This is watching financial history in the making. We are seeing dramatic moves in commodities, inflation is just ready to explode from all the liquidity thrown out there in the face of tight commodity supplies.
As I mentioned before, when you have an ever growing supply of money, growing at double digit percentages annually with no growth in the supply of commodities, you have inflation and explosive moves in oil, grains, softs, metals, etc.
On the grains....
Shorting wheat here is financial suicide. I don't have the balls to go long after this kind of quick move but I definitely would not short here. When there is a supply squeeze, unlike a demand story, the price goes up very quickly. We have reached that marginal point and for a nearly inelastic good like grains, you can get huge jumps in price when supply is low. Just look at what happened in the 70s and look at some of those charts. You will not want to be short now.
BUT, there will come a time this year where the grains will be so overextended from short covering, fear, and outright mania that a short will pay off huge. Still not close to that stage yet. I'm thinking $8 corn, $22 soybeans, and $16 wheat are levels where you could say things are getting a bit out of hand. I probably wouldn't touch the short side before those price points. Of the 3 big grains, when the time comes to short, soybeans will be the best to short, with corn being the worst.
As I mentioned before, when you have an ever growing supply of money, growing at double digit percentages annually with no growth in the supply of commodities, you have inflation and explosive moves in oil, grains, softs, metals, etc.
On the grains....
Shorting wheat here is financial suicide. I don't have the balls to go long after this kind of quick move but I definitely would not short here. When there is a supply squeeze, unlike a demand story, the price goes up very quickly. We have reached that marginal point and for a nearly inelastic good like grains, you can get huge jumps in price when supply is low. Just look at what happened in the 70s and look at some of those charts. You will not want to be short now.
BUT, there will come a time this year where the grains will be so overextended from short covering, fear, and outright mania that a short will pay off huge. Still not close to that stage yet. I'm thinking $8 corn, $22 soybeans, and $16 wheat are levels where you could say things are getting a bit out of hand. I probably wouldn't touch the short side before those price points. Of the 3 big grains, when the time comes to short, soybeans will be the best to short, with corn being the worst.
