Agriculture Boom

At the fundamental level of commodities (or equities, bonds, or derivatives etc.) what exactly is it that drives price higher? Demand. Simply put. You can say fundamentals, but demand is the most fundamental concept there is. So why do I mention this now? This article from HardAssets Investor written late last week points out that in just over a year an Index fund had to close to new money because it reached its maximum capacity so rapidly. While there are still relatively very few funds out there invested solely in commodities, and the individual investors like ourselves are in relatively short supply (compare daily volume of corn or even oil to QQQQ sometime just for kicks...), there are more people piling in to this space every day.

Unlike equities where there are IPO's and new corporations formed and new issues of stock released, there simply is a finite amount of space for the commodity investor to roam around in, therefore, whenever it gets crowded, you'll find people paying higher prices just to "get in to the market." For those of you who have watched CNBC for at least a year or more now, sit back and take note of how many times in a day, or hour for that matter, they mention rising commodity prices. This boom is exciting the average investor that wants into the space and index funds want to provide an outlet for them.

The moral of the story is hold on for a great bull market for a while. The internet and news media are the two reasons why I believe that this bull market will be the largest in history. Now have I been trading commodities for 30 years and have a PhD or some grounds to make this statement? No, not really. But what I do know is that the internet is the perfect vehicle to drive information to the masses. Remember the tech bubble of the 90's? One of the largest busts in history since 1929 largely because everyone was in the market! People I didn't know were giving me stock tips, heck, the NASDAQ still hasn't hit those levels again and likely won't for some time. Finally, what I'm saying is that just as soon as everyone wants in, you should be the first to get out!