June 15, 2022

Just 8 months ago, mass public perceptions, driven by Wall Street, were that LIBOR, which is THE international benchmark for short term lending, would still be at 1/2% in December of this year (see chart following). Now, however, with Eurodollars collapsing, LIBOR has blasted its way all the way up to almost 4.25%, and I have zero doubt this sort of change will VERY negatively impact commodity prices. The futures markets ARE LEADING the Fed towards highly aggressive rate hikes to fight what became runaway inflation…And late though they may be, the Fed WILL win that battle. Prices WILL fall.

The same thing from a different perspective…

And do remember that LIBOR is the rate that banks can borrow overnight between themselves…The actual interest rate that private borrowers get is usually quoted as something like, “LIBOR + 2.5%,” meaning that the cost of that money is already maybe somewhere up in the 6-7% range, which DOES become a significant factor in potentially LIMITING business planning…and spending.

Shifting gears for a moment…

As Wall Street is ABSOLUTELY the public’s primary source for information and OPINION in the markets, I think it is extremely important to always be aware of what those bank and brokerage house sheep and SALESMEN are recommending, especially when they are all on the same page…as, based on my 42 years in the brokerage business, if they are really hot on something, you’d damn well better be looking in the opposite direction.

I mean, really…Six months ago…or even just three months ago…growth stocks were THE popular investment, seemingly bulletproof…with any dips being touted as a “buying opportunity,” which we now know was one more infinitely wrong perception hoisted on the public by Wall Street’s “research teams.” And it still just baffles me why the public EVER puts any faith in ANY brokerage house “strategist” or analyst when FACTUAL histories show them to be perennially FAR more wrong than they are right…and usually with somewhat disastrous financial consequences…which is precisely what so many people are experiencing in their stock and retirement accounts right now.

My point here is that, TODAY, WALL STREET’S LOUDEST AND VIRTUALLY UNANIMOUS RECOMMENDATION IS: BUY COMMODITIES…with a special emphasis on BUY CRUDE OIL…and to BET ON MORE INFLATION…In other words, even though those markets HAVE BEEN rising for several years now…and quite sharply of late due to the Ukraine war…those geniuses think getting long commodities, at or close to record highs, is a smart investment…and yes, even with rates beginning to scream higher.

And for sure, there are obviously times when I myself am just dead, dead wrong…but on the flip side, I DO also get it right…And yes I have been wrong…or maybe just early…about this, but never in my career have I disagreed with them more, and I REMAIN CONVINCED THAT BEING SHORT THE COMMODITIES SHOWN BELOW…ALL OR ANY OF THEM…HAS BECOME THE SHORT TRADE OF A LIFETIME.

To me, all the press about how Ukraine is so bullish for Oil, and a number of crops, is just the final fake-out icing on the cake for what HAS BEEN a bull market (same as in Stocks) for commodities…and I STRONGLY RECOMMEND BUYING PUTS AND/OR SELLING FUTURES  IN THESE MARKETS…RIGHT HERE. RIGHT NOW…because, as  I have documented so many times in this newsletter, WHEN THEY STOP…THEY TEND TO STOP DEAD…AND THEN GO RELATIVELY STRAIGHT, STRAIGHT DOWN.

SOYBEAN OIL

I still see this as the most overvalued commodity we trade...And still think it would be EASY to QUICKLY see it back where it was just six months ago...Today's close was the lowest in several months and may be signaling that this think IS done on the upside...And if it is, I maintain that it will NOT just be drifting slowly lower...I think it will basically be going straight down...

CORN

According to all the talk about Ukraine, and weather, and potential buying from China, Corn should be headed higher…and NOT have spent the last few months potentially making a top. This market has had every chance in the world to go higher…and it HASN’T…Meanwhile, there is one hell of a crop developing in the Midwest…Get on NOW. As noted so many times, Corn has a strong tendency to, literally, from one day to the next, just start collapsing in 20-30 cent down days.

SOYBEANS

There has been TONS of bullish news here, but even so, IT HAS GONE NOWHERE ON THE UPSIDE SINCE LATE FEBRUARY...Last week's new high, by a few cents, and then having reversed down again, certainly could have been the last, last, LAST "fake out-break out" for Soybeans. A 25% drop takes this to $12.00...and I THINK THAT IS WHERE IT IS HEADED...AND IMMEDIATELY SO.

COTTON

There has been a LOT of talk about drought but this market is STILL falling. I suspect that all of the weather has already been factored in here...and that this contract is headed down HARD from here. Do NOT ignore what the Fed's intentions are.

CRUDE OIL (just a chart) Call me if you want to talk about this…

And DO read this and check out the chart following…

Just for the record…If you are looking at some of these commodities, and hearing all the bullish, bullish talk/fundamentals about them…and thinking, “How could he possibly think we’re going back to $5.00 Corn, or $12.00 Soybeans…or 90 cent Cotton? NO WAY they can go that low!” Then take a look at the following very real, and very current, example…LUMBER…and do understand that NONE of the markets are any different from this one…

If you have read this far, you’ll know from the past that I recommend owning puts in all of these markets as a “unit.” But if you don’t want to go that far, my recommendation is to go with the Soybean Oil and Corn…

And also, if you have been on this with me, you have definitely been losing money…but I cannot emphasize how important it is to re-up the bet here. Sooner or later, this stuff IS going down…and do think the odds are through the roof, and some evidence, that it’s starting now…and the last thing you want to be doing in three months is the “I knew I should have done it again” thing…Yeah. I have been wrong. But the trade is still here…And more than EVER, I don’t think it gets any bigger than this…I’m there. Hope you will be too.

And if you’re one of the lucky guys who haven’t been on this? Oh man…Now is your chance. Or so think I.

Call if you’re interested…

Thanks,

Bill

770-425-7241

866-578-1001

All option prices in this newsletter include all fees and commissions. All charts, unless otherwise noted, are by Aspen Graphics and CRB.

The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: Corn, Soybeans, Soybean Oil, Cotton, Crude Oil