By Gareth Soloway on April 24th, 2010 11:40am Eastern Time
As I look across sector after sector, my eyes do not deceive me as they see 100, 200, 300% gains in the last year in many stocks. Financial stocks, retail stocks and others are truly amazing to behold. The economy seems to be on a one way track higher, not even willing to look back at the past and charging towards a robust future, filled with growth and prosperity and bubbles.
The money is flowing free, the Federal Reserve and U.S Government has made sure of that. After hundreds of billions in bailouts and stimulus packages and the Federal Reserve printing trillions, the steroids are truly flowing throw the veins of the market and the roid rage is ripping this market up day after day.
While I glance at countless stocks hundreds of percentage points off their lows, I cannot help but find one sector that does not mesh with the overall economic recovery theory. I sit here and find myself trying to figure out why agriculture stocks have not moved higher off their lows? By no means do I wish to portray a feeling that the economy is not in a recovery mode but instead I wish to give pause on the possibility that these stocks are showing us the recovery is just a short term move on the back of trillions in printed money and government spending. Ultimately, only so much debt can be printed and once that stops, will the average American pick up the slack? With unemployment where it is, it seems unlikely. Let's not forget, unemployment by government standards is 9.7% but the true unemployment rate is estimated to be around 18%.
Potash Corp./Saskatchewan (NYSE:POT), The Mosaic Company (NYSE:MOS), Monsanto Company (NYSE:MON) are all still nearer their lows than their highs of 2008. Potash Corp. hit a high in 2008 of $241.62. It is just slightly over $100 right now and in the last two weeks has fallen over 10%. The Mosaic Company is much the same. The most shocking would be Monsanto Company, which is within 5% of the lows it hit when it was crushed in late 2008. These were the lows for the last 3 years. Note the chart below.
So why is Monsanto Company at the lows, why is Potash or Mosaic off the lows but lagging all the other sectors in a major way? These are stocks that thrive on a true recovery and with them lagging, it makes me wonder if the recovery is only Federal Reserve and government spending based. If it was a wide based recovery, amongst the people, these stocks would be among the leaders. This is food for thought, pun intended. In a year, let's look back and see what has happened. It should be clear by then.
I for one am looking at these as a possible true indicator of a future, six months to a year out. That is of course, assuming the government and Federal Reserve have stopped a majority of their trillions of Viagra pumping activity. For now, as a Chief Market Strategist, seeing these stocks under perform is troublesome as they could be hit hard should the hard to come by pull back occur. I will stay away from them in the short term.
Gareth S
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