"Go ahead and take your tax losses on those bank stocks like a big kid, and move on to one of the next major investment themes."
---------------------------------------------------------- AGRI-FOOD THOUGHTS by Ned W. Schmidt, CFA, CEBS Schmidt Management Company April 30, 2008
Hard to miss a news story on global situation in rice. More has been written on rice in past month than probably occurs in a year. At the same time, the price of oil was bid to an all time high. All that action fed the interest in grains, especially those that might be converted to biofuel. This headline attention on Agri-Food also fed investor interest. As this week's chart shows, Agri-Food stocks have been having a very good time. Given dismal returns in much of investment arena, little wonder investor interest in Agri-Food has grown. 2+ billion consumers in China and India are earning higher incomes. They are spending a goodly part of that income on Agri-Food products. While a lot has been written on price of rice, did you know that the price of cotton is up 37% from a year ago?
While the outlook for the next decade or so is for a short supply situation in Agri-Food, a decade is composed of numerous shorter time periods. With arrival of spring in the Northern Hemisphere, attention turns to new crops about to be harvested and those about to be planted. Expectations on prices may, for that reason, experience some seasonal moderation. Oil price expectations are also likely to weaken. With these factors, short-term market prices for some Agri-Food investments may become more attractive. Now, therefore, might be a good time for researching Agri-Food investments. Go ahead and take your tax losses on those bank stocks like a big kid, and move on to one of the next major investment themes. Agri-Food investments, due to the economic drivers, complement your Gold investments and may offer some potential diversification as the covariance has been running near zero.
