Monday, March 20, 2006

Buying sugar:

I was reading an article on Bloomberg today about sugar, with the basic
summary being several fund managers (who i'm sure are already long)
talking about how it could quadruple and still look cheap.

Well, that was enough to do some further looking into sugar, since the
trading I am interested in is in identifying trading opportunities where
prices have CONSIDERABLE room to move. Thinking further about my current
views on the world, it seems to me we have a broad-based global economic
recovery, inflation creeping higher, money supply and liquidity
extremely high (although now slowly being removed through central bank
hikes) and a vast number of people being dragged out of poverty in
China/India through the forces of globalisation.

This increase in inflation, demand, and the sheer number of people with
increased spending power, it seems logical to think commodities can go
higher still. Also, it seems the world is becoming obsessed with
alternative energy sources, one of which is producing ethanol from
sugar, so decreasing supply into its regular markets.

Looking back at past "price shocks" in sugar in the 1970's, the spikes
are exponential in nature, and if we had an equivalent price move today
it would more than quadruple the price, and that is just to get it to
the same NOMINAL price as in 1970's, not even adjusting for inflation! I
will be returning to exponential price moves in future blogs, as I think
this could be a fundamental thing in the markets, as it is in nature.

I bought £10 per cent of New York raw sugar expiring July '06 at $16.43.


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17 May, 2006 12:28  
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17 May, 2006 12:45  
Anonymous Anonymous said...

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17 May, 2006 12:48  
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17 May, 2006 12:57  

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