Jonathan Hoenig - Survive the Slide When Markets Reverse
Like a sea captain surveying wrecked ships washed up on the rocks, I’m more than a bit nervous holding livestock funds like iPath Livestock ETN (COW) after seeing the stunning drop in sugar, which has plunged 43% in seven weeks on news of better-than-anticipated crops from Brazil and India.
It’s a dramatic reversal for what had been for a few months one of the strongest markets on earth. Sugar more than doubled from spring 2009 to February 2010, when it reached a 30-year high. Already a popular arbitrage between oil, ethanol and corn, sugar became an outright speculative favorite as well.
Taking advantage of higher prices, growers responded by increasing output, among the factors that have contributed to the commodity’s sharp decline. iPath Sugar ETN (SGG) has dropped 44% from its peak.