Is This the Next “Black Swan” to Hit Agriculture?
Aug 15, 2012
If you are looking for the next curve ball or "black swan" type event... here you go! Germany's second largest bank "Commerzbank" has joined "Deutsche Bank," "DekaBank" and now Austria's "Volksbanken" in removing their farm commodity investment products from their investment portfolios. You heard me right, a handful of the world's largest banks have decided that rather than facing the stiff media scrutiny and criticism associated with agricultural commodity speculation they would simply bow out gracefully. In a statement released yesterday, the folks over at Volksbanken said, "Volksbanken Investments will not offer any new products in this area and will withdraw all of its offerings in this sector." At the end of last week, Commerzbank decided to restrict "food-related" investments by stripping all agricultural products from its multi-million dollar commodity index fund. To put it bluntly, the banks simply do not want the negative press from the media as they blame higher food prices on excessive speculation. I am not saying ALL big banks are going to pull out of agricultural commodity type investing, but as food prices move higher and higher, I have to assume the talking heads will push their witch hunt deeper into the banking sector. If the banks start feel more negative press and pressure from the media, there is a chance we could see more and more of them forced to the sideline. This is certainly not conducive to an environment that will create more money flowing into agricultural commodities. Even though the fundamentals are bullish we have to keep our eye on ALL of the balls that are up in the air, especially those that may ultimately affect "money-flow."
If I am "counting cards" I have to give the edge to the bulls right now. I simply see more cards in the deck that could ultimately push prices higher in the coming weeks than I do bearish cards. However, I remain deeply concerned about "money-flow." Understanding just how important money-flow is and how much we need it in order to see higher prices, I am constantly monitoring its every move. If the large money-mangers and global bankers (as I mentioned in the opening paragraph) start to feel more negative pressure from the media and talking heads about so called "food speculation," we may see some of our biggest and baddest soldiers, who have been fighting for the "Long Side," forced out of the battle. With fewer soldiers and ultimately less ammunition on our side we could end up having a much more difficult time moving the price lines beyond $9 in corn and $17 in soybeans. Fundamentally all arrows point towards higher prices, but as we have come to learn in this high volume fund driven area, "money-flow," or should I say, possibly lack there of, will ultimately determine if prices move higher. I remain cautiously...
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