Commodity Insight: The silly season has arrived

Watching the various markets move higher on bad news and lower on good news is the order of the day. Lately, there is little connection between logic and reality.

Everywhere, there is intense volatility, causing markets and prices to rise and fall sharply. Such a fickle scenario has brought forth a silly season.

Each Monday, the U.S. Department of Agriculture rates the crops and tries to gauge their health. Since mid-May, the U.S. crops have suffered from record dryness, which has cut yields and production for corn, soybeans and spring wheat.

This week, the USDA pegged the corn and soybean crops to be the worst rated since 1988, 35 years ago. From a statistical standpoint, such data should be bullish.

But with the silly season here, the two days after the crop ratings were announced, corn, soybean and wheat prices fell 56 to 89 cents a bushel. It was a huge decline in the face of bullish news.

Despite bullish crop ratings, the grain complex got a haircut. The day was volatile, illogical and rather silly, in my view.

Last week and this week, Federal Reserve Chairman Jerome Powell said that U.S. interest rates were going to remain elevated for some time with more rate hikes likely in the months ahead.

Powell stated the Fed will keep pushing rates north to fight inflation while most other world central banks are following a similar path.

But a day ago, it was announced that U.S. consumer confidence jumped to a 17-month high on fewer worries about higher interest rates and a recession. I cannot think of anything sillier than consumer confidence improving in such an environment.

Another silly scenario, in my view, are the cryptocurrency markets and bitcoin. This week, bitcoin hit a one-year high with stiff gains also seen with a host of other crypto markets.

Yes, the crypto markets that are not backed by any physical asset and do not produce anything tangible are just about the best, most bullish markets anywhere.

It was 14 years ago bitcoin came into being and it remains the most known and most expensive crypto market in the world.

It has been estimated that the number of farms and ranches that use the futures markets for hedging, trading or speculation is less than 250,000.

But it is also estimated that 20% of Americans — which constitutes 50 million people — own crypto. That alone is downright silly, in my view.

Warren Buffet said this about bitcoin: “Whether it goes up or down in the next year, or five or 10 years, I don’t know. But the one thing I’m pretty sure of is that it doesn’t produce anything.”

Not long ago, Federal Reserve Board of Governors member Christopher Waller stated: “If people want to hold such an asset, then go for it. However, if you buy crypto assets and the price goes to zero at some point, please don’t be surprised and don’t expect taxpayers to socialize your losses.”

Buffet and Waller are convinced that plunking money down on a crypto market is downright silly.

Forbes Magazine estimates there are now 600 crypto exchanges across the globe. Fourteen years ago, there was one crypto currency in existence, bitcoin. Ten years ago, there were seven crypto currencies.

Today, there are 22,932 crypto currencies. Not one is backed by anything physical and not one produces anything tangible.

But millions of people trade the crypto markets in hopes of catching the big one. And, facetiously, Buffet said, “bitcoin is probably rat poison squared” — and Buffet was, indeed, being silly with such wording.

When the silly season arrives, everything is questionable because of volatility. Oftentimes, bullish news is faded. So is bearish news.

Oftentimes, sources that have been counted on and relied upon in the past suddenly have a cold hand and have to be ignored.

In the silly season, it is not unusual for smart people to do dumb things, or dumb people to come up with smart ideas.

It is simply a difficult and challenging environment in which to invest, speculate or trade. And that is the silly season — warts and all.

Don’t forget the most difficult question to answer when exiting any market with a profit or a loss is this: “There is no answer!”

Just exit the market, clear your head and blame things on the silly season. That is how it is.