Table of Contents:
- Will funds continue to push soybeans higher?
- Understanding Money-Flow and Rotation
I always talk about the flow of money, but I seldom go into any detail about the actual "rotation" and movement. This is certainly a phenomena we need to understand, especially when investors and money managers get nervous and start seeking safety in less expensive areas...in other words searching for true "VALUE." Keep in mind, investors have not only been uncertain about the geopolitical changes happening in the Black Sea region, but there is also some clear uncertainty in regard to Janet Yellen, the NEW Fed Chair of the world’s #1 economy; the shadow banking system in China; and the probability of higher short-term interest rates.
One can argue that the markets are always right and that over the course of time ALL money is eventually allocated efficiently – the concerns and problems however arise in the way we get there. As Josh Brown indicates in his daily blog, the "efficient market" isn’t a state of being – it’s a verb, a process. It doesn't always make sense, sometimes money chases "value”, sometimes it chases "performance"... and many times money is simply thrown in whatever direction has worked best the past few weeks.
In other words, “Repeat until broke” can often be the battle cry. With this being said, the "rotation" of money back into the grain markets might be as simple as money managers chasing "value" or more recently, the repeat until broken mentality. Regardless of why, we have certainly seen a massive rotation from the large spec and funds from record net short positions in wheat to now being long about 30,000 contracts. In corn, there has been a rotation from being short around -200,000 CBOT corn contracts to now being long somewhere over 270,000 contracts. I heard they increased their net long position by about 20,000 contracts in yesterday's trade. Remember, as money-flows...the market goes!