Jurgens Bauer on Sugar's Outlook

One of my favorite commodity analysts to track is Jurgens Bauer, especially for his thoughts on the softs. I used to frequently post links to his columns when, I think, he wrote for Barchart.com, or was at least syndicated through them.

He's since moved on, and I was happy to see his name popup as the featured interview over at Hard Assets Investor. It's an 8-minute interview - one that's well worth watching if your keen on commodities, particularly if you're following sugar and cotton.

Jurgens is a throwback - he just LOOKS like a guy who grew up in the trading pits - that just adds to his aura. He did allow that sugar could go to $0.30...or even $0.40...since we are in a supply deficit. He views key upper resistance as $0.23 or so (which we've seen).

Sugar me sweet! Does sugar have another push up?

(Source: Barchart.com)

More on sugar: Sugar prices hit 28-year high...what does Jim Rogers have to say about it?

Why Commodity/Shipping Weakness Could Predict Next Leg Down in Stocks

Interesting times in the markets. US equities have now completed a standard fare "Fibonacci retracement" off of the March 6 lows. Now, where to from here?

Bulls and bears alike conceded that a strong rally was quite probable. Now that it's happened, what can we expect?

There seem to be two or three prevailing market outlooks today - and all 3 are quite different!

1. We've averted armageddon. Now it's back to business as usual, albeit at lower levels. How much lower is the big question.

2. We haven't yet seen the bottom of this, and the March 6 lows are destined to be taken out. This is nothing more than a parallel universe to 1930.

3. This rally was engineered by the government and driven by the printing of money. Inflation has shown up sooner than expected - thus we should pile into gold, silver, and metals while we still can.

If you discount the less dramatic "Golilocks scenario" of #1, then you're left again with inflation and deflation staring you in the face.

Both sides of the debate have strong arguments for - and against. It's one of the most intellectually challenging forecasts that I can remember seeing in my (young) investing career.

I've accepted the fact that I'm not as smart as the gurus on both sides of the debate...if they can't figure out which it will be, how can I!

While, as regular readers know, I've recently warmed to the deflationary outlook, I'd still like to hedge my bets in case I'm wrong.

So, though I'm not doing much trading, I am watching the commodity sector closer than every. You'll recall that commodities, one by one, rolled over in early 2008, prior to the equity markets. I've come to believe that commodity prices are "smarter" economic forecasters than, say, the S&P 500.

Here are three charts that I pulled up this evening, which appear potentially ominous, at least in the short term.

The Baltic Dry Index shows that, well, less stuff is being shipped:

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View the full INDEX:BALDRY chart at Wikinvest

Where has everything been shipped to? China, of course!

Uh oh...looks like China is starting to turn down:

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View the full INDEX:SSEC chart at Wikinvest

Finally, let's take a look at oil - which last peaked in June of 2008. Oil looks like it's forming out a "lower high", and is having trouble holding onto the $70 mark.

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View the full FUTURE:CL00 chart at Wikinvest

Bottom Line: There appears to be A LOT of optimism priced into, well, just about everything right now. If US/global growth disappoints later this year (hard to imagine it won't), we could be in for another leg down. So, take heed to these potential leading indicators!

How Productivity May Hold the Secret to the Inflation/Deflation Outcome

My good friend Jonathan Lederer, President of Lederer Private Wealth Management, an investment advisory firm based quite close to my home here in Sacramento. Every quarter, Jon creates a fantastic update and outlook for his clients, where he dives into the current economic situation, and often applies a unique approach to the markets.

Jon really outdid himself in his Q3 update for 2009 - when he was kind enough to forward me a preview copy of his newsletter, I said: "Jon - this rocks! Can we please post this on the blog?"

Lucky for us, he was all for it - and you can read this great inflation/deflation piece here.

Quick Market Hits for the Week Ahead

• Robert Prechter, the "ultimate contrarian", lays out a very convincing argument for an upcoming powerful rally in the US dollar.

• Our old favorite sugar surged to a 28-year high this week. Here are the details...along with some updated thoughts from Mr. Sugar himself, Jim Rogers.

• Finally, a hilarious video reviews Bernanke's Greatest Hits as an economic prognosticator.

Positions Update

No new trades this week...cotton closed "limit down" on Friday after rallying earlier in the week.

Fundamentals for cotton appear to be quite favorable, and these prices should be a bargain. However if we are, in fact, in a Global Depression, we may very well see cotton, and other commodities, roll over.

