El Conquistqdor Francisco de Orellana

El Conquistqdor Francisco de Orellana
The Conquistador who put the Amazaon baisn "on the map"....Francisco Orellana

Tuesday, November 13, 2012

A hedge against food prices....they say buy into an ETF. We say...buy a farm in Ecuador and have your own chickens, fruit, pigs and turkeys

Inflation is an evil of the world. It is an unseen thief. It’s the worst form of robbery, because we often don’t even realize we’re being robbed, or the extent of damage it’s doing to our lives.

Without taking the right proactive measures, inflation is guaranteed to eat up your purchasing power and make you steadily poorer, year after year.

Some people think they are safe because they have a savings account, money market account or possibly a CD. They like these investments because of their conservative nature and low risks. However, believe it or not, they are in actuality “high risk” investments. If that’s all you’re invested in, inflation is going to gobble up any paltry returns you earn.

It may cost you at a slower rate than if you’d just stuck your money under the mattress … but not much slower.

Higher Inflation is Coming in 2013

It’s crucial right now to learn to invest in stocks that can help you fend off inflation. This is because in 2013, inflation will head higher. Food inflation, especially, is set to rise … and that’s one of the worst kinds there is.

After all, if electronics are surging in price, you don’t have to upgrade your smartphone or laptop right away if you don’t want to. If gold and silver are soaring, you don’t have to go out and buy a bunch of jewelry at that very moment.

However, you have to eat no matter what food prices are doing. If the prices are high, you can’t simply say, “Well, I won’t eat this week. Instead, I’ll wait until next week.” And more importantly, you certainly can’t say this for your family, either.

The bad thing about food inflation is that you just have to suck it up and pay the higher prices to continue to survive. That eats into money that could be spent elsewhere on bills or other things you want to purchase.

In other words, when food prices are out of control, it clamps down on discretionary consumer spending.

How do I know food costs are going up next year? Remember the terrible drought that caused the price of corn, wheat and soybeans to rise? Those wholesale costs are about to cycle through and be passed on to you, the consumer.

In fact, I saw an interview with the V.P. of a huge bulk-purchasing firm for restaurants, and he said that food prices were already starting to rise … and some were about to spike.

For instance, he said that chicken wings will continue to rise next year until they are about 100% higher than they were last year. Not good for your local sports bar, is it?

Bacon is projected to rise around 5%. Apples and apple cider are projected to rise 20%-30% this holiday season. Turkey is projected to rise 7%, just in time to hit Thanksgiving shoppers.

Whole chickens have already risen 6% since April, and chicken breasts are up 5% within the same time period.

Eggs are projected to go much higher because of a limited supply of chickens. Cooking oil is expected to jump by 5%. Dairy prices will likely rise 5%-10% higher too, he said.

So expect your grocery bill to rise in 2013 and for the cost of eating out to increase as well. But again, there is something you can do to counteract higher prices: Invest in something that keeps pace with or, even better, outpaces the rising costs of those goods.
The Solution to Rising Food Costs

There’s an easy way to get some broad exposure to fight off the horrible effects of food inflation. You can do this by investing in the PowerShares DB Multi-Sector Commodity Trust Agriculture Fund ETF (DBA). It has diverse exposure to different areas of agriculture.

DBA is about to produce its first “higher low” in a long time. It will use its moving averages as support. Additionally, we see that the weekly Relative Strength Index (RSI) is about to become oversold, and this means that higher prices are likely to come in the months ahead.

In addition to that, the moving average convergence divergence (MACD) diverged from the falling price action earlier in the year, and this showed that DBA’s descent was likely coming to an end. Well, that did happen, and now DBA has surged so much that the MACD’s lines are now above its zero line.

This tells us that the likelihood of an uptrend forming and continuing is high at this point. And with what we expect for food prices in 2013 and beyond, we know that we’ll see DBA head much higher in the months ahead.

So if you want to effectively hedge some of your higher grocery bill and dining out costs, then I’d encourage you to fight food inflation by buying DBA today.

Have a nice day!

Sean Hyman
The Sovereign Investor

1 comment:

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