Sunday, February 20, 2011

Silver to Wheat Ratio


Click to enlarge.

February 20, 2011
Increases in commodities, stocks may have run course

The "fat lady is clearing her throat". The recent price gains in equities and commodities may soon have run their course on the psychological influences of rhetorical expectations of a global economic recovery. I fully expect her to break out into "song" in the near future and that could spell the end of the meteorical rise in prices for equities and commodities.

I am a believer in the theory. If true, I will take some short-term damage in TIPS but I should be okay over the long-term. Those with direct exposure to equities and commodities may not be so fortunate.

March Wheat closed at $8.22 ¼ per bushel, down 28 1/2c and near a five week low on profittaking in front of the holiday weekend. We could see renewed buying on Tuesday as the reality that people "must heat" and shortages persist takes hold once again.

Wheat is certainly a bargain relative to silver if history is any indicator. I find the "must heat" pun particularly amusing from a gallows humor perspective. Sigh.

Source Data:
Kitco: Silver
USGS: Historical Mineral Prices
USDA: Historical Wheat Prices

12 comments:

Stagflationary Mark said...

I should have probably been more clear in my chart.

The ratio is the cost of a troy ounce of silver to the cost of a bushel of wheat.

Mr Slippery said...

Yeah, but you can't eat wheat. Oh, wait. ;)

Stagflationary Mark said...

Mr Slippery,

If you can't stand the wheat, get out of the kitchen. ;)

Anonymous said...

Hey, you may already have to modify your chart :) To take in account wheat's clear underperformance today.

http://finviz.com/futures_charts.ashx?t=ZW

http://finviz.com/futures_charts.ashx?t=SI&p=d1

LOL

Mr Slippery said...

Mark,

The silver train wants you back on board! Your SLW ticket is ready, one way trip to the moon ;)

There is some serious tectonic forces moving the silver market. My humble goal is to only collect some free groceries on the coattails of the playas.

Where is that Ozzy video clip? All aboard!

Chinese Minter said...

Is that bushel with or without chaff?

(word verification is "pricer".)

getyourselfconnected said...

If you want to play Crazy Train, play the live version from the Rhoads Tribute album!

Silver is KING!!

disclosure: Long physical silver.

Stagflationary Mark said...

Hey all!

There was a key "ingredient" missing from my analysis!

You really CAN eat gold and silver!

I expect a septic tank recycling boom though, so some caution may still be warranted. ;)

P.S. We can't "separate the wheat from the chaff" here. EVERYTHING has value!

getyourselfconnected said...

I just gnaw on a 10 ounce JM silver bar from time to time. My dentist hates that I do that though.

Stagflationary Mark said...

GYSC,

I think you need to find a new dentist!

He may need to *brush* up on his *calculus*. Math seems to be the *root* of the problem.

Silver really is *filling* if you sink your *teeth* into it.

If gold was king, then where are the *crowns*?

HomeShalom said...

I was just thinking about the relationship between wheat and silver last night and happened upon your blog. I think my Dad usually sold wheat for around 2 Silver Dollars a bushel in the 60's. Today those silver dollars are worth about $31.00 each. Spot silver is at $40.90. So today you get a 4+ bushels of wheat for an ounce of silver instead of a half bushel. I do not see this reflected in your chart. Wheat is a bargain today.

Stagflationary Mark said...

HomeShalom,

I don't know why you don't see that reflected in my chart. Perhaps your dad was a shrewd negotiator in the 1960s. :)

You are preaching to the choir about wheat though. I have stockpiled a healthy supply of spaghetti!