May 18, 2020

The Covid-19 Crisis pretty much tanked every market that we trade…pushing many of them to unrealistically low, incredibly-below-cost-of-production levels…BUT…Beginning with the March 24^th turnaround in Stocks, my view is that virtually every one of those markets has now definitively bottomed…And that ALL of them are buys, and very likely headed back at least to where they were before they cratered…and in some cases, beyond there…Just as the sell-offs were precipitated by what I have referred to as “demand vacuums” in which buying suddenly just TOTALLY & TEMPORARILY evaporated, what we easily may now see going forward are “production vacuums,” wherein demand climbs back toward normal levels…but with curtailed production being unable to crank back up anywhere near quickly enough to meet that demand, the result could be potentially SHARPLY higher prices…

I REMAIN COMMITTED TO MY “BUY EVERYTHING” (except Gold) OUTLOOK…in other words, trying to be long as many markets as I can…NOT knowing which of them will go first, or last, or biggest (or not at all)…I’d also say that a definite part of my approach is that as any of the markets below looks like it is “trying to go,” making new recent highs for example, I am adding to that position…

I still recommend being long the Stock Indices…Yes, the Covid Crisis has been devastating, and it may be with us as a factor for longer than we want to think, but I believe the economic SHOCK/SURPRISE (which is what matters most to the markets) is behind us…Whether the steps being taken by authorities here in the USA, or everywhere else on the planet, are late, or not enough, or politically/egotistically driven, etc., I do know that armies of doctors, scientists and numerous other well intentioned individuals/entities WILL solve whatever problems need to be solved…In other words, nobody is just sitting on their hands. People (and computers) ARE working towards beating the virus…and they WILL do so. Yes, the new normal will be different…but to bet that companies like IBM, Caterpillar, Home Depot, Proctor & Gamble, Microsoft, Disney, Coca-Cola, Verizon, Visa, Apple, etc. are just going to go dark, adapt in no way whatsoever, and never show profitability again is to ignore several hundred years of capitalism…and the chart following.

I continue to look for new all time highs in 2020…

CRUDE OIL – As I wrote a month ago, all of the “no where to store it” bearish nonsense was just that…NONSENSE…I continue to look for higher oil prices.

Traditional Commodities…Some are already truly ERUPTING higher, which is what I think will be the case with all of them…And as stated above, my own personal view that if/when each of the markets below starts “looking like it’s getting started,” to ASSUME that an explosive move is potentially imminent. As I have been noting in previous newsletters, ENORMOUS amounts of capital left the equities markets, pretty much at the lows in stocks, and I would offer those funds have to find something to invest in, and if even a small percentage of that “idle money” seeps into the commodities markets, there is no telling what sort of upside moves we might see…especially when I still absolutely view the agricultural commodities as THE most undervalued asset class on the planet.

I still see higher Crude Oil… which is now almost $30 off of its April 21^st low. So, let me suggest that you think back about 2-3 weeks and NEVER AGAIN FORGET how the media was jam packed with “experts” and “strategists” screaming about “no place to put all the oil” and sounding like Crude could never go up again…Just “TOO MUCH Oil!”…and then never forget that 99% of the market based opinion out there is usually garbage, usually backwards and usually doing nothing more that reporting the news AFTER the fact…then predicting the same for the future.

Even though I look for this market to move higher, if you’re not already on this, I don’t see this as a good place to be entering…Especially when there are, I believe, so many other places to put your risk capital…

This next section is where my true focus is now…and will be for the next 3-4 months…

BUY CATTLE, CORN, WHEAT, COTTON, & THE SOYBEAN COMPLEX…

One of the most important lessons I’ve learned in this game, many times over, is to BE ENTHUSIASTIC WHEN EVERYBODY ELSE IS NOT…to BE ENTHUSIASTIC WHEN EVEN YOU YOURSELF DO NOT NATURALLY FEEL THAT WAY…that THE BEST TIME TO BE A BUYER IS WHEN ALL (AND I DO MEAN ALL) OF THE CONVENTIAL THINKING ARGUES, QUITE “LOGICALLY”, THAT THERE IS NO REASON TO DO SO…I could give you an explanation of how overwhelmingly bearish opinion does change the supply-demand (buyers vs sellers) equation of what influences markets to go down…and up…but all I’ll do here is point to what has recently happened in those two major markets above…Stocks and Crude Oil…that when they bottomed there was absolutely NOTHING to suggest being a buyer…that there was nothing but panic, fear and unanimously bearish sentiment…EVERYWHERE…And then I will tell you that it is my very strong opinion that something of the same is coming every one of the markets that follow below…

