Trying to hear what’s not being said – May 5, 2022

Readers of my weekly ‘Macro Extremes’ note may deduce that the following are Overbought and ’Stretched”

Cotton (up 50% in 4 months)

Rice (up 22% in 4 months)

Corn (up 36% in 4 months)

Natural Gas (Henry Hub price) has soared 117% in 3 months

These higher prices are good for the producers and onerous for the buyers of the raw material.

However, the contrarian thinks about what the story looks like when things change and move in the opposite direction.

For those who chased the news and fearfully bought something at the wrong end of the pendulum, you may be surprised to know that since the week surrounding February 28th – March 7th, 2022 (Ukrainian invasion)……

Wheat is 25% lower (remember how the lack of Ukrainian wheat was going to send prices higher ‘forever’?)

Aluminium is 24% lower

European delivered (Dutch TTF) Natural Gas has slumped 55%

Palladium has declined (Russia has 40% of the global reserves)

Crude Oil is 18% weaker

the Japanese Korean LNG Marker has fallen 54%

Lumber has swooned 34%

Nickel has tanked 50% from its March intraday high

and Hot Rolled Coiled Steel is 20% lower than its September 2021 high.

Interestingly, the Baltic Dry Index has ‘only’ risen 20% since the early March news of supply disruptions and port chaos in Shanghai arose.

May 5, 2022

by Rob Zdravevski

rob@karriasset.com.au