The Mega Rallies in Futures Missed by Today’s Traders
While the “dead cat bounce” in cryptocurrencies is the talk at holiday parties, most investors are oblivious of the multi-year “bull market” in cattle as they eat an overpriced steak.
Seriously, history can be an important teacher in dealing with inflationary times. While the stock market traded sideways for a decade, the commodity bull markets in the late 1970’s were legendary!
Agricultural commodities like Soybeans (up 190%), Cocoa (up 531%), Sugar (up 624%), Wheat (up 199%) were the hot places to be and many of these powerful rallies happened within short periods of time.
While the debate continues how the current high inflation period compares with the 1970s, one thing is glaringly apparent. Today’s traders are avoiding traditional commodities and focusing on new age alternatives such as cryptocurrencies & NFTs to enhance returns.
As a Commodity Trading Advisor (CTA), it’s hard for me to fathom the popularity of speculating solely in relatively untested, controversial “cryptos” while fortunes can be made in the current fast-running bull markets of commodity futures in cattle (108%), cocoa (up 109%), orange juice (up 254%) and sugar (up 158%).
It doesn’t need to be an “either or” choice! Yet, active traders (big and small) are missing a huge opportunity by not including these time-tested securities within a mix of exotic alternative securities.
Commodities have several key advantages:
1. Futures trading accounts are available at most major brokerages to qualified retail investors.
2. Exchange traded worldwide, highly leveraged (up to 90%) and high liquidity.
3. When properly timed, profits can be made in bull and bear markets.
4. Favorable tax treatment regardless of turnover
5. ETFs are available in many commodities for normal investing.
To their relief, the concentrated crypto bets held by committed traders had a huge rebound in value since 2022’s cryptocurrency massacre. Now might be the time to take advantage of the bounce and diversify their portfolios into commodities where comparable returns can be made with better liquidity.
Remember, a successful trader’s goal is making money, not caring how or where it’s made.