Thursday, May 1, 2008

More on Potash

Or is it moron potash? Only time will tell.

Why commodity investors better watch their potash

"First, there's plenty of potash -- nearly 300 years of known reserves at current consumption rates, according to the International Fertilizer Association.

"Second, you could hardly have found a worse investment in modern times -- according to the U.S. Geological Survey, real potash prices have fallen 95 per cent from their record (peace-time) peak in 1919 through the recent trough in 2003.

"Third, the current combined market cap of the three large North American producers -- Potash Corp., Agrium Inc. (AGU/T) and Mosaic Co. (MOS/NYSE) -- is bigger than the value of all of the potash ever sold in the history of the world.

"Fourth, and in our view most importantly, we believe that the euphoria in the fertilizer sector reflects a potentially dangerous broader trend across the commodity spectrum -- investors mapping evident short-term supply/demand imbalances into expectations of persistent long-term supply/demand imbalances."


I've decided to move my short-term inflation mood back down to neutral. I've got a very bad feeling about this. It is too easy to get caught up in price appreciation euphoria. Ask any dotcom investor from 2000. Ask any real estate investor from 2005.

I will continue to own TIPS and I-Bonds long-term though. As I have stated previously, I may not do as well relative to others if inflation slows but lower inflation would help us all (TIPS and I-Bond investors included).

I will also keep my name. I am still expecting slower growth AND relatively stubborn inflation long-term. Perhaps we only get slower growth OR relatively stubborn inflation long-term. If so, I'd still be half right (which is good enough for me anyway).

See Also:

Deflation Revisited

6 comments:

Anonymous said...

Stag,

http://finance.yahoo.com/echarts?s=MOS#symbol=MOS;range=5y

Cramer was pushing MOS at the end of 2007. The guy never fails to show-up late and lose. Who says they don't ring a bell at the top?

If MOS doubles from here it is a $100B stock. I'm taking the under.

Stagflationary Mark said...

You have inspired me to offer up an article I remember reading from 2002.

Stagflationary Mark said...

MAB,

I also want to point out that my very bad feeling about the commodity boom actually means I'm slightly more optimistic in general. I've had my fill of parabolically rising raw goods prices.

Go figure.

Anonymous said...

Stag,

I went out & stimulated some more inflation in the OPEC economies today. I filled up my SUV. It was running on fumes. I had to take a knee when I heard the price - $84.

From there I went to Home Depot to spur on the domestic economy. $3.17 for shower door rollers, $9.99 for a gallon of Round-up weed killer, and $7.84 for some tall fescue grass seed.

Next, I decided to really go on a bender and stopped at Walmart. I bought generic razor blades < $4.00. At this point I was starving. I splurged on two KFC Snackers at a dollar a piece. Tasty. Next door was a Starbucks. I used a coupon and got a free cup of coffee.

So far I can definitely say that yesterday's fed rate cut has not altered my spending behavior. Time will tell.

Anonymous said...

Stag,

One more thing. Based on my above mentioned spending, I'm not sure I'm following how the a weaker dollar is going to improve our trade deficit. Do they have unwanted weeds in the desert? I guess we could always export oodles of Snackers.

Stagflationary Mark said...

MAB,

So far I can definitely say that yesterday's fed rate cut has not altered my spending behavior. Time will tell.

But what would Yoda say?

So altered my spending behavior far I can definitely say that yesterday's fed rate cut has not. Tell, time will. Yes, hmmm.

Learn to Talk Like Yoda with The Yoda Speak Generator
http://www.yodaspeak.co.uk/index.php

This seems worthy of its own post come to think of it, lol.