The Next Crisis Will be Over Food
February 17th, 2008WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
The mainstream media is figuring it out, quite late, as usual.
Be careful, though, about timing long entries when Goldman Sachs is shilling something higher, or short when they’re badmouthing something. Remember what happened after that late November 2007 Goldman Sachs’ call to sell gold?
Crooks.
Now, am I kicking myself for taking profit on DBA when I did at $36? No. Even though DBA is trading around $39 now, I’m still satisfied with my decision to take profit when I did. And I’d buy DBA again after a pull back, if it comes.
I’ll tell you what I’m not so proud of, though…
I was so convinced (gut level) that a short term correction was due that I bought a couple of cheap February DBA puts at .10. They expired worthless last week.
Buying those puts was a wildly reckless move that went against my own analysis on the matter. I wrote that I thought that it could easily go higher, with the fans intact and the symmetrical triangle shaping up. But there was nothing in there that justified taking a position (even a tiny one) the other way.
Cost of stupidity, including commission: About $27.
Reminder to stick with my own discipline: Priceless.
Via: Financial Times:
I used to think that the fastest way to become worried about markets was to stare into the bowels of a monoline. No longer. A few days ago, I happened to hear Goldman Sachs discuss the state of the global financial system with European clients.
And what struck me most forcefully from this analysis – aside from the usual, horrific litany of bank woes – was just how much trouble is quietly brewing in corners of the commodities world.
Never mind that oil prices are high; that problem is already well known and gallons of ink have been spilt debating that, along with the pressures in metals and mineral spheres.
Instead, what is really catching the attention of Goldman Sachs now is the outlook for agricultural prices. Or as Jeff Currie, head of commodities research at the US bank, says with disarming cheer: “We think we could go into crisis mode in many commodities sectors in the next 12 to 18 months?.?.?.?and I would argue that agriculture is key here.”
Now, to some readers of the Financial Times, that observation might seem odd. After all, inhabitants of the western world typically spend far more time worrying about the price of petrol for their car, rather than the price of wheat or corn. And when western investors do think about “commodity shock”, their reference point typically tends to be the 1970s oil crisis.
However, as Mr Currie observes, this is a dangerously blinkered view. Back in the 1970s, famine touched a much bigger proportion of the world’s population than the energy crisis, he says. And even today, rising food prices pack a powerful political punch in the developing (or partly-developed) world, to a degree that is sometimes underappreciated by the pampered west.
…
But leaving aside this very real human tragedy, what should also be crystal clear for investors is that this is not a picture that points to 21st-century capital markets progress; nor is it likely to breed stability in the medium term. Anyone who thinks this decade’s problems start and end with credit, in other words, may yet receive a rude shock; sadly, we live in a world where soyabeans may yet pack as painful a punch as subprime.
