Conclusions and the Corn Palace
Well we made it through! I’m down 13% and ranked in the bottom five. But who cares, it’s over! right? right?
I didn’t trade this week, and as not trading and doing no market analysis is a sure fire way to get yourself landed in the bottom five, I might as well just lean in to it and write about something entirely different.
One thing I’ve been thinking about is how much I dislike technical analysis in the commodities market. If the idea is to set prices based on information from the world, then technical analysis shouldn’t be successful. How would a head and shoulders form exist if the market were acting appropriately in response to new information? It wouldn’t, unless somehow the world were providing information that would cause it, which I can’t imagine happens often enough for a name. It doesn’t make sense to me and I think it’s frustrating that food prices are being determined by dumb sounding charts like “dead cat bounce”, “cup and handle”, “Ascending wedge” etc etc. (The more I think about it the more these just sound like yoga poses).
So if I don’t like technical analysis, what can I use to assess market movement? I really like the idea of leading indicators. Mike talked briefly about the skirt hem indicator in 585 a few weeks ago- skirt hems go long during recession and shorter in times of economic growth. There are other indicators like this- the appalachian trail gets more through hikers when the economy is bad, and men buy more underwear when it’s good. But the one I want to talk about this week is the Corn Palace Indicator (I just made this up).
For those of you who don’t know about the Corn Palace, it’s the best place in the world. It was built in 1891 in Mitchell, South Dakota as a showcase of the fertile lands of the State. It’s been rebuilt 3 times (turns out building things made out of corn is slightly flammable), and also the Palace has a mascot, obviously named CORNELIUS! Every year they cover the Palace in murals made from ears of corn, which all relate to a common theme (if you’ve ever seen the movie Drop Dead Gorgeous, then some of these themes will sound strikingly familiar- “American Pride” (2011), “Salute to Youth Activities” (2012), “Everyday Heros” (2008).)
Corn Art
While I didn’t grow up on a farm, I did grow up in the midwest. Minnesota is one of the largest producers of corn, and obviously South Dakota is right up there as well. My godparents live in Mitchell so we’d make the drive out there at least three times a year. Also they lived four blocks away from the Corn Palace. I was a huge fan (I am a huge fan).
For anyone who wants to check it out, there’s also a livefeed (THIS IS NOT A JOKE) of the Corn Palace.
The author, age 17, at the Mitchell Corn Palace
So how does this relate to economics and commodity markets? Well the Corn Palace uses a lot of corn. And in 2007, the drought in the midwest was so bad, the Corn Palace couldn’t replace their murals for the first time since 1892. Just last year, the number of corn varietals ready at harvest for the Palace was nearly halved, again by severe drought. Steven Colbert, covering the story for The Colbert Report said, “We’ve been warned about rising food and fuel prices. But no one prepared us for less vibrant corn murals.”
And it’s true. The local news each year about the Corn Palace murals reflects the overall harvest in the Midwest. A good year means a good Palace. As the impact of climate change continues to grow, I’m worried we’ll be seeing more extreme weather events, and fewer corn murals. The already volatile commodities markets will probably increase in volatility as we lose our predictive capabilities due to climate change. And as I mentioned in my previous post- that will have a more widespread effect on the world than just the Corn Palace designs.
So that’s all folks, I’ve lost a lot of fake money in this fake trading game, but I’ve learned a lot too. Also, I’ll continue to use this blog for analysis throughout the year, so check in from time to time, if you’d like.
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