Man It Feels Good To Be A… Farmer?

Nothing is more difficult, and therefore more precious, than to be able to decide. ~ Napoleon

Good morning!  

In this week’s Dirty Dozen [CHART PACK] we walk through competing arguments behind what’s driving inflation. We then look at rates and financial conditions, go through some Ag charts, talk US dollar positioning, and finish by pitching an Ag equipment stock as well as a renewables infrastructure play, plus more… 

***click charts to enlarge*** 

  1. @MrBlonde_macro published a piece last week updating his thoughts on the current macro environment, valuations, near-term risks, etc… He also pitched an interesting SPX dividend futures trade. You can find the post here.


  1. Bridgewater recently published a report titled “It’s Mostly a Demand Shock, Not a Supply Shock, and It’s Everywhere” about, you guessed it, strong demand. They argue against the popular narrative that inflation pressures are primarily caused by COVID induced supply shocks. Rather, it’s the result of lots of stimulus cash, repaired balance sheets, and a tightening labor market + rising wage pressures that’s driving a historic wave of demand… demand that’s likely to be sustained. 

Obviously, if true, this will have reverberating consequences for markets and policy makers alike. Here’s the link. 



  1. One of my favorite econ writers Matthew Klein provides a balanced counterpoint to Bridgewater’s inflationary views. In this recent post (link here) he argues that the data suggests these inflationary pressures are temporary, writing: 

The categories represented by the red columns constitute the overwhelming majority of consumer spending4 yet they collectively explain just 38% of the total increase in the CPI so far this year. The CPI is 5.5% higher in October than it was in January, but it would have been just 2.1% higher if the pandemic-disrupted categories—which normally contribute very little to changes in the total price index—hadn’t had such a massive impact.


  1. The inflation debate aside, the incredibly strong demand and growth we’re seeing in the US right now is real and unlikely to significantly slow anytime soon. Our US Growth Composite is just coming off record highs… 


  1. Considering this backdrop, it’s quite unreal that real rates are at all-time record lows and financial conditions have never been looser… 


  1. We’ve been Ag bulls all year and the charts in the space just keep setting up. Here’s a weekly of the Invesco DB Agriculture Fund (DBA). 


  1. Variations of this chart have been floating around over the past week. It shows the correlation between fertilizer and agriculture spot prices, implying that the former is leading Ags to the upside.


  1. I’m keeping a close eye on the US dollar here. It’s been driven higher by an improving front-end yield-spread. 


  1. But Spec positioning is getting quite crowded on the long side while DXY has only risen to the middle of its 7-year sideways range. We’re still longer-term USD bears (here’s our write-up explaining why) and this is obviously an important market to watch considering where inflation is at while the USD has yet to kick off its cyclical bear trend.


  1. Either the world is satiated with dollars which is why it’s not being pulled higher by positive relative performance or the dollar is gearing up for a big reversion higher. I think the former… 


  1. I’m digging into a number of Ag and infrastructure/CAPEX boom plays this week. AGCO is one that caught my eye. The company manufactures and distributes agricultural equipment and related replacement parts worldwide and is based out of Georgia. It’s cheap. Growing top and bottom lines. And it’s a perpetual cannabalizer of shares. Plus, the long-term chart looks ready to rip. 


  1. Another one I’m starting to look at is Infrastructure and Energy Alternatives, Inc (IEA). They’re a leader in the renewable energy construction space with strong growth, a large backlog, and solid balance sheet. 


Thanks for reading.

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.