Recall in early to mid 2008, commodity prices peaked before the broader equity indices - rolling over one by one as a precurser to the Great Deleveraging. Keep an eye on the commodity sector this time around, as it may serve as our canary in the coal mine.

Cotton continues to "range trade".

(Source: Barchart.com)

And, as mentioned last week, I'm planning to "go long" the dollar index very soon.

Current Account Value: $25,488.91

Cashed out: $20,000.00

Total value: $45,488.91

Weekly return: -3.4%

2009 YTD return: -49.8% (Ouch, that's gonna leave a mark)

Prior year's results: --> Don't try this at home...this is what is known as wreckless trading

2008: -8%

2007: 175%

2006: 60%

2005: 805%

Initial stake: $2,000.00

Sugar Prices Hit 28-Year High - How's Jim Rogers Playing It?

The severe supply/demand imbalance in sugar fundamentals has propelled sugar prices to a 28-year high. The big driver of the rally has been India - which, as we reported earlier this year, has turned into a net importer of sugar.

As you can see below, sugar prices are starting to go "parabolic." Commodity rallies typically end with a big blow off and stories like this one by the mainstream financial media, questioning where the world will ever find enough sugar to meet demand.

Sugar mania is running wild!

(Source: Barchart.com)

If you are an adventurous trader, you could initiate a long position and try to ride this spike up for as long as it goes. I personally do not have this stomach for this, having been burned one too many times on the inevitable reversal. Parabolic spikes rarely end quietly.

I hope that you, Dear Reader, played this trade better than I did. Since writing on March 1 that sugar could stage an impressive rally, my follow through trading was quite poor...to say the least!

Ah well, if you missed this rally - be patient. We should get another shot at it - at least according to our favorite sugar guru Jim Rogers, who told Bloomberg:

“Sugar is certainly going to go much, much higher during the course of the bull market,” Jim Rogers, chairman of Rogers Holdings, said in an Aug. 6 interview in Singapore. “Sugar is still 70 percent below its all-time high and not many things in life are 70 percent below what they were in 1974. Sugar has a wonderful future.”

What's the easiest way to invest in agriculture if you don't trade futures? Check out our recent piece: 5 Easy Ways to Invest in Sugar...And Other Agricultural Commodities.

5 Easy Ways to Invest in Sugar...and Other Agricultural Commodities

One of the commonly asked questions on our recent reader survey (appreciate you checking it out here if you haven't already) was:

How can I invest in sugar, and other agricultural commodites, without having to trade futures themselves?

Opening a futures account IS a big pain - and learning also takes time - so many folks want to know how they can get in on Jim Rogers' favorite markets without opening up a futures account.

If that's you, here are some ideas for you to consider. And a heads up that I do intend to cover the basics of getting started with futures at some point...just need some time to put that information together.

Easy ways to invest in agriculture, from the comfort of your regular brokerage account:

• PowerShares DB Agriculture Fund (DBA) - Consists of roughly equal parts corn, soybeans, wheat, and sugar. Not something I'd buy and hold for 10 years, but something you can trade in/out of fairly safely. I'd consider buying the breakouts, and setting a trailing stop.

• Jim Rogers Agricultural Index (RICIA) - Despite the fact that this is supposed to track the Rogers Index itself, it scares me a bit, because I've never understood who was behind it. I've also seen RJA mentioned, which may be worth a look, but I can't vouch for it personally. Instead, I would recommend...

• Direct investment in the Rogers index via Uhlmann Price Securities - The official fund. They do have a minimum investment level, I'm not sure what it is right now. If you want to buy and hold a basket of commodities/agriculture for the next 5-10 years, this is probably the best way to do it, and it's hard to see how you could go wrong.

• Potash (POT) - Can include many of the other fertilizer guys here as well. Analogy here is that you're buying the guys that make the "picks and shovels" for the coming agriculture boom. Don Coxe likes this method of playing the ag boom. Requires some stock picking, unless you just pick up an index of these guys...which would be...

• Market Vectors Agribusiness ETF (MOO) - An index of the picks and shovels guys.

• Livestock Index (COW) - Bonus pick! This one is simple...it's just lean hogs and live cattle futures. The play on agricultures is that cattle and hogs eat grains - a lot of grains - so rising input prices should eventually result in rising meat prices. This is one you probably also want to buy on a breakout, and have a trailing stop.

Were these suggestions helpful? Anything else you'd like to explore in future columns? Leave a comment and let me know!