iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
21,907 Blog Posts

The Difference Between Commodities and Banks

Commodity related stocks have great balance sheets, great businesses and good pricing power.

Banks have heinous balance sheets, terrible businesses and zero pricing power.

Both sectors have loads of shorts in them. Mostly, people are short commodities, due to the belief of a ‘global growth’ slowdown; whereas they’re short banks, well, because they’re banks.

The flaw in being short commodity stocks is parallel to being long banks.

Companies like Agrium Inc. (USA) [[AGU]] , CF Industries Holdings, Inc. [[CF]] , The Mosaic Company [[MOS]] and Potash Corp./Saskatchewan (USA) [[POT]] have displayed zero signs of slowdown. In no way has growth or pricing power deteriorated. Therefore, if you are betting against them, you’re either guessing or just trying to catch “a quick trade.”

On the other hand, buying banks here means you believe there will be an uptick in business, despite seeing zero signs of a respite. Again, you’re guessing or trying to catch “a quick trade.”

At the moment, everything is reliant upon the minute by minute moves of crude. However, I guarantee you, this will soon pass. Eventually, businesses are evaluated on their supply/demand statistics. In my opinion, if forced to choose, I’d stick with names like FCX , Southern Copper Corporation (USA) [[PCU]] , AGU and MOS, while avoiding banks like the plague.

Naturally, market participants are trying to catch an early turn in both sectors, hoping to be rewarded for their early entry points. But, more often than not, timing tops and bottoms is a low percentage bet. You’re better off throwing sticks of dynamite at your life savings, than mess around with banks, following 40% spikes, or shorting commodities, following a 40% decline.

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44 comments

  1. ottnott

    Too many words. You only need 7.

    Some commodities taste good. No banks do.

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  2. Juice

    Interesting that SKF & SRS are up .. not much but its a change of character in an otherwise up market. Maybe they’re resting before another push lower.

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  3. Danny

    ^ottnott – that was funny.

    Fly, this is a great note. It is incredibly frustrating trading off fundamentals at times.

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  4. Phil_from_Brazil
    Phil_from_Brazil

    I’ll put a post with more details later tonight. Right now, just know this:
    GG’s a buy for a trade. DGP is going higher for an investment.

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  5. Anton Cigur

    Fly talking his book,
    Fuckery by Rat and Blinky:
    Commodities suck.

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  6. The Fly

    Anton:

    I’d like to curse at you right now, but I can’t.

    So, I’ll just say, good Sir, you are wrong. I am talking from fact.

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  7. JakeGint

    Here’s the thing:

    L-V-S is boning me.

    Is this Gambling?

    ___

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  8. Juice

    Trying a VLY short again. Maybe EWBC as well.

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  9. alphadawgg

    Wow. Did you actually write that? I didn’t see even one curse word in that post. Not even an “egregious” thrown in for good (or bad) measure.

    This is a good start on the road to cleanliness.

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  10. CubsRock

    Fly, I could hear you swearing from here when Maria came on, lol.

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  11. Anton Cigur

    Betting the wrong way,
    Like a fucktarded asshat,
    SKF mocks me.

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  12. Danny

    Jake, LVS looks like it hates 53.80

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  13. chivasontherocks
    chivasontherocks

    i can make him curse.

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  14. Woodshedder

    Anton, are you visiting Japan?

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  15. The Fly

    Anton:

    You are a worthy opponent and poet.

    I wish you good luck in all of your endeavors.

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  16. chivasontherocks
    chivasontherocks

    http://www.rallymonkey.com/video/kenindex.swf

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  17. Anton Cigur

    Just fucking around,
    Commodities killing me,
    I am a big fan.

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  18. The Fly

    Chivas:

    Touche.

    I see your rally monkey with this:

    http://www.youtube.com/watch?v=atZCGEwfIks

    QED

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  19. chivasontherocks
    chivasontherocks

    lmao,

    touche to you sir.

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  20. CubsRock

    Sold my VSE here, betting on corn and oil going higher.

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  21. alphadawgg

    All this politeness is refreshing. Carry on, good sirs.

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  22. Juice

    Oil stocks may have put in a low … perhaps crude will have a bounce with golds, commodities following and the current trade will reverse for a bit.

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  23. nullpointer

    digging the haiku, hairstyle

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  24. r

    “Civility costs nothing and buys everything.”

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  25. The Contractor

    I prefer this fly much more.

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  26. Rally Monkey

    God bless you Chivas

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  27. chivasontherocks
    chivasontherocks

    LOL

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  28. boca

    All this politeness and poetry is really making me irritable.

    Let’s see… will I choose A or B?

    Choice A) Smarmy insurance agent with plump pink cheeks bobbin’ and smilin’ while he tries to sell me mutual funds with stupid fees, while wearing a gray pin-striped suit and a phony silk hankie in the front pocket.

    Choice B) a pick-up ridin’, blue jean wearin’ down to earth good old boy who wants me to look at Cabela’s with him for a new gun rack.

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  29. Scum Bucket Bitchez
    Scum Bucket Bitchez

    It’s getting deep in here:

    Fly, I must say, that you sir, are a gentleman, a scholar, and a damn fine judge of whiskey. Nothing but blessings flow from yonder keyboard and only the finest refreshment from thine edificial blog forthwith.

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  30. The Fly

    Why thank you good Sir Bucket.

    Off to drink a glass of cooking sherry.

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  31. Juancho

    Fly, you are showing excellent restraint and humour, good sir.

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  32. boca

    What is the world coming to when a poster named “Scum Bucket Bitchez” is getting downright flowery with the compliments? I have a migraine now.

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  33. BPOE

    MVIS;

    My Vision Is Sorry !!

    What is with the fucking delay’s.

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  34. recusancy

    BPOE,

    The stock just went on sale. That’s all. Be a thrifty shopper and pick some up.

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  35. BlueJeanCowboyWithAPhonySilkHanky
    BlueJeanCowboyWithAPhonySilkHanky

    Boca:

    Can I interest you in some high fee mutual funds after a quick trip to Cabella’s to buy some gun racks?

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  36. Kiwin

    Shit, piss, fuck, cunt, cocksucker, motherfucker, tits, fart, turd, n twat.

    Phew.

    http://www.youtube.com/watch?v=QlPwojdNgrs

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  37. Leonard The Monkey

    Crazy ass monkeys.

    By the way buy CDS ahead of earnings tomorrow.

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  38. Nihilist Investor
    Nihilist Investor

    It’s all about time and getting a trade to fade from view. Right now, we are too close to the dumping in commodities to expect a turn. Perhaps, 3 months from the peak at the end of September, we can expect a rebound. Similarly, the bank crisis of early July is too close at hand. Perhaps, in October we can expect more issues to emerge. All the banks are still early in their 3Q’s.

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  39. Juice

    Fly, you better start banking egregious coin soon. This just doesn’t feel right.

    God intended for the Fly to bank egregious coin and curse with egregious fervor.

    And to overuse ‘egregious’, to an egregious extent, egregiously.

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  40. Topper Harley

    Did I just hear some asshole on CNBC say commodities have real earnings while the banks do not?

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  41. DSB

    Kiwin, are the last 4 letters of that link a coincidence? I knew youtube was racist man.

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  42. mrkcbill

    yes you did.

    That was Fly

    Odd No?

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  43. Sahim

    What if the dow never gets below 11k.
    “The Fly” wouldn’t last.

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  44. Dinosaur Trader

    I’ll get in on this whole “nice trend” thing…

    Ragin’s blog is gay.

    -DT

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