Friday, March 28, 2008

Bookkeeping: Cutting Back on Powershares DB Agriculture (DBA) - Focus on Fertilizer for Now

TweetThis
Despite no change to my long term view on the crops I am cutting back on my Powershares DB Agriculture Fund (DBA) position to a 0.5% fund holding as the chart appears to be going sour (breaking down below the 50 day moving average). I am cutting back here in the mid $37s. I am still concerned about more deleveraging by hedge funds, especially if the credit market continues to struggle and banks want to repatriate their money - and the hedgies seem to have really had an even larger effect than I assumed on these commodities. [Feb 28: The Hedge Funds are Coming! The Hedge Funds are Coming!] So at this moment the hedge funds overpower the underlying fundamental crop supply/demand situation - this will reverse in time I am very confidant but I don't want to stand in front of a herd of panicked hedge funds if this scenario plays out. As with everything of late - better safe than sorry; cash is not trash. There is a reason I call these hedgies locusts - they come into an area en masse, feed, ruin it, and then move on... so we'll let this ETF settle and then revisit at either a lower price or on a breakout. I'll be focusing instead on the fertilizers for the near term as Mosaic (MOS) reports next week.

With that said, no change to my long term view and I look forward to next week's crop report - my expectation is the exact reverse of what happened last year when farmers piled into corn due to the ethanol boondoggle. With the ridiculous rise in wheat, I expect a huge upswing in wheat plantings and ... *drumroll* a shortage in corn. Which will drive it up next fall/winter ;) And so the World of Shortages continues - until farmland devoted to growing crops (along with large yield increases) starts happening, it is simply robbing Peter to pay Paul. Take from 1 crop, another will derive a shortage next year. And so we'll continue... as too many humans want to eat like a Westerner, and we keep putting food into our cars (not just here in the US, but worldwide).

Still very wary of this market as a whole...

Long Mosaic, Powershares DB Agriculture Fund in fund; long Mosaic in personal account


Disclaimer: The opinions listed on this blog are for educational purpose only. You should do your own research before making any decisions.
This blog, its affiliates, partners or authors are not responsible or liable for any misstatements and/or losses you might sustain from the content provided.

Copyright @2012 FundMyMutualFund.com