No… SoyAAPL isn’t the newest Snapple flavor, it’s the combination of two of the worst-performing investments over the past few months. While most of the stock world has been obsessing over the drop in AAPL lately, those of us in the futures world have been watching grain markets, and particularly soybeans, plunge at about the same pace.
With the grain complex down big for the 3rd day in a row today and, in the case of soybeans, down for the 6th out of the last 7 days, the trade of the year for many Ag CTAs has started to sour in a big way. Concerning soybeans in particular, after rising more than 43% from the end of May to the beginning of September due to the US drought; soybeans have given back more than 20% since their peak (Disclaimer: past performance is not necessarily indicative of future results). What will the Ag traders do for an encore? Get on the short side? Or buy into this drop as their setup for the next rally?
Chart courtesy Finviz.com
Only time will tell how the commodity trading advisors specializing in the Agriculture sector play this drop, but our thoughts go out to the poor hedge fund manager who went with the “Buy Apple, Buy grains” investing meme at the end of the summer riding the incredible momentum in both. As we’ve said before and we’ll no doubt say again – trees don’t grow the sky…
PS – This is a nice lesson in causation versus correlation. While AAPL and soybeans may be correlated right now, that does not mean one is causing the other. Just like Facebook isn’t causing the Greek crisis; soybean prices are not falling because of lack of new ideas at Apple, and Apple stock is not falling because of recovering soybean supplies.