And I can assure you, if you want to go looking for the psychological comfort of “expert analysis” in the media that agrees with my bullish view, you’re probably not going to find any…same as it was when we made the turn up in Stocks and Crude.

Buy CATTLE…

Options are expensive here but I suspect they are indicating the potential for VERY large moves…I am only buying one side here…then, if wrong, basically risking half the option value before exiting and looking to reposition.

I would almost say that Cattle HAVE to go up from here, as, if they don’t, I could see this industry being priced out of existence…And then what?

CORN

Corn reminds me of Crude Oil 3 weeks ago…If you want ultra bearish talk about ultra bearish supply, that is what you now have in Corn…And as I keep stating, this crop is a LONG, LONG way from being “made.” $1-$2 annual moves have been commonplace in Corn, for decades…And I don’t think this year will be any different…

I WOULD ALSO NOTE THAT SPECULATIVE FUNDS ARE SHORT ARE RECORD LEVELS…This does not mean the market has to turn around here, but again, ANY weather event…or even mildly friendly trade news…could definitely produce a “jolt” to the upside.

WHEAT

And Wheat, according to every analyst I have seen is just hopelessly bearish…And I would note that this market tends more towards $2-$3 swings…

COTTON

Cotton continues to climb…when virtually ALL of the analysis I’ve seen in this market continues to be nothing but bearish…We are still long, and while July options are getting very short term, I am going to recommend new positions in July one more time…I might be dead wrong, but with my impression being that farmers have nearly unanimously let go of what they produced last fall, I believe a STRONG finish in the July contract is a distinct possibility…even taking it higher than the 70 cent mark I have drawn in here…One thing I don’t see?

July just sitting here until expiration…

And the Soybean Complex…specifically Soybean Meal

After some initial success, I have been suffering for the past 5 weeks with the Soybean complex…And with July Meal having made new lows today, the thought of giving up has certainly crossed my mind…BUT…I have been here before (wrong and/or early) and this is where I have learned to trust the data, and ignore the doubt or lack of confidence that comes with having been wrong, and go with what the data, my instincts and experience are telling me…which is that DURING THE PAST 20 YEARS, THERE HAVE BEEN 15 SIGNIFICAN T RALLIES IN JULY MEAL BETWEEN APRIL AND EXPIRATION…AND I AM THEREFORE NOW VERY DEFINITELY CONTINUING TO BE LONG…AND CONTINUING TO BUY THIS MARKET…

Take a look at the rallies that have occurred…and the percentage gains in those rallies…and then decide for yourself is “giving up” is what makes sense here…Quite the contrary, I think there is potentially more leverage here now than when I first started recommending this trade back in February.

The tally? 14 of the 15 rallies were AT LEAST 19%...With the market currently at about 290, a 20% rally translates into about $58 or $5800 per futures contract…So I am DEFINITELY not walking away from this trade.

As always, just because rallies have occurred on so many occasions does NOT mean we will see anything like them during the next few months…But these histories DO suggest the possibility…I would also add that you can be sure that NONE of those rallies started from a point at which analysts everywhere were screaming, “Buy Meal Now!” Believe me. That is NOT how this stuff works…And finally, I’ll repeat that, at this time of year, ANY abnormal weather can set this market, and the other row crops, on fire.

Just to give us a little more time, I am now recommending the August contract that follows below…

And I would emphasize that just because this thing started to go in March…and then reversed down…does NOT mean it can’t get the move going from here.

Give me a call if you want to talk about any of this…There’s obviously a lot going on and I’d love to hear what YOU think…

Thanks,

Bill

All option prices in this newsletter include all fees and commissions.

Unless otherwise noted, all charts are by Aspen Graphics.

The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: All of them