET — wheat prices rallied.

Now take a long look at the following close-up of wheat prices since the start of 2009. Labeled in print are several excerpts of our past wheat analysis taken from various Futures Junctures Service publications.

Here are the broader insights as they appeared at the time:

March 2009 Monthly Futures Junctures:

“Grains Selloff cooling Down: The decline from the January peak at 658 ¼ shapes up quite nicely as a countertrend move, which we can expect will be more than fully retraced in the weeks ahead.. clearing the way for a run up on the January high.”
June 2009 Monthly Futures Junctures:

“The Party’s Over In Grains: Wheat prices finished a three-wave corrective advance at the recent June peak of 677. We can now look for wheat to more than completely retrace the December 2008 advance that began at 497.”

October 6 Daily Futures Junctures: “Wheat is at an interesting juncture. I think it prudent to acknowledge that an important low could be in place…” with prices likely to see the $6.00 per bushel level soon.

The Stock Market

“Last February, wave guidelines indicated that a rally was coming and that it would be “sharp and scary.” This was at a time when 97% of traders (according to MBH Commodities’ poll) thought the market would continue down. Our ideal upside target zone for the S&P was 1000-1100, which so far has been exceeded by only 19 points. “

So, just as with the dollar in recent months, the stock market is still signaling exhaustion of its 2009 counter-trend move. The gaps up and down through 1096 on the S&P, which are playing havoc with many people’s psyches, have been entertaining from a technical point of view. This level is right at the upper end of our ideal target range, and the market’s action
seems to reﬂect its importance. Each time the December S&P futures contract gapped up to breach 1100, it waited a few days and gapped right back down through it.”

Fiat Money and Social Trends

“The economy, as measured in inﬂated nominal terms, has also had somewhat of a respite, as we expected. But the trend of presidential popularity reﬂects this year’s net decline in real stock prices, much as happened during the Bush Administration, as shown in Figures 1 and 2. “

This continuing correlation is particularly interesting given that the political establishment is primarily responsible for the bad-debt guarantees, mortgage loans to broke people and transfers of debtors’ obligations to the public, which have kept the credit supply inﬂated over the past year. Unconsciously, yet justly, the public is not letting inﬂation snow its opinion of the political leader. Its mood with respect to the President is falling right along with real stock prices, which started down in 1999 and have never looked back. The main reason that Barack Obama enjoyed a high initial popularity is that he was not George Bush. That’s why the motto “hope and change” resonated with voters. But his popularity peaked ten days before the inauguration. The trend in social mood that was previously working against Bush is now working against Obama. I am quite sure that the lowest level for the President’s popularity during the current term will break records.

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