Martin Kronicle

From agrimoney:

“Market softness in agriculture, which has brought steep declines to crop prices, has spread to the farmland market, a survey showed, even as Westpac analysts warned over a commodities correction.”

“We are beginning to see some of the air exiting the farmland price bubble,” Ernie Goss, economist at America’s Creighton University said.

I have an article coming out next week that will put the grain and oilseed markets into perspective. I am bullish on the entire grain complex and farmland too for the next 20 years. You’ll see why next week.

Mark Spitznagel, who now runs Universa out here in LA, and who worked with NNT at Emperica is launching an ETF that will emulate their style of management for institutional investors.

Here’s how the article starts off:

“With Santa Monica’s trendy beaches a block away, Mark Spitznagel and three fellow traders spend their days placing a couple dozen bets that a disastrous event will rock equity markets or cause inflation to soar. On roughly 95 trades out of 100 they lose money.”

Some takeaways from the text:

First of all, Santa Monica’s beaches are not trendy to say the least, but I guess saying so give a better contrast to Spitznagel’s look. The runoff meets the Pacific ocean in Santa Monica. Anyone who has a brain on the Westside is either heading up to Malibu, or going to the South Bay – Manhattan Beach, Redondo Beach, or Hermosa Beach…but I digress…

What do you think of the mathematical expectation of a Universa trade? If such a trader has a 5% accuracy rate, what does the ratio of the average winner to average loser have to be for the ethos to be worth while investment?

What does that say about the manager’s need to be correct – do you think Spitznagel’s ego is tied up in his need to be correct?

“People have a natural bias to look at returns and not to look at possible losses,” says Taleb. “If you reduce big losses, your overall returns will be higher.”

I’ve always said, that your winners will only look like winners to the extent you keep your losses small.

Hat tip Meb Faber.

I saw the Born In The USA tour at Giants Stadium. I was in the 11th row right behind NYC Mayor Ed Koch and NJ Governor Tom Kean. You could feel a punch from the sax when Clarence really went for it. And with the hometown NJ crowd causing the stadium to sway while rocking to the music, I swear I could smell his breath from the stage as he wailed on the sax that night. RIP.

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John Del Vecchio

I had a chance to catch up with Active Bear ETF Portfolio Manager John Del Vecchio. Del Vecchio specializes in short selling. HDGE uses no leverage and is fully transparent.

His favorite shorts right now are AsiaInfo-Linkage, Inc. (Ticker: ASIA) and Juniper Networks, Inc. (Ticker: JNPR).

Lean hogs have broken the downtrend and reversed course. I’ve looked at the chart with an eye to the Sperandeo 123 Reversal pattern that he delineates in his book Methods of A Wall St. Master.

For those of you who are a little more aggressive, you can try to catch the change at the inflection point, however that is much more tricky to do. If nothing else, you’ll need to be quick to exit the trade if you catch it wrong.

I would begin by trading extremely small. If you catch the reversal, you can add to your winners once the trade starts working in your favor. If you’re lucky enough, you can be fully loaded by the time the chart pattern above gets underway. Then the market has to pay you an entry fee to join the trade.

There are several key fundamentals at play in the hog trade. I’m working on a big white paper on such which I’ll publish here once it runs.

All you need is one or two of these to make your year. Key is to play the best defense.