Will Bauer

Potash Corp.: Sitting on the Long-Term Trendline

David,
I agree but would add that the recent $US rally *and* significant POT selling may well be simply a case of hedge fund deleveraging. It has long been the case that a good investment pairing is short USD + long commodities (oil, ag, gold). With the significant pressure in terms of increased margin limits et al., it is quite possible that the recent USD run-up is a case of them covering their shorts to lock in profits and reduce margin usage.
There is certainly *nothing* that has changed in terms of the fundamental macro-economic problems confronting the US dollar (of which there are so many I don't know where to start in enumerating them!)...so I would expect the USD to weaken over the next few weeks/months and commodities (including equities like POT) to begin to strength once again!
Once again, NOTHING has changed to make the US dollar (or US economy) healthy...this is just a temporary negative spike.


On Aug 12 10:05 AM David White wrote:

> The big reason for the decline in commodities recently seems likely
> to have been the US dollar strengthening. The led to investor exiting
> their commodity futures hedges against the dollar. Today the EURO
> is up against the dollar. Not coincidentally POT has started to go
> up again. The strength of the US Dollar does appear to be the key
> issue in commodities prices these days. Also by now a lot of people
> have already exited their hedge (of the dollar) trades. This was
> creating a short term temporary spike downward in demand on most
> commodities. If the US dollar is now wavering, hedgers might try
> to re-enter. This would spike prices the other way. If the US dollar
> strength is still improving overall, enough hedgers may already be
> out of the market to allow commodity prices to rise. Demand is actually
> increasing for most commodities. Oil demand may be the one commodity
> demand that is most tied to economic performance, especially US economic
> performance. For the "food" commodities the demand should still be
> great. The temporary downward spike in demand may be nearly over
> if most of the hedgers are now out???? If so, this would allow the
> Ag stocks to begin their rise.