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| Doesn’t exist. I’ll be the first to admit I am yet cautiously bullish on old crop wheat. At the moment, the market is cleaning the pockets of the bulls. I am carefully bullish, a long shot; knowing full well we may have rationed the entire old crop. I do not want to influence anyone. My opinion is simply that, a gut hunch.
We may well be rationing the new crop as we watch. The battle may be down to bean and corn acres. It is far too early to make a decision there.
Back when I was a young tiger, with a lot of farm, construction & practical work experience and after several years in the grain business, initially with a big outfit at the grass roots level, I knew “my stuff.” I had made some decent money short the bean market in a 50 cent break and it was burning a hole in my pocket; I looked for other trades; I came across a market which always collapsed in January. Every year the market rallied in November & December & collapsed in January. I mean, every year.
I researched this market in depth. I knew every available fact. The cash market was weak. I studied the charts. I was making $4,000 a month which was a decent living for a young guy in the sixties. I had some savings and a house. I developed a game plan. I sold a few contracts, the market began to decline…I was in good shape. Prices broke some more…I was in better shape. One Monday morning, the market opened limit bid. I was not worried, I knew the cash market was sick. On Tuesday, the market again rallied the limit, but traded…I sold some more. I was now about breakeven. On that same day, the market returned to limit bid and for the next 3 days was limit bid. I was now stuck. I received a telegram margin call which included upside protection for the following Monday. The cash market was in shambles.
There was not a single bit of information upon which I could make a decision. It was made for me. I could not raise all of the money, I was out of cash. My position was liquidated by the brokerage house at limit up that next Monday; within the following ten minutes, the market collapsed to limit down and before January was over, that market made new contract lows. I had to mortgage our house to meet my brokerage obligations & had to explain to a school teacher wife about why that was necessary. Five points: be flexible, never have a position you cannot handle financially, learn that each market often has its own personality, know you have adversaries (in the old days, a clearing house owner could just look at the house books and determine if a market was building more than usual longs or shorts—too many on either side, flush them out. Today we frequently have funds for or against a position) & there is always some unknown. Always. A person possessing more common sense than I would have traded one or two contracts and able to stay with the position. Common sense and I were strangers in that trade. I had been searching for more risk, I felt too flush.
It was extremely difficult to explain (for me) a flaming disaster to a regular person (wife), and a regular intelligent person (schoolteacher) which was an incentive to learn to trade more intelligently. Speaking about my own frame of mind, whenever I get to feeling I know what I am doing, I think of that trade and know I have momentarily lost my common sense once again. If I knew what I was doing, I’d be at a car wash earning some large tips. I think an older person, out in the cold, babbling about the good old days could generate enough sympathy to slide the occasional Lincoln in my pocket; or at least a few Washington’s.
Today, a weak Tuesday. Frequently these markets lack follow through on Tuesdays, I think tomorrow will provide more clues, and Friday. A very successful energy trader indicates this crude market is for real. Some proprietary information sent to me says the ethanol inventories are at 22 days, an improvement over the typical 32 day supply. Gold seems okay. South America is getting rain, but needs more. The stronger dollar bothers me. Wheat and bean supplies will be tight. The Western Corn Belt is wet, crops in the field. Fundamentals look too good, maybe we need more of a shakeout yet.
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The Fail Safe Trade
