Trump's Trade War a Win for Fertilizer If Farmers Seed More Corn


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Comments of the Day

08 November 2018



Video commentary for November 7th 2018



Eoin Treacy's view

A link to today's video commentary is posted in the Subscriber's Area. 

Some of the topics covered include: Wall Street jumps back above the trend mean following the mid-term elections, Dollar eases Europe still struggling to rally and China at an important area of short-term potential resistance. 



Email of the day on the bearish perspective

I have been a subscriber for almost a decade and enjoy listening to your video presentations and reading the comments. No hurry, but would be great if you can spare your time to offer your thoughts on Dr. John Hussman's comment, link here: 


Eoin Treacy's view

Thank you for your support and for this article which may be of interest to the Collective. Here is a section:  

It’s important to recognize that despite its discomfort, the market decline we observed in October is only a drop in the bucket toward normalizing valuations. I’ll say this again, because it is important. Over the completion of the current market cycle, I fully expect the S&P 500 to lose close to two-thirds of its value from the recent peak. We don’t require this outcome as a precondition for adopting a bullish market stance, as an improvement in market internals alone would encourage a neutral or even constructive market outlook (though with a safety-net given present market extremes). The problem is that there is no market cycle in history, even at the 2002 low, that ended at market valuations greater than half the level they established at the recent peak.

This is clearly not a favorable outlook for passive investors. While investors have embraced passive strategies as a result of strong backward-looking returns, this popularity represents little but performance-chasing at the most extreme valuations in history. At the recent market peak on September 20, we estimate that the prospective 12-year total return from a conventional passive asset mix invested 60% in the S&P 500, 30% in Treasury bonds, and 10% in Treasury bills reached a low of just 0.48%. There is only one instance in history when these estimates were lower, which was in the 3 weeks immediately surrounding the 1929 market peak. Given that most pension funds assume future returns in the range of 7% annually, it implies that the coming years are likely to include a rather widespread pension crisis.

Shorter-term, remember that bear markets regularly include scorching advances from oversold conditions, each time prompting dip-buyers to exclaim “New highs, here we come. Am I a genius or what?” and encouraging long-term investors to breathe “Phew, I’m glad that’s over.” A typical bear market includes several waterfall declines, along with multiple interim recoveries approaching even 10-20%.



Hermes shakes off China worries with sales rise

This article by Harriet Agnew for the Financial Times may be of interest to subscribers. Here is a section:

On a call with reporters, Hermès executive chairman Axel Dumas dismissed fears about a slowdown in China, which analysts and investors are concerned may come from a trade war with the US. “We are still strong all across the board in China,” said Mr Dumas. “We don’t see any change of pace at this stage.” Comparing the slightly slower third-quarter performance of Asia-Pacific to the overall figures for the region in the first nine months of the year, he said that “the differences for me are not material.”

Earlier this month luxury rival LVMH said that Chinese border authorities are stepping up searches on travellers, looking for luxury items brought back from cities like London and Paris. Mr Dumas said he believes that fluctuations in the euro have a greater impact on Chinese tourists shopping in Europe than fears about tighter border controls.

This month Hermès followed in the footsteps of Louis Vuitton and Gucci by launching its own ecommerce website in China, as the group seeks to increase its exposure to the world’s largest and fastest-growing market for luxury sales.


Eoin Treacy's view

It is interesting that the company has reported it is seeing now lack of demand for its products in China but the price fell anyway. That is a clear example of the market being a discounting mechanism since what investors probably wanted to hear was that demand was growing strongly.



Trump's Trade War a Win for Fertilizer If Farmers Seed More Corn

This article by Jen Skerritt and Isis Almeida for Bloomberg may be of interest to subscribers. Here is a section:

The feud between the U.S. and China that’s withered sales for American soybeans will probably result in farmers shifting acres to corn, said Chuck Magro, chief executive officer of Nutrien Ltd., the world’s top crop-nutrient supplier. Corn acres require about twice the amount of fertilizer and crop chemicals than soybeans, he said.

“The corn acres are worth more to companies like us,” Magro said in a telephone interview. “This could be actually a short- term win for us. It depends on what actually gets planted next year.”

The last time the U.S. saw a dramatic surge in corn acres was a decade ago after Congress approved the Renewable Fuels Standard, which expanded the mandate to blend ethanol into gasoline. That season, the corn area rose by more than 15 million acres, according to U.S. Department of Agriculture data.


Eoin Treacy's view

The trade war is having a number of knock-on effects for a whole host of markets from iron-ore demand to copper and fertilisers. Since China is a major consumer of just about all commodities the outlook for its economy has a significant impact on demand. The potential for more corn plantings because reduced soy planting is a potentially an important catalyst for agricultural shares which have until recently been quite depressed.



Long-term themes review October 29th 2018



Eoin Treacy's view

FullerTreacyMoney has a very varied group of people as subscribers. Some of you like to receive our views in written form, while others prefer the first-person experience of listening to the audio or watching daily videos.

The Big Picture Long-Term video, posted every Friday, is aimed squarely at anyone who does not have the time to read the daily commentary but wishes to gain some perspective on what we think the long-term outlook holds. However, I think it is also important to have a clear written record for where we lie in terms of the long-term themes we have identified, particularly as short-term market machinations influence perceptions.

Let me first set up the background; I believe we are in a secular bull market that will not peak for at least another decade and potentially twice that. However, it also worth considering that secular bull markets are occasionally punctuated by recessions and medium-term corrections which generally represent buying opportunities.

2018 has represented a loss of uptrend consistency for the S&P500 following a particularly impressive and persistent advance in 2016 and 2017. Many people are therefore asking whether this is a medium-term correction or a top. There is perhaps no more important question so let’s just focus on that for the moment.



The 49th year of The Chart Seminar



Eoin Treacy's view

The next Chart Seminar will be held on 12 and 13 November 2018 at The Army and Navy Club in London.

If you have an interest in attending an online Chart Seminar please contact Sarah and we will arrange times based on the time zones of those who wish to attend.

I am also in initial discussions with a potential partner about organising a New York Seminar.

If you would like to attend or have a suggestion for another venue please feel to reach out to Sarah at [email protected].  

The full rate for The Chart Seminar is £1799 + VAT. (Please note US, Australian and Asian delegates, as non EU residents are not liable for VAT). Subscribers are offered a discounted rate of £850. Anyone booking more than one place can also avail of the £850 rate for the second and subsequent delegates.


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