Sunday, February 01, 2015 02:39pm
North Adams, MA now: 25 °   
Send news, tips, press releases and questions to info@iBerkshires.com
The Berkshires online guide to events, news and Berkshire County community information.
SIGN IN | REGISTER NOW   

Home About Archives RSS Feed
@theMarket: The Line in the Sand
By: Bill Schmick On: 01:20PM / Saturday September 25, 2010
Important
0
Interesting
0
Funny
0
Awesome
0
Infuriating
0
Ridiculous
0

It would seem that a low-volume battle is being fought over that 1,130-1,150 level on the S&P 500. As I expected, the break above 1,130 occurred this week and now the bulls have to defend it while attempting to push up above 1,150.

Actually, the S&P reached an intra-day high of 1148 this week. That is the highest level since May 18. Readers may recall that the present correction and subsequent trading range in the markets began with a decline in late April from a high of 1,219. Last week, I wrote that the S&P 500 would break above this trading range.

Also last week I raised my price targets on gold (to $1,350 per ounce) and silver ($36 per ounce) as well as other precious metals. If those metals continue to steamroll higher, I may have to bump up my estimates in the weeks ahead. Both metals continued to make new highs after the Federal Reserve on Tuesday said they were ready to increase their quantitative easing measures a second time if the economy continued to slow. Investors obviously are betting that QE II is in the cards because both commodities took off just minutes after the meeting.

"Explain that to me," asked one client over sushi at Shiro's this week.

Quantitative easing, for those who are unfamiliar with the concept, occurs when the Fed buys securities (in this case, Treasury bonds and mortgage-backed securities) in an effort to inject more money (stimulus) into the economy. Of course, more money in the system can mean higher inflation down the road if that money is used to buy goods and services. So far, that has not been the case.

All that money continues to sit on the sidelines, earning next to nothing because the banks and corporations are afraid to spend it. Since market participants discount today's actions into the future, investors are assuming that QEII will happen and, at some point down the road, that money will be spent. That will almost assuredly trigger a higher Inflation rate, so buy gold and silver now in anticipation. Of course, the best laid plans sometime go awry. Since gold and silver, along with other commodities, are generating big returns, most players are buying first and asking whether it's a good move later.

While commodities take center stage, the bulls and the bears stand toe to toe. Between them, is drawn a line in the sand that could determine whether this market rolls over once again and trades down 10 percent, or continues higher, maybe back to the April highs. I'm betting higher for now. What the bears don't understand is that the game has changed. The Fed has basically given investors a "put" on the market. Either the economy continues to grow or the Fed will come in and backstop the economy with QE II.



Tags: securities, metals, commodities      
The Independent Investor: Wheat, Weather & the Grocery Shelves
By: Bill Schmick On: 09:12PM / Thursday September 09, 2010
Important
0
Interesting
0
Funny
0
Awesome
0
Infuriating
0
Ridiculous
0

If you have been watching commodity prices over the last two months, you would think that the world's consumers are in for another escalation in food prices last seen in the summer of 2008. Yet, short-term movements in agricultural prices do not necessarily translate into higher food bills in the long term.

Much of the recent escalation in "soft commodities" like wheat, rice, coffee, corn and so on can be blamed on the weather. Readers may recall my columns "Weather and the World's Economies" and "What's the Price Tag of a Perfect Storm." In those articles, I explained how weather can impact prices of all sorts of things but especially commodities. This year's wheat crop is a good example of that.

This has been the hottest summer on record for us in the Northeast as well as other parts of the world. July was the hottest month in 150 years in Russia. By now, even if you live in Siberia, you are aware of the devastating drought within Russia, caused by that heat wave. The drought also sparked a series of fires that engulfed over 300,000 acres across seven regions. The weather and fires devastated that country's wheat crop. As a result, the government imposed an embargo on any further wheat exports, which account for 13 percent of global wheat exports.

Although the Russian wheat shortfall occupied the headlines, grain production has also suffered this summer because of severe flooding in Pakistan, China and Canada, while northwestern Europe has also suffered a drought. This has taken the wheat world by surprise. Wheat is a hardy grain resistant to all but the worst weather and producers grow it in overabundance. Huge wheat stocks have traditionally backstopped shortfalls in other soft commodities. As such, wheat is also the speculator's favorite grain to "short" since price declines are expected in all but the worst years. However, this year the tables were turned on everyone setting off a short-covering panic and buying frenzy in wheat futures which have gained over 35 percent in a short time.

There is a domino effect when a commodity as important as wheat has a sudden and sharp decline in supply. Livestock producers, for example, who may have been feeding their herds on cheap wheat are shifting out of that high-priced grain to corn. Suddenly the price of corn begins to rise. Rice, often a substitute for wheat in human consumption, has also risen recently.

In the commodity trading pits, sentiment has rapidly changed because of these windfall profits. Speculators, looking to make a fast buck on the next commodity to move are buying up anything that goes snap, crackle or pop. Normally this kind of behavior only impacts prices in the short-term (similar to the price effect of an unexpected freeze in Florida's orange juice production).

This time, however, because of wheat's function as the grain of last resort, this impact on prices could stretch out into the first quarter of next year. Investors have bid up the stocks of fertilizer, farm equipment and other agricultural-related companies as farmers around the world plan to increase their own production in an effort to fill the "wheat gap." Out in our own Midwest, farmers are optimistic that prices will be rising throughout the rest of this year and into next. But don't start stocking up on Cheerios quite yet.

