A strange disease is wiping out pigs in the United States.
So far, “porcine epidemic diarrhea” has cost 2.7 million animals their lives, and counting.
The market is already feeling the impact.
Pork production is down 7%, the biggest decline in over 30 years.
The offshoot is a 13% super-spike in bacon prices.
A pound of bacon now costs $5.46.
Ham and chops are on the rise, too.
The crisis has forced Smithfield Foods, one of the nation’s largest pork processors, to slash its five-day production schedule down to four days.
More troubling still, the government doesn’t know how to stop the disease from spreading.
Former NYMEX commodities trader, Lee Lowell, has profited through similar crises before.
He’s rarely ever wrong, winning on 108 of 115 recommendations over the last five years.
I asked him to chat with us about this evolving situation, and he agreed.
Please have a pen and paper ready, because Lee also reveals a clever way to profit.
Onward and Upward!
Founder, Wall Street Daily
More Storylines Impacting Markets
Separating Sheep From Goats…
Once the Federal Reserve announced its intention to curb its bond-buying program, it became a forgone conclusion that global investors would plow money into emerging-market sheep (countries with well-run economies), while fleeing from emerging-market goats (countries with ineptly run economies).
The six biggest goats include Brazil, India, Indonesia, South Africa, Turkey and – the worst of the worst – Argentina.
Each goat has a quickly-growing current-account deficit, anemic currency, dangerous inflation and declining stock market valuation. As the currency inflows continue to wane for the goats, rising trade imbalances will further hamper economic recovery in developed economies, while also exacerbating the goats’ risk of default. This will universally affect global stock valuations.
California Drought Brings Smiles to Gold Bugs…
The devastating drought in California has left reservoirs at a fraction of their normal depth, seriously threatening an agricultural industry that’s responsible for growing half of the nation’s fruits and vegetables.
But in a glass-half-full way of thinking, gold prospectors are flocking to the Golden State to take advantage of much-reduced water levels, hoping to find gold in riverbeds that haven’t been mined in decades.
Bond Failure Risks Global Recession…
China’s recent attempt to auction 28 billion yuan ($4.6 billion) fell short of its goal, and portends a selloff in U.S. equities with exposure to China.
China’s Ministry of Finance was able to raise just 20 billion yuan ($3.3 billion), and was forced to do this at an interest rate 31 basis points higher than similar maturity notes. This failure is a clear indication that China will continue to fall short of delivering the 7.5% GDP growth that economists believe is needed to keep the global economy in growth mode.
Indeed, real GDP growth in China will come in at about 5.5%, leading to increased risk of a global economic recession by 2015.
Draghi Declares War on Deflation and Europeans…
Believing deflation to be the biggest threat to the European Union, European Central Bank (ECB) President, Mario Draghi, has alerted currency traders that if the euro is strengthened any further, then the ECB will enforce a greater monetary stimulus.
Draghi’s threats are an attempt to weaken the euro, thus making European exports cheaper… while also helping to forestall a Japanese-style deflationary spiral that most economists have dubbed the “Lost Decade.”
Of course, Draghi failed to explain how higher inflation, and its resulting higher prices, will help the average European make ends meet. Especially in one of the most sluggish economies on Earth. Draghi’s efforts will likely lead to economic stagnation while leaving enormous piles of debt in its wake.
Profits Follow Rotations…
Financial analysts can identify three instances in the recent past where rotations from growth stocks to value stocks have fueled an upswing in the equity markets.
By all accounts, this current rotation has all the earmarks of a similar trek for profits. The rotation from hyper-growth equities with no earnings has given way to value names that have strong histories of documented performance.
In the last month, value stocks have gained roughly 1.25%, while growth stocks have shed nearly 6%. This rotation is driven in part by the fading momentum trade, as well as divergence in relative valuations. Furthermore, this trend will continue to drive the markets higher… as retail investors get on board the expressway to value.