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Cotton Passes $2, Parabolic Sailing Ahead

Tyler Durden's picture


Last week,
when commenting on cotton's torrid YTD performance, we noted "A retest
of the $2 psychological price barrier is now guaranteed and is on next
week's docket." This despite the ICE's 25% hike in initial and
maintenance margins. Sure enough, as expected, cotton has just passed
the $2 price (an all time record obviously). Since our initial observation on
cotton's bubbly performance back in September, cotton has now surged by
over 100%. But fear not: surely this is a demand phenomenon, as
revolutionaries across the world realize they have to be well-dressed
for all those cameras...


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Thu, 02/17/2011 - 09:30 | Link to Comment lettuce
lettuce's picture

check out CPI... here comes the commodity pain trade!

Thu, 02/17/2011 - 09:31 | Link to Comment Jason T
Jason T's picture



why not just borrow Ben confetti, buy cotton now so you can lock in today price before it rockets higher next week after he prints another $10 billion and hyperinflates our dollar even more.


(isn't that what the Germans did?  Until the farmers wouldn't even accpet the german mark anymore.  Demanded foreign curreny.)  money dies.

Thu, 02/17/2011 - 09:38 | Link to Comment eigenvalue
eigenvalue's picture

No, Bernanke is not to blame. It's China's fault. There is too much money in China  so people are importing cotton from the US to build up speculative stockpiles.

Thu, 02/17/2011 - 09:52 | Link to Comment EscapeKey
EscapeKey's picture

Nothing is ever Bernanke's fault. One who performs a job, and never admits a fault, probably never does anything.

If the fucker wants to claim credit when things go right, he should accept responsibility when it goes wrong.

Thu, 02/17/2011 - 10:20 | Link to Comment firstdivision
firstdivision's picture

So now we will have a Tulip Crisis in the form of cotton.  I may bring down the Chinese gov't then.

Thu, 02/17/2011 - 09:51 | Link to Comment PY-129-20
PY-129-20's picture

Doktor Bernankenstein is creating a cotton monster. And yes, the Chinese are also involved in this operation.

"China has the world's largest money printing operation but still fails to meet demand for yuan, a central bank official said, amid rampant lending and a flood of foreign exchange into the country.

The remarks by vice governor Ma Delun, posted on the central bank website Tuesday, highlight the challenges facing Beijing as it tries to control the value of its currency and reduce the volume of money flowing into the economy.

China employs more than 30,000 people to print money and offers them incentives to work extra hours to ensure there is enough yuan in circulation to match demand, which is growing by 20 percent a year, Ma said.

But it is not enough.

"The growth of yuan production capacity has failed to keep up with the pace of demand," he said, adding that the central bank was also struggling to crack down on the increasingly sophisticated production of fake notes."

Thu, 02/17/2011 - 09:39 | Link to Comment assumptionblindness
assumptionblindness's picture

When looking at that chart all I can think is "buy the f-ing dip!"

Thu, 02/17/2011 - 10:02 | Link to Comment John McCloy
John McCloy's picture

Buy the pause and soon...
Buy the rip

Thu, 02/17/2011 - 11:26 | Link to Comment malikai
malikai's picture

Looking at this chart, the dip I see coming will be the bubble popping and the whole commodities complex collapsing with it. Parabolic moves like this are unsustainable. This reaks of a squeeze. I can't help but think about oil in 08 when I see moves like this. The flipside would be this as the beginning of the hyperinflation spiral. But it's too soon to tell.

Thu, 02/17/2011 - 09:38 | Link to Comment youALREADYknow
youALREADYknow's picture

These option premiums are outrageous. $1,500 for May11 3.00 calls?!? Nearly 50% ROI for a 45-50 day option.

Time to step in front of this train....

Thu, 02/17/2011 - 10:42 | Link to Comment HUGE_Gamma
HUGE_Gamma's picture


Thu, 02/17/2011 - 09:44 | Link to Comment HamyWanger
HamyWanger's picture

This is somewhat misleading.

You're trying to say that hyperinflation is here, but all I see is Chinese peasants who hoard their cotton for personal profit instead of selling it immediately, causing a vicious circle.

Read Dr. Paul Krugman Ph.D. (Nobel Prize) on this subject.

Thu, 02/17/2011 - 09:47 | Link to Comment topcallingtroll
topcallingtroll's picture can do better than that! Socks for the long haul!

Thu, 02/17/2011 - 09:50 | Link to Comment SheepDog-One
SheepDog-One's picture

LOL Hammy, nice.

