Thursday, October 25, 2012

Sugar Bottom Approaching

Short Side Of Long  ... The Sugar price still remains in its cyclical bear market, which started in February 2011 with a peak at 36 cents. Basically, the current downtrend has persisted for almost 20 months now and Sugar prices have corrected by more than 45%. There aren't too many other financial assets with an improving long term fundamental picture, within a secular bull market and trading at a 50% discount from recent value. The only other asset that comes to mind with all of the criteria above would be Silver. However, hardly anyone seems to agree with me.

... While the Sugar bear market might not be over yet, we are definitely coming closer to the end of it. On a historical performance basis, Sugar offers amazing value. Consider that at today's price, Sugar is 45% below its February 2011 bull market highs, more than 55% below its November 1980 high and finally more than 65% below its November 1974 all time peak.

... On inflation adjusted basis, Sugar is even cheaper.  The last two price peaks during the last great commodity secular bull market were 57 and 43 cents in November 74 and November 80 respectivly. If we adjust those peaks via BLS CPI inflation rate (and we all know those inflation figures are understated and bogus quite honestly) we get a price between $1.10 towards $2.40. Using Shadowstats CPI data, the price becomes insanely expensive. Now consider that Sugar today trades at only 19 to 20 cents. What more can I say?