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November 9, 2022

 It IS all just one big game…

Considering what has happened in the stock market, just since the beginning of this year, I’d say it would be tremendously naïve to not understand that all of the values in these PAPER MARKETS are nothing but a function of mob psychology in a giant cash money GAME…And if it’s not, please explain to me why all the standard metrics (malarkey) about PE’s, book values, forward earnings, etc. have been USELESS in predicting the brutal collapse in equities.

Being realistic, at the beginning of this year none of the brokerages and none of the financial media were publishing ANYTHING to suggest that, for one, the FANG’s, widely regarded as bulletproof by virtually 100% of those “experts,” could drop by 76%, 52%, 76% and 44% respectively, taking along with them 1000’s of stocks that were dropping just as precipitously…not to mention that, as this disaster was taking place, Wall Street’s “strategists” basically continued talking about “buying opportunities” and “support levels” and, oh yeah, “Just hang on. Maintain your discipline.”

Or taking this collapse from another perspective…If you walked down your main street and ticked off all the storefronts and businesses you see, in the REAL world, can you imagine every one of them, in one nasty 6 month swoop, suddenly losing HALF of their value? NOT a chance…But again, that IS the real world…and for the umpteenth time, this other PAPER WORLD IS JUST A GIANT GAME…Whether you’re talking stocks, fixed income or commodities, today’s price is just today’s PERCEPTION…which WILL, 6 months hence, probably be quite different AND almost certainly be accompanied by a totally different STORY.

Really…Does what you see on the stock charts following reflect the REAL world?

And believe me, the same is  true for commodities…as can also been seen below with just a few major predictions from those same experts being prime examples of how the prevailing, and fairly unanimous “logic” was just totally backwards…

Headlines like these were EVERYWHERE back in March…

…but what we really got was a 35% DECLINE

And remember what THE SCREAMING HEADLINES WERE AS WE HEADED INTO SUMMER? How nothing would stop Gasoline prices from going to the moon?

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 And what happened?

And do NOT think that this was, “just because Biden tapped into our reserves.”

AND…let’s not forget Wheat, with the same sort of headlines…which really was THE commodity that was the most directly affected by the War…

There was not a professional analyst anywhere that would have predicted the crash and burn that took place…

The truth is, I could go on and on with examples of how today’s OPINIONS/PERCEPTIONS rarely match up with what becomes the reality, but these few glaringly obvious cases should be enough...

So, to reiterate…Can anyone honestly tell me that these monster companies, and these commodities, actually changed in “value” by this much in a matter of months? The markets are NOT real. For sure, there’s always some underlying story that “supports” the ups and downs of all this stuff, but in the end, it IS just a function of money chasing and fleeing popular ideas, all of which ARE generated by the media and the brokerage houses…which, let’s face it, ARE the source of just about every investor’s, or trader’s…or FARMER’S decision making process. And for the 1000th time, when you KNOW that ALL of the well dressed, well-spoken talking heads (however famous they may be) are on one side of a market, you damn well better be looking in the opposite direction…And no, this doesn’t mean my/your timing is going to be perfect, but I do know, as regards the commodity markets, that sooner or later, the “Big One,” (an outright collapse) eventually has DESTROYED all of the “logic” and hype of EVERY bull market I have ever seen…And that is NOT going to change…And for the 1001st time, ALL of those commodity market tops ARE going to be swarming with “fundamentals” and “logic” that suggests prices can ONLY be going even higher.

The point is, as a trader, you do have to see through, and BEYOND, the headlines…and understand that 99% of commodity futures opinion, coming from analysts and talking heads, is nothing more than CROWD FOLLOWING GIBBERISH (like PE ratios in stocks six months ago) that is basically only a buzzword filled summary of what HAS happened…and that MOST importantly, almost none of it comes even close to being a reasonable predictor of what is GOING to happen. So, in my old hack opinion, If you want to be there when the big stuff happens, you DO have to understand that those guys, as a crowd, do NOT know…and when they are OBVIOUSLY and UNANIMOUSLY spouting the same market opinion, it usually pays, sooner or later, to go the other way….

And when it comes to row crops?

To get down to specifics…and the here and now of what I think is coming…And yes, I have been predicting this for months on end…

Whether it be end users or producers (FARMERS), they are ALL forming their opinions based on information they get from those very same media sources…and subsequently making their buying and marketing (SELLING) decisions accordingly. And with that information having been roaringly bullish for the entirety of this year, it has led to buyers having ALREADY bought far out in the future, while farmers, waiting on the “next bullish leg up,” are sitting on product they really should have long since sold. This is evidenced by estimates that farmers have only sold a bit more than 50% of this year’s crop…and almost none of  next year’s crop…EVEN THOUGH PRICES ARE STILL HANGING NEAR RECORD ALL TIME HIGHS…In other words, prices are already at levels rarely seen before, but, influenced by everything they keep reading, they are classically holding out for even better prices…But, at some point, THEY WILL HAVE TO SELL ALL THOSE BILLIONS OF BUSHELS, and quite typically, it is nothing more than “surprising” price declines that eventually does spur them to, “Sell now! Before it gets any lower!” And again, quite typically, when they are ALL reacting the same way en masse, it DOES result in the fairly straight down sell off that you can see, almost annually, on the 50 year study included further below.

 

No farmer wants to hear it, and amazingly, the end and collapse of every bull market always seems to surprise everybody, but I continue to think Corn (and Soybeans) are both about to absolutely fall out of bed…

So here it is again…How CORN DOES GO RELATIVELY STRAIGHT DOWN…for the past 50 years…And one more time, generally speaking, not one of these downturns was even remotely being predicted by the analytic masses of ag “experts.”

HOW, YEAR AFTER YEAR, CORN GOES DOWN….Note the percentage declines and how quickly they do take place…and KNOW that every one of them started down, for no particular reason, when virtually ALL of the rhetoric out there, almost certainly, was still absolutely bullish.

 

  

 

Year after year, over and over…and as I keep noting…out of nowhere while everybody is only thinking and talking “bullish fundamentals.”

And here it what we are looking at today…Made the top, been sideways…and ABOUT TO GO.

So look…In spite of ALL the bullish talk, this market made its top 6 months ago…as did just any number of commodities that have already experienced fairly severe declines…AND I THINK THIS, ALONG WITH THE SOYBEAN COMPLEX, IS NEXT IN LINE…AND IMMEDIATELY SO.

We have been off of this for a while, but I THINK SOYBEAN OIL IS READY FOR ANOTHER PLUNGE LIKE WE SAW EARLY LAST SUMMER…ONLY BIGGER.

 DO SOME OF BOTH…Buy the puts. Forget you own them for a few months…I mean that.

Call me if you want to know more,

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, Soybean Oil

 

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