LONG-TERM INVESTMENTS

ESTABLISHED MARCH 20, 2001
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* Near All-Time Lows

* Near All-Time Highs

Coffee- Excellent buying opportunity!!!  Since 1975, coffee has only reached this low (60) one other time.  In 1992-93, coffee did manage to tumble all the way to 50, but within a year, it shot up to 260.  Possibly history will repeat itself!  Options may be an extremely good purchase now.

Soybeans- With the exception of less than one month when prices dipped down and bounced right back up in 1999, soybean prices have never been this low since 1972!!!  Some analysts are talking about possibly $3 soybeans for next year (now 4.40).  How can this be?  Why will farmers continue to plant soybeans even with low prices?  Government subsidies.  Soybeans may be a good buy right now, or may not.  Options may be a wise choice so that you don't have to commit.

Orange Juice- Has only reached this low (750) two other times since 1977!  In 1993 and 1997, OJ tumbled to 650, but quickly rebounded up to 1300, which is near its average for the last 23 years.

Cotton- Currently at 4980, cotton is way below average!  In fact, cotton has only reached this low 2 other times since 1975!  In 1999, cotton stayed at this price for nearly half a year.  Also, in 1986, cotton tumbled from near its average of 700 to 300 in one month, but quickly rebounded. 

Oats- Low prices!  Oats has reached this low 5 other times since 1973, but they have never dropped below the 95-100 range since 1973.

Wheat- Although wheat is not at bottom prices, it is near the bottom.  Average price in the last 28 years is approximately $3.40 with the 4 lows since 1973 varying between $2.20 and $2.60 (currently $2.70).

Lumber- Build a house!  With a slight upwards long-term trend in the lumber markets, I believe that lumber is near a low.  Lumber is increasing at approximately $5 per year since 1970, estimating by the charts.  Generally commodities don't have an upward or downward trend in the long run due to the nature of a purely competitive market.  Economists claim that in a purely competitive market, the prices will equal the cost of production in the long run, ensuring no profits and no losses.  However, trees are disappearing and take several years to grow back (limiting supply), and population is growing and more houses are being built (increasing demand), which causes prices to go up slightly.  Same principle can apply with certain precious metals.

Live Cattle/Pork Bellies- Both are at near high prices, but according to the spread chart and the principle of economics, the spread should be approximately zero instead of -10.  Therefore, given enough time, the spread is GUARANTEED to return to zero.  In this case, buy Live Cattle even though they are high, and sell Pork Bellies.

10 Year Treasury Note/ 30 Year Treasury Bond- Distinct drop in 2000.  Prior to 2000, the spread was around 10 with .5 fluctuation either way (now spread between 0 and 1).  I'm not sure if these can be traded as commodities, but if they can, I think a jump back to around 10 could be in store within the next year.  However, I am not familiar with these commodities, so that is not gospel.  My theory though is that when the stock market tumbled early last year, investors took money out of stocks and invested into Treasury Notes (since the 10 year is almost equal to the 30 year).  If my theory holds true, when the stock market turns bullish again, we may see the spread increase back to the 10 points in a very short period of time.

Heating Oil/Unleaded Gasoline- Similar to the Live Cattle/ Pork Bellies spread, both heating oil and unleaded gasoline are high priced.  However, economics GUARANTEES us that, given enough time, this spread will return its average of about -.03.  This particular spread has only reached this low 3 other times since 1985.  Once in 1989, in 1990, and in 2000.

Palladium- Although palladium has fallen from 1100 to 800 within the last few months, looking at the 30 year chart since 1970, palladium has never climbed above 350 before last year!!!  It's 30 year average price is approximately 125 with a slight upwards trend due to the same principle explained with lumber.

Feeder Cattle- Perhaps will stay up in price for a while.  Feeder cattle as a whole don't seem to be as volatile as other livestock commodities.  It appears to go more in general cycles, based on the chart since 1970.  Feeder cattle have only reached 86 or above 3 other periods in time.  The prices hit 86 in 1978-1980, then tumbled down to about 66 for approximately 10 years, and hit 86 again in 1990-1991, dipped down a little, and hit it again in 1992-1993.  Once again it dipped down for approximately 7 years with an average about 70, and hit 86 again in 1999-present.  In short, feeder cattle may dip soon, but I also wouldn't be surprised if it hangs near the 86 range for another year, or at least until after hogs and pork bellies tumble since the spread is negative between them.

Pork Bellies- Pork Bellies has reached the 90s price several times since 1970... 7 times in fact.  However, they have rarely stayed that high for more than a month at a time.  Based on history and the principle of a purely competitive market, I believe Pork Bellies will soon fall hard and fast!!!

10 Year Treasury Note- Has reached a record high since 1989 with the exception of a month in 1998.  Interestingly, the chart has a definite upwards trend to it.  I'm not really sure what this indicates, but it is an interesting phenomena and I'll look more into it.  Ironically, although this commodity is reaching new highs which indicates a sell in commodities, when comparing the spread with the 30 Year Treasury Bond, a buy is indicated.

**These are my own personal opinions and may not be reflected in the markets.  Therefore, I suggest you do your own research before investing.