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Commodity Insight: Misleading old sayings

With winter coming in like a lion this year thanks to an unprecedented Thanksgiving storm system that blasted the Midwest and East Coast, I thought I would reprint my column from the spring of 2013 from my book, “Haunted By Markets.”

The column had to do with misleading old sayings. Anyway, here are some old saws that are far from being accurate.

A large number of sayings should be doubted. For instance, if “all roads lead to Rome,” as the saying goes, then how do you get out of the place? Apparently, you don’t — which means, of course, that old, worn-out saying is a lie.

When fall rolls around, investors are bombarded with this old saying: “October is the most bearish month for the stock market.” That old saw is dusted off to remind investors that all of the historically large declines with stocks took place in October, which is an absolutely accurate fact.

It was Mark Twain, however, who said it best, stating, “October: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” Mr. Twain knew what he was talking about.

Another old saying about the stock market, “Buy low, sell high,” is only half true. The total truth is, for short sellers anyway, “Sell high, buy low” works the same way.

Short sellers make money if a stock or commodity goes down and they can buy it back at a lower price. “Buy low, sell high” is true because it is a successful strategy. So is, “Sell high, buy low.”

Since the start of the trade war with China in early 2018, U.S. grain prices have been going lower, lower and lower. When the war began, soybean prices were around $10.80 a bushel, but recently fell to $8.67.

Losses also have been seen with wheat and corn, as well. Those losses came even though farmers did not plant 15 million to 20 million acres because it was too wet and cold for most of the year. Clearly, 2019 has been a bummer for U.S. agriculture.

However, another old saying that is not — and I repeat, not – misleading is this: “The best cure for low prices is low prices.” Based on how fickle Mother Nature can be, the potential for an end to the trade war with China and how quickly prices can reverse course when market psychology changes, my lean is that for now, enough is enough on the downside for the U.S. ag markets.

But, understand, without an end to the trade war or help from Mother Nature, the upside potential for grains is limited. Still, I view prices here and now as “in the hole.” And I never suggest selling markets “in the hole.”

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