Saturday, November 16, 2013

Let’s Talk About Corn For A Minute

This has been something that I’ve been somewhat obsessing over in the last week. Thursday night during and after my presentation at Duke University, one of the things the students were most interested in was my Corn trade. One of the kids was fascinated that I was buying Corn and not talking about Tesla or Twitter or any of these other “hot topics” that have been in the news lately. Phil Pearlman and I first went over this trade during our weekend video last weekend. But I wanted to go over some of the details in a separate post and follow up on some of the things we discussed.
What first caught my attention was the hate that Corn has been getting lately. We haven’t seen this much pessimism in the Corn market since back in 2009. This detestation of Corn by the investing public came just before a 150% rally in Corn prices. Here is the current public opinion chart of the corn market that consists of a basket of our favorite polls: Bloomberg, Market Vane, Consensus Inc, Ned Davis, etc. The colored lines represent 1.5 standard deviations above and below a 1-year moving average:
11-15-13 corn public opinion
The next thing that got my attention was what the “smart money” and “dumb money” have been doing. The commercial hedgers have been loading the boat as corn prices have fallen, while the speculators are selling the heck out of it. I like to be on the side of the commercials: (more)
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