The all-time high and ensuing fall in cattle prices brought a sigh of relief, as it appeared the cattle top was in. We sincerely thought we saw it coming in June when we discussed the “Beginning of a Cattle Top.” The fundamentals of the increased demand via the global growth of the foreign middle class demographic remains fully in play as well as this year’s supply issues as nothing has occurred on either of these fronts to change the market’s current dynamic. Therefore, the only question to ask going forward this year has been, “How high is high?” Recent action in the live cattle futures spread between the current, October contract and the next active contract in December provides us with some clues as to what’s next.
There’s good news on the horizon for the average U.S. retail investor. There’s a bubble coming and for once, Joe Investor is going to miss out on the boom and crash. Two primary stories create the potential for a short-term meteoric rise in prices only to quickly plunge as macro economic forces and political issues sort themselves out. In a world full of financial instruments, global exchanges and products ranging from weather derivatives to technology indexes to silkworm futures, the base metal nickel is inaccessible to the average retail American trader.
I thought taking a vacation at the end of 2013 might allow me to come back to the markets with a clear head and new viewpoint. My hope was that a little detachment would bring the forest back into the picture at 35,000 feet. I’ve now caught up on my reading and research and find the markets just as schizophrenic as they were when I left. While the markets remain as confusing as ever, our trip did provide me with the sense of awe that comes from physically standing in the presence of thousands of years of history. One thing is for certain; mankind always finds a way.