Schmidt's Agri-Food Thoughts
Ned Schmidt, July 27th, 2009
Page 1
Some, and perhaps more than we imagine, economic sectors are immune to the failing economic policies of the Obama Regime. Those industries being driven by the dominant global trends should be somewhat resilient to the ongoing economic problems of the U.S. However, none will totally escape as the U.S. is such an important economic center of consumption. How do investors escape this reliance on U.S. economic activity level? The answer is, quite simply, Agri-Food.
Investors, particularly those in the U.S., are being exposed to a grand period of illusory economic statistics. The U.S. Federal Reserve has injected more than a trillion dollars into that financial system. Doing so has managed to halt the process of economic collapse. The U.S. economy now bobbles up and down at the bottom of the abyss. However, no energies have been released that will cause true growth, not illusory growth, to manifest itself. Obama Regime's high tax, anti growth approach will not do the trick.
An example of the economic statistics likely to be used to fool investors is that of U.S. economic growth. Note that an out of work individual unable to buy an imported television or foreign-made clothing could cause U.S. GDP statistics to appear as if improving. Due to magic of the math of economics, an out of work individual NOT buying an imported television causes U.S. net exports to be less negative and, therefore, U.S. GDP growth becomes positive. Obama Regime and investment hucksters will make much of this.
Agri-Food is an economic sector more driven by global trends, and not overly reliant on Western economies. As shown in our first chart above, the Agri-Food stocks corrected, and then rose to slightly more than the most recent short-term high. Actually, the correction was more than that shown in the graph. Individual issues, especially, experienced more corrective action than implied by the average. At the same time, while well off the bottom, the market for stocks of the last decade continues to languish if put into historical perspective.
Most interesting though is the strong divergence between the performance of the Agri-Food stocks and the S&P 500. While the general stock market remains mired in the mess created by the Federal Reserve and the Obama Regime, the Agri-Food stocks have shown more independence. In part, the reason for that development is that the fundamentals are strongly influenced, and perhaps dominated, by global factors.
