A Note on Corrections

Yesterday was a fairly rough day for many of the softs, some even hit limit down. Does this mean it's all over? Absolutely not. This is simply a temporary "correction" in the value of these commodities. There has been no major global surplus harvested in all of these crops in the past 12 hours (a Santa Claus like feat), and short of nuclear war there will be no blights unleashed that will wipe out all global production sending prices skyward either (if there is, I'm afraid we all have something a little more important to worry about than the price of corn my friends). The bottom line is that the fundamentals are still in place, however the short term speculators (like all of us) have driven prices slightly higher than the current market will bear for a few days/weeks. The following information will help paint a more scientific picture for you than just my opinions as to why this is a confirmed bull market that will not end abruptly:

1) Read this interview with Jim Rogers done by the online publication HardAssets Investor (HAI). First, if you don't know who Jim Rogers is, he is one of the premier minds in all of commodities investing and takes a more Warren Buffett long term approach to investing. Second, this article highlights many of his points about the status of our current bull market.

2) Big Red. That's right, that's my name for China. Nothing has changed here last night. Even if their blistering GDP growth slows from 11% to 8%, which by the way would be significant especially with the Olympic Games being held there in a few months, you still have 1.3 billion people that are joining the middle class a the most rapid pace in human history. People in the middle class consume more high quality food products (made from corn, sugar, etc.), wear nicer cotton clothing, and consume more energy (oil, nat gas, and even biofuels). So if you're convinced that Big Red is a fraud, then by all means, sell everything and get out of commodities right now without reading on.

3) Energy. Many people are commodity historians and they look back to past booms to compare this one too and say that, "It can never hold up!" Well, their analysis is based upon domestic population growth and historical consumption data. If you've been under a rock for the last 5 years, first of all welcome to the sunny side, second of all, we're using more and more products from the earth and converting them into energy daily. DAILY. This demand is soaring and has only begun. I truly believe that demand for many of these crops is experiencing the iceberg effect, we have only seen the first 10% of it. Now that's not to say the speculators haven't priced in more than 10%, but I don't think anyone can fathom 100% yet, simply because oil is still just too relatively cheap (don't jump me, I said RELATIVELY) compared to its alternatives.

I'll stop there for now, hoping that I have given you some heart to stay with this market even if it is handing you some lumps.