Thursday, September 30, 2010

This Macro Market

This past week there was a front page WSJ article titled, "'Macro Forces' in Market Confound Stock Pickers" which was worth reading. Though I gave up on individual stocks a decade ago, and wouldn't touch one now, there are still agricultural investors out there trying to play the game. My father told me this week that one implement dealer in his area has sold fifty $300,000 combines this season (rural Nebraska). My driving took me past a number of dealerships and their inventories were impressive. Go out and buy Deere? Not so fast.

This WSJ article describes how the current markets reflect macro moves and stock pickers are not being rewarded for their research and analysis. This has been the case, especially since 2008. A market deserted by individual investors is now dominated by short term hedge fund trading and the like. But we already knew that, didn't we?

Interestingly, the article contains this sentence, "Prior to the financial crisis, such high correlation levels were seen previously only during the Great Depression, according to data compiled by market-strategy firm Empirical Research Partners."

To follow, I've put together three popular Ag stock's five year charts followed by the S&P Chart, just for fun. Note that there is less correlation in the charts prior to 2008. As always, buyer beware. We are not investing in ordinary times.

Deere & Company

Archer Daniels Midland

Valmont Industries

Chart forSPDR S&P 500 (SPY)