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This Bull Market Could Lead to Trouble Around the World

By Jeff Clark
Thursday, February 27, 2014

Quantitative easing might finally be taking its toll.
 
For years, many economists have argued that central banks' money-printing policies would create inflation... leading to higher agriculture prices (among other things) and riots around the world.
 
So far, agricultural commodities prices have stayed relatively low. For the last three years, they've been in a bear market. And falling food prices have masked the increase in prices of other things – like health care and electricity.
 
But as you can tell by walking into any grocery store, food prices are going up – fast. And it could lead to trouble...
 
Yesterday, I paid $8.99 for a pound of bacon. It wasn't the fancy, gourmet bacon, either. It was the pre-sliced, shrink-wrapped stuff you find in the packaged-food section of any supermarket. It was $4.99 a pound a few weeks ago.
 
Bacon isn't the only food going up. Beef, chicken, milk, and cereal prices are all headed higher in the U.S. and around the globe.
 
Here's an updated chart of the PowerShares Agriculture Commodity Fund (DBA) – a basket of 17 different agricultural commodities – I showed you a couple weeks ago...
 
DBA stock price chart
 
DBA is already up 13% this year. Since my last essay, it has broken through its first resistance level at about $25.70. It is now approaching its 2013 high near $28 per share. Over time, it may even challenge its 2012 high, just above $30.50 per share.
 
But the price increases of the individual commodities that make up this fund are even more startling. For example, wheat is up 15% in 2014. Sugar has risen 20% in just the past month. And the price of coffee is 70% higher than where it was last November.
 
After a long bear market, quantitative easing is finally pushing agricultural commodities higher. And they show no signs of stopping.
 
This means a strain on our wallets in the U.S. It could also mean riots around the world...
 
Generally speaking, a well-fed population is less likely to rise up in violent protest against its government. People will put up with a lot as long as they're not starving.
 
But when they're hungry and prices have risen so much that they can't afford to feed their families, look out. That's when the trouble begins.
 
Today's prices probably aren't enough to cause any riots. But if prices keep escalating, I suspect we'll soon find out what price will do the trick.
 
Best regards and good trading,
 
Jeff Clark




Further Reading:

Right now, Jeff is bullish on another area of the commodities sector: gold stocks. "Gold stocks are nearly as cheap – relative to gold – as they were at the start of the gold bull market in 2001." Read more here: This Chart Shows Why You Should Own Gold Stocks Today.
 
DailyWealth classic: Dr. David "Doc" Eifrig has shown readers how powerful it can be to hold "chaos hedges" – like gold – in your portfolio...
 
"When investors get nervous about bad economic news... debt crises in Europe... and the specter of runaway inflation in the United States," he writes, "stocks fall, and gold and silver rise." Learn how Doc protects his wealth with precious metals here and here.

Market Notes
The housing uptrend is back on... big construction fund ITB jumps to a six-year high.
 
Chicago Bridge & Iron, a natural gas infrastructure builder, soars to a new all-time high... up 126% in the past 18 months, including dividends.
 
Foreign steel companies are struggling... ArcelorMittal and Sesa Sterlite fall to three-month lows.
 
Uranium giant Cameco breaks out to a 21-month high.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1845.16 +0.0% +23.3%
Oil (USO) 36.75 +0.4% +10.3%
Gold (GLD) 128.10 -0.9% -18.0%
Silver (SLV) 20.43 -2.8% -28.1%
U.S. Dollar 80.41 +0.3% -1.8%
Euro 1.37 -0.3% +4.9%
Volatility (^VIX) 14.35 +5.0% -14.9%
Gold Stocks (^HUI) 240.00 -1.5% -35.1%
10-Year Yield 2.67 -1.1% +42.0%

World ETFs
Symbol Price
Change
52-Wk
USA (SPY) 184.85 +0.0% +25.7%
Israel (ISL) 17.00 +0.6% +22.5%
Japan (EWJ) 11.55 -0.4% +14.8%
Taiwan (EWT) 13.93 +0.9% +6.1%
Canada (EWC) 28.99 -0.4% +4.8%
S. Korea (EWY) 60.69 +0.9% +0.4%
India (IFN) 20.52 +0.3% +0.4%
S. Africa (EZA) 61.36 -0.8% -4.7%
Singapore (EWS) 12.63 -0.6% -5.3%
China (FXI) 34.82 +0.4% -5.8%
Russia (TRF) 13.71 -1.0% -7.3%
Lat.America (ILF) 33.39 -0.5% -19.8%

Sector ETFs
Symbol Price
Change
52-Wk
Biotech (PBE) 46.36 -0.3% +90.9%
Alt. Energy (PBW) 7.13 +1.9% +64.9%
Defense (PPA) 32.30 +0.1% +52.5%
Media (PBS) 26.08 -0.3% +46.8%
Health Care (IYH) 125.21 +0.0% +41.0%
Big Tech (QQQQ) 90.23 -0.1% +37.2%
Nanotech (PXN) 8.40 +0.7% +31.1%
Semis (PSI) 19.94 +1.2% +34.6%
Consumer Svcs (IYC) 122.22 +0.6% +34.5%
Software (PSJ) 37.68 +0.2% +32.1%
Industrials (IYJ) 100.21 +0.3% +29.7%
Retail (PMR) 33.08 +1.4% +28.7%
Transportation (IYT) 130.56 -0.2% +27.3%
Financials (IYF) 79.27 0.0% +24.5%
Construction (PKB) 23.08 +1.8% +24.3%
Telecom (IYZ) 28.86 -1.0% +23.9%
Basic Mat (IYM) 81.74 +0.8% +22.4%
Water (PHO) 26.56 +0.5% +21.7%
Insurance (PIC) 19.01 +0.1% +18.3%
Utilities (XLU) 40.27 -0.3% +13.3%
Real Estate (IYR) 67.96 +0.3% +4.3%

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