Going Further Afield

Published on: October 14th, 2020

Analyzing commodities is a tricky business. Esoteric characteristics (supply, demand, production variables like weather or jurisdiction, security, geopolitics, etc) make each one unique. Julian is interested in the top-down, reflation narrative and wants to investigate other expressions for the theme. Below are some of his thoughts on agricultural commodities.

Comments

  • JN
    Jill N.
    19 October 2020 @ 06:16
    Was Julian's Macro Insiders report prepared in September or October ? his report is dated 14 September (footnote) but it was uploaded on 14 October and seems to be pretty current ?
    • HM
      Harry M. | Real Vision
      21 October 2020 @ 12:12
      The footer was probably not updated by the editorial team. Which is not ideal, but it happens.
  • DR
    Derrick R.
    18 October 2020 @ 19:30
    Would love to hear JB's opinion on energy commodities as well, this report has me wondering why it is not even mentioned in a reflationary picture, with the energy stocks currently on the ropes.
  • CG
    Chinmay G.
    18 October 2020 @ 06:38
    Hello Julian, Thank you! I don't have access to any ETFs in my Fidelity employer retirement brokeragelink plan. It can only let me invest in mutual funds & individual stocks. Which ones should I use as substitutes? Thanks Chinmay
    • HM
      Harry M. | Real Vision
      18 October 2020 @ 13:34
      Tricky to give advice on individual stocks for reasons including legal issues in the US. Have you considered stocks like Nutrien, Mosaic, or Caterpillar? I have got to say, that these are very much second order plays on the theme, so while most would agree they should benefit if agriculture picks up, there are multiple things which can go wrong with the investment thesis.
  • CH
    Charlie H.
    17 October 2020 @ 18:44
    The inverse relationship between real yields (currently negative in the US) and Gold prices have been uncanny. Therefore because Julian expects Gold to go much higher ($2500) from here do we expect either a) the relationship to disconnect and/or b) real yields to fall even further?
    • HM
      Harry M. | Real Vision
      18 October 2020 @ 00:34
      I think a bit of both. The relationship "coefficient" can change. However its fair to say the JB expects real yields are likely to continue to be under pressure because we may be coming to the end of a relatively benign period for CPI.
  • CB
    Charles B.
    14 October 2020 @ 15:10
    Hi Julian, I don't see this one in the summary box at bottom of page.New Trade Recommendation: Buy Corn at $390, Target >$550. Stop $350
    • HM
      Harry M. | Real Vision
      15 October 2020 @ 15:11
      Let me get that fixed.
  • MG
    Miguel G.
    14 October 2020 @ 16:39
    Nice write up Julian. As a play on agriculture, do you have any thoughts on playing some of these fertilizer stocks like CF or MOS?
    • TM
      Tyler M.
      14 October 2020 @ 19:29
      Hey Miguel, I've been watching MOS for a while. For what it's worth, I just added to my position today. Chart looks good to me.
    • HM
      Harry M. | Real Vision
      15 October 2020 @ 12:16
      I know that JB likes MOS, and that it makes sense as a play on these developments. Of course, its worth noting that the British Army has acronym regarding over-complication. KISS. Keep It Simple Stupid. Should work, makes sense, but adds a layer of complication. I think MOS should be analysed on its own merits.
  • AD
    Anthony D.
    15 October 2020 @ 03:42
    Julian, Thank you for this detailed report. MIke Oliver's work is also suggesting a fast move up approaching in commodities. What do you think of long dated options on XME or even FCX? Go out to Jan '22, the returns on near by strikes look pretty good.
    • jw
      jarkko w.
      15 October 2020 @ 04:19
      Hi Lawrence! I'm also checking out LEAPs, likely to do normal ATM strategy, but wondering timeframe. Is 22 overkill?Maybe 21 is enough? Anyways like to hear what you decide to do?I'll report back after my own investigation.
    • HM
      Harry M. | Real Vision
      15 October 2020 @ 12:09
      I saw that piece too! JB has been bullish commodities for a while but it certainly looks like we are getting decent confirmation. As for using long options it very much depends on cost and breakevens. It certainly helps me to use them on relatively volatile markets because I trade with stops. But if the vol. is too high it would give me pause. I took a look at IVOLCORN and that suggests that vol is creeping up. Thats 3m implied, but the low is about 13% and the high is above 50%. More realistically the recent high was 35% and the current is about 21%. So not cheap, but if you are expecting a multi-stage bull market it might be a great way of keeping your hands away from the position.
  • DD
    Donal D.
    15 October 2020 @ 07:52
    For those of us with no access to trade futures would using the CORN etf be a suitable alternative?. The expense ratio is on the high side at 1.11% and AUM is $149M which is about a quarter the size of DBA. Thanks, Donal.
    • HM
      Harry M. | Real Vision
      15 October 2020 @ 12:04
      Yes there are a number of ETFs. CORN is certainly one. You could also look at the grain ETFs. They would all be decent substitutes.
  • LM
    Lawrence M.
    14 October 2020 @ 23:58
    Agreed, great report. Easy to follow and execute. Thanks!
  • DM
    Dominic M.
    14 October 2020 @ 21:30
    Great report, Julian - thanks for this.
  • SN
    Sean N.
    14 October 2020 @ 19:28
    Great analysis Julian. I'm feeling very similarly about things at the moment. It's crazy, but tech stocks could easily move past their recent highs... I agree one should be on board in case the reflation narrative looks through all the election uncertainty as it appears to be at the moment. There may not be a lower buying opportunity for trades like silver. Something unpredictable is going to break somewhere eventually and cause a big up tick in volatility / downdraft in equities. You and Raoul, may have to look closer at geo-politics and civil discord for triggers?