The S&P trade was basically flat today, but boy, did my wheat spread move. I was tempted to add to it, but decided to go surfing with my son instead.
I’ve noticed a lot more volatility in the grain spreads, the most since 1986, when some spreads moved $0.70 in 4 days. This action is pretty good, as I have a pretty good indicator of spread direction, and can sometimes pull a few dollars out.
However, as good as the markets can be, a good day surfing always beats a good day in the market.
Jeff
Man, my Ag ETFs, long and short, are dead in the water. Beans, wheat, and corn somehow just keep cancelling each other out. I wish (and kind of don’t) there were a pure soybeans and a pure wheat ETF.
I think what’s happening in commodities is the same thing that happened in the 80’s with mutual funds. Huge amounts of money poured into funds and they became the institutional investment of choice. In Canada, they helped keep our local stocks artificially high. I think commodities are going to see the same effect (a financial premium). But the problem is that commodities are the building blocks of our economy. I think we may be in the process of unwittingly institutionalizing permanently higher prices and/or inflation through the financial demand for more commodity ETFs that institutions like pension funds are allowed to hold.
Changing subjects, did you see my posts on Credo Petroleum? That stock went from $12 to $20 and back to $16.50 in two days on no (known) news and relatively huge volume. They hedge all their natural gas production, and they have some oil (unhedged) but not all that much in relation to the gas. I don’t understand why the stock would suddenly do this if there isn’t something else going on behind the scenes - takeover speculation, a big find, or some big deal around their Calliope spent-gas-field recovery system. It gapped $3.50 at the open today after finishing up $4 yesterday, and I was able to clear out quite a bit at $19.80 (in keeping with my strategy). It’s pretty bullish action. It’s a thin stock - less than 10 million shares outstanding.
It’s also further vindication of my balance-sheet value strategy for name selection. My value screens are coming up pretty solid. I’ve had four take-overs of stocks that showed up on my basic screen - and I was sitting in two of them when the bids happened, and picked up most of the move of a third before it was announced (I was out by then).
Cheers,
George
Comment by allocator — May 23, 2008 @ 2:06 am
George,
I saw that post,and saw that move…..sometimes, things just happen. Were you able to watch the tape action of Credo when it had that dipsy doodle?….that would have told you what was going on for sure. The tape tells all.
The only thing left for the ags before the next big move is to play the spreads. There will be another big move in the ags, but the $19,999,999 question is, When?
Jeff
Comment by masteroftheuniverse — May 23, 2008 @ 2:12 am