After highlighting the grain markets posting fresh 2.5 year highs yesterday (and then seeing them promptly sell off), the Softs staged a rally of their own today to push them to 13 to near 30 year highs (and Bernanke is still claiming no inflation?)
One odd thing concerning managed futures… While nearly every systematic multi-market trader we track has at least one long position on in the grain sector; only 20% of the multi-market managers we track are long cotton, sugar, coffee, or cocoa. Most programs we track exited long soft trades in mid-November and seemingly have not found a lower risk re-entry point as volatility continues to expand.
But is there also a little career risk/”nobody ever got fired for choosing IBM” going on here? In the managed futures space, it can be a lot easier to defend taking the wrong side of a trade in traditional, liquid markets like Corn or Wheat – and a lot harder to tell investors you lost their money in the significantly less liquid Cocoa or Coffee markets.
We’ll see if these recent trends entice some managers to brave the Soft markets a little bit more frequently and in greater quantities.