Daily Gains Letter

commodity price cycle


The Inflation Apocalypse: Here Comes the Next Super Cycle

By for Daily Gains Letter | Mar 22, 2013

220313_DL_clarkTwo big trends are about to collide: global warming and global re-inflation. And the result is going to create a lot of shocks and opportunity. I’ve heard people refer to the recent tsunamis, rising temperatures, floods, and droughts as the “weather apocalypse.” Whatever you call it, the re-inflation in prices combined with global warming is going to create a new super cycle in agriculture and agribusiness.

The business cycle is changing in financial markets. Currencies are being devalued. The bull market in bonds is over. Central banks are repatriating their gold. There’s massive monetary stimulus, and now there are rising prices, which should help boost earnings initially. The stock market could go a lot higher this year.

The re-inflation cycle has staying power, even through the next U.S. recession. An inflationary business cycle, product scarcity, increasing demand, and the weather represent a fundamental, long-term uptrend for agriculture—the final leg of the commodity price cycle.

The stock market’s recent breakout was very powerful. Wall Street is now ahead of first-quarter earnings season. Before the next big crash, I think the stock market will have one final push higher—a lot higher than current levels.

I absolutely agree with Jim Rogers’ view about agriculture. But hey, even Jim has something to sell you. The re-inflation definitely has consequences, but global monetary stimulus is on a tear. And as an investor, it doesn’t pay to fight it.

The stock market is holding firm ahead of first-quarter earnings season. Its performance is very similar to the strength experienced during the first four months of last year. “Sell in May, and go away?” I think it’s … Read More


Agriculture; the Next Black Gold?

By for Daily Gains Letter | Mar 20, 2013

200313_DL_clarkWhen the stock market experiences its next major pullback, it should be an attractive entry point to consider select large-caps that pay dividends. On the cusp of another earnings season, most large U.S. corporations are in excellent financial health.

There are a number of investment themes playing out in the current business cycle. When gold prices were lofty, stocks like Caterpillar Inc. (NYSE/CAT) and Joy Global Inc. (NYSE/JOY) were really doing well.

Stock markets in China, the world’s second-largest economy, have been drifting for several years, but emerging markets, like the Philippines and Malaysia, are growing like mad. And Japan’s stock market recently turned significantly higher. Many Japanese companies are expecting strong revenue gains this year on the back of a weaker yen.

The ebb and flow of the global business cycle is always changing; and with inflation creeping into the U.S. economy, the next big play will be in real assets, as the commodity price cycle makes its final migration into the agriculture sector.

Deere & Company (NYSE/DE) has the biggest market share of any large equipment manufacturer related to agriculture in the U.S. Currently, the stock is not expensively priced, with a price-to-earnings (P/E) ratio around 11.5. Deere’s stock chart is featured below:

dl_0320_image001Chart courtesy of www.StockCharts.com

On the stock market, Deere has proven to be cyclical and a very good long-term wealth creator for shareholders. Since 1963, the company has split its stock two-for-one on four occasions, the last one being in November 2007. Deere also split its stock three-for-one in November 2005, and the company has been increasing its annual dividends consistently for the last 10 … Read More