The U.S. Department of Agriculture is only expecting a 1.5 percent increase in prices this year, which is actually down from the prior two years, when prices grew 1.8 percent per year. The real increases in food prices are still waiting in the wings until the world's economies are on firmer footing. Once people can afford to spend again, prices are expected to move up quickly in commodities across the board.



Tags: commodities, wheat      
Page 3 of 3 1  2  3  
News Headlines
Pittsfield Suns' Hot Stove Features Red Sox GM Cherington
Watertown Tops Berkshire Battalion in OT
Adams-Cheshire Little League Signups Set
MCLA Athletic Training Major Wins EATA Scholarship
Fairview Commons Receives National Award
Senator Downing Hosts Town Hall Forum on Wednesday
2015 Pittsfield 4th of July Parade Theme Announced
Goodwill Offers Soft Skills, Custodial Workshops
Cultural Pittsfield This Week: Jan. 30-Feb. 5
Berkshire County Arc Accepting Applications for 2015 Scholarships

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.

 

 

 



Categories:
@theMarket (158)
Independent Investor (214)
Archives:
January 2015 (9)
December 2014 (7)
November 2014 (4)
October 2014 (9)
September 2014 (5)
August 2014 (7)
July 2014 (2)
June 2014 (6)
May 2014 (9)
April 2014 (8)
March 2014 (6)
February 2014 (6)
Tags:
Economy Rally Retirement Europe Energy Stimulus Metals Federal Reserve Interest Rates Bailout Taxes Fiscal Cliff Jobs Congress Housing Pullback Crisis Currency Selloff Debt Debt Ceiling Stocks Greece Markets Europe Euro Recession Deficit Election Banks Fed Japan Stock Market Commodities Oil
Popular Entries:
The Independent Investor: Understanding the Foreclosure Scandal
The Independent Investor: Don't Fight the Fed
@theMarket: QE II Supports the Markets
The Independent Investor: Does Cash Mean Currencies?
@theMarket: Markets Are Going Higher
The Independent Investor: General Motors — Back to the Future
The Independent Investor: Will the Municipal Bond Massacre Continue?
The Independent Investor: How Will Wall Street II Play on Main Street?
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
Recent Entries:
The Independent Investor: College Savings Accounts Are Not Risk-Free
@theMarket: More Stimuli Equal Higher Markets
The Independent Investor: The European Central Bank Delivers
@theMarket: Tail That Wagged the Dog
The Independent Investor: What's Happening to the Movies?
@theMarket: What Will the New Year Bring?
The Independent Investor: Think twice Before Co-Signing Student Loan
@theMarket: What Will the New Year Bring?
The Independent Investor: Could Greece Upset the Applecart?
@theMarket: Santa Comes to Town


View All
Boys BB: Pittsfield vs Drury
Pittsfield boys basketball team won over Drury 65-51.
BFAIR Family Fun Night
BFAIR hosted a Family Fun Night at Greylock Bowl & Golf...
Girls BB: Drury vs Wahconah
The Wahconah girls basketball team defeated Drury Thursday...
Boys BB: Lenox vs McCann Tech
The Lenox boys basketball team was able to pull away from...
Alpine Ski
Multiple teams at Slalom, Bousquet
Hockey: Mt Everett vs...
The Wahconah hockey team defeated Mount Everett, 3-2,...
Berkshire County UCP Telethon
United Cerebral Palsy of Berkshire County held its 52nd and...
Girls BB: Athol vs Hoosac...
McKenzie Robinson dished out nine assists to help the...
Swimming: Wahconah vs St....
Liz Bernardy won the 100-yard freestyle and 200 individual...
Boys BB: Drury vs Hoosac...
Friday night basketball, Drury boys win over Hoosac Valley...
Girls BB: Lee vs Mount...
Barrett scored a game-high 27 points in Thursday's 57-44...
Boys BB: Smith Academy vs...
The Pittsfield boys' basketball team defeated Smitch...
North Adams Chamber @...
The North Adams Chamber of Commerce held its first...
Hockey: St Mary's vs Wahconah
The Wahconah hockey team defeated St. Mary's Wednesday...
Berkshire Chamber @GFCU
Berkshire Chamber of Commerce held its January networking...
Boys BB: Wahconah vs Drury
The Wahconah boys basketball team was able to pull away and...
Boys BB: Pittsfield vs Drury
Pittsfield boys basketball team won over Drury 65-51.
BFAIR Family Fun Night
BFAIR hosted a Family Fun Night at Greylock Bowl & Golf...
Girls BB: Drury vs Wahconah
The Wahconah girls basketball team defeated Drury Thursday...
Boys BB: Lenox vs McCann Tech
The Lenox boys basketball team was able to pull away from...
Alpine Ski
Multiple teams at Slalom, Bousquet
| Home | A & E | Business | Community News | Dining | Real Estate | Schools | Sports & Outdoors | Berkshires Weather | Weddings
Advertise | Recommend This Page | Help Contact Us | Privacy Policy| User Agreement
iBerkshires.com is owned and operated by: Boxcar Media 102 Main Street, North Adams, MA 01247 -- T. 413-663-3384 F.413-664-4251
© 2000 Boxcar Media LLC - All rights reserved