A Bull Market In Wheat

When you develop a desire for trading, you must realize that the desire originates from the greed for profit and that it is only a feeling that has little to do with the possibility of making actual profits. Therefore, you need to identify and control the greed when it grows in you. Meticulous analysis of the possibility of making actual profit should be your priority. ~ “The God of Trading, Honma: The Creator of Japanese Candlestick Charts”

Good morning!

In this week’s Dirty Dozen [CHART PACK]  we look at household’s high ownership levels in equities, before diving into what this means for future returns. We then discuss elevated risk metrics, the Buy Climax case, growths emergence over value, the bullish setup in semis, and some Ag-related news, plus more…

Let’s dive in.

***click charts to enlarge***

  1. I like to check in on household ownership of equities as a percentage of financial assets from time to time (it currently stands at 43.2%, just shy of the all-time high reached in 2000 of 44.6%).

This chart from NDR via CMG Wealth gives another way of looking at things. Here is household financial assets versus income. It’s a little elevated.


  1. If equity ownership as a % of total financial assets continues to be a high signal guide for forward returns, then probabilities point to a -0.50% annualized market return over the next decade (NDR chart via CMG Wealth).


  1. Goldman Sachs Risk Appetite Indicator is close to an all-time high…


  1. From GS “high RAI levels means the likelihood of very strong S&P 500 returns (>10% over 3m) is usually lower. But the risk of very large equity drawdowns (>10%) is also usually lower, because there is likely a strong macro backdrop that has boosted risk appetite, similar to the COVID-19 recovery. Nevertheless, there is a more negative skew of returns and the probability of corrections increases.”

This fits in with our current base case. A Buy Climax over the next few weeks, maybe months even… followed by an extended period of sideways chop and volatility in US markets.


  1. I like the Qs here as growth is deeply oversold on a relative basis. This is likely their last hurrah before an extended period of underperformance (chart via Fairlead Strategies).



  1. Another bullish growth/tech chart via Fairlead Strategies, showing improving momentum in the Nasdaq.


  1. @MacroCharts shared a number of great charts on the twitters last week. Here’s one showing the correlation between negative bond sentiment (as marked by a low DSI) and the follow-on returns in growth relative to value.

This makes sense as falling yields provide relief for more richly valued growth names.


  1. A couple of weeks ago I pointed out the extraordinary breadth in semis (link here). Here’s another one from @MacroCharts showing a big weekly price thrust in the SOX index. Prediction: the supercycle in computing power is going to become a mainstream narrative in the coming months.


  1. It’s hard to find a bearish-looking chart in the space. QRVO is one of many names breaking out from nice technicals…


As well as the Japanese company, Murata Manufacturing. A stock we bought last year and took profits on before this recent pullback that’s giving another good entry point.


  1. Last month, I pointed out the impressive relative strength of Japanese financials, using Nomura (NMR) as an example. Well NMR was recently implicated in the Archego’s blow-off, apparently, the bank is on the hook for potentially $2bn in losses.

Its stock price has taken a big hit but its credit is mostly unfazed — especially when compared to the reaction seen in Credit Suisse, who also got caught up in the mess.

I’m keeping an eye on NMR and may consider putting on a starter position once its technicals firm up some.


  1. Wheat’s traditional premium over corn fell last week to its biggest discount since 1977 (h/t BBG). This is typically a bullish sign for both.


  1. We’re big Ag bulls at MO. I pitched the fertilizer company CVR Partners (UAN) in these pages back in early Jan. The stock is up nearly 200% since…

We currently hold a number of Ag-related names. A new one I’m starting to look into is Marrone Bio Innovations (MBII). It’s an AgBiotech that hails from my alma mater, UC Davis.

You have to do your DD on this company as its potential value lies all in the future… But, there may be something here… idk, we still have some work left to do.

Stay safe out there and keep your head on a swivel.

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Brandon Beylo

Value Investor

Brandon has been a professional investor focusing on value for over 13 years, spending his time in small to micro-cap companies, spin-offs, SPACs, and deep value liquidation situations. Over time, he’s developed a deeper understanding for what deep-value investing actually means, and refined his philosophy to include any business trading at a wild discount to what he thinks its worth in 3-5 years.

Brandon has a tenacious passion for investing, broad-based learning, and business. He previously worked for several leading investment firms before joining the team at Macro Ops. He lives by the famous Munger mantra of trying to get a little smarter each day.


Investing & Personal Finance

AK is the founder of Macro Ops and the host of Fallible.

He started out in corporate economics for a Fortune 50 company before moving to a long/short equity investment firm.

With Macro Ops focused primarily on institutional clients, AK moved to servicing new investors just starting their journey. He takes the professional research and education produced at Macro Ops and breaks it down for beginners. The goal is to help clients find the best solution for their investing needs through effective education.

Tyler Kling

Volatility & Options Trader

Former trade desk manager at $100+ million family office where he oversaw multiple traders and helped develop cutting edge quantitative strategies in the derivatives market.

He worked as a consultant to the family office’s in-house fund of funds in the areas of portfolio manager evaluation and capital allocation.

Certified in Quantitative Finance from the Fitch Learning Center in London, England where he studied under famous quants such as Paul Wilmott.

Alex Barrow

Macro Trader

Founder and head macro trader at Macro Ops. Alex joined the US Marine Corps on his 18th birthday just one month after the 9/11 terrorist attacks. He subsequently spent a decade in the military. Serving in various capacities from scout sniper to interrogator and counterintelligence specialist. Following his military service, he worked as a contract intelligence professional for a number of US agencies (from the DIA to FBI) with a focus on counterintelligence and terrorist financing. He also spent time consulting for a tech company that specialized in building analytic software for finance and intelligence analysis.

After leaving the field of intelligence he went to work at a global macro hedge fund. He’s been professionally involved in markets since 2005, has consulted with a number of the leading names in the hedge fund space, and now manages his own family office while running Macro Ops. He’s published over 300 white papers on complex financial and macroeconomic topics, writes regularly about investment/market trends, and frequently speaks at conferences on trading and investing.

Macro Ops is a market research firm geared toward professional and experienced retail traders and investors. Macro Ops’ research has been featured in Forbes, Marketwatch, Business Insider, and Real Vision as well as a number of other leading publications.

You can find out more about Alex on his LinkedIn account here and also find him on Twitter where he frequently shares his market research.