Thu, 02/17/2011 - 09:53 | Link to Comment Zeno of Citium
Zeno of Citium's picture

How many worthless titles do you need to pile on a guy to justify his talk ? If he's good, does he need them titles ?


Does it make you feel special citing his rubbish ? Or do you just like to k155 455 ?

Thu, 02/17/2011 - 09:52 | Link to Comment EscapeKey
EscapeKey's picture

4/10. That one was a bit weak.

Thu, 02/17/2011 - 09:57 | Link to Comment jobs1234
jobs1234's picture

And I take it that doing something to kill off the speculators, like rate hikes or outright threats that the punch bowl is going away, won't work, huh?

Ben doesnt even have the guts to do an "irrational exuberance" speech. At least Greenspan pretended to talk down parabolic speculation.

Thu, 02/17/2011 - 11:34 | Link to Comment whatsinaname
whatsinaname's picture

The market did not really care about Gspan after the I.E. speech and just kept going up. Likewise, neither will it this time. If Gspan was serious he could have hiked rates early in the game instead of playing Bailout Bob.

Thu, 02/17/2011 - 11:46 | Link to Comment Vampyroteuthis ...
Vampyroteuthis infernalis's picture

He who cites idiots tend to be no better than that.

Thu, 02/17/2011 - 09:44 | Link to Comment Ferg .
Ferg .'s picture

Cheap cash being poured into speculation and cotton brokers hoarding . Potent combination .

Thu, 02/17/2011 - 09:45 | Link to Comment topcallingtroll
topcallingtroll's picture

I sure wish you would goose the natgas price next. Inflation is hit and drive it.through the roof, no?

Thu, 02/17/2011 - 10:36 | Link to Comment JawsMusic
JawsMusic's picture

topcalling troll,

Natural GAS has seen a big increase in reserves and at the same time U.S. general demand is down as the U.S. economy is in the toilet. NatGas in the U.S. is almost all domestically sourced. So it will not partcipate in the international demand run up.



Thu, 02/17/2011 - 11:23 | Link to Comment Harmonious_Diss...
Harmonious_Dissonance's picture

Natural Gas is cheap, clean, and easy to get.


So enough houses explode and people outcry to stop the drilling/fracking, then yes the price will go up...

Thu, 02/17/2011 - 09:49 | Link to Comment SheepDog-One
SheepDog-One's picture

Parabolic sailing for cotton....thats ok, sailors wear polyester.

Thu, 02/17/2011 - 10:51 | Link to Comment Cash_is_Trash
Cash_is_Trash's picture

My underwear is outperforming the S&P.

Thu, 02/17/2011 - 10:01 | Link to Comment Johnny Lawrence
Johnny Lawrence's picture

The demand for underwear is at an all-time high. 

Thu, 02/17/2011 - 11:48 | Link to Comment Vampyroteuthis ...
Vampyroteuthis infernalis's picture

As people crap their pants at the grocery store in response to high prices.

Thu, 02/17/2011 - 10:14 | Link to Comment pale writer
pale writer's picture

Well, well, well.  Bennie the Beard has finally found a way to increase the value of the filthy rag legal tender paper.  Bravo!

Thu, 02/17/2011 - 10:17 | Link to Comment The Axe
The Axe's picture

Cotton is just one UGLY short squeeze....TUTLIPS anyone....long bulbs. short cotton via ETF

Thu, 02/17/2011 - 10:23 | Link to Comment monopoly
monopoly's picture

Krugman, he is so totally worthless I am surprised that Tyler does not ban his name from the site.

"Dressed correctly for revolution." Tyler, how do you do that so early in the morning. LOLOL

Thu, 02/17/2011 - 11:59 | Link to Comment Temporalist
Temporalist's picture


"Dressed correctly for revolution." Tyler, how do you do that so early in the morning. LOLOL

Tinfoil hat...nothing else.

Thu, 02/17/2011 - 10:37 | Link to Comment jobs1234
jobs1234's picture

2.40 lock limit on the cotton futures....ouch, no inflation, unless they demand we start eating cotton.

Thu, 02/17/2011 - 10:46 | Link to Comment daybyday
daybyday's picture

please stop the bitching about margin increases...we need them to protect are asses from stupid fing clients who do not understand leverage and mkt protects my ass from jack offs that over leverage themselves…and this is actually creating a short squeeze in the mkt…as I just blew clients out short positions this am as they where approaching deficit balances in their accounts….and when cotton tanks as it will I blow these over leveraged jack offs out of there buy side positions….and as I see it I see if you cant come up with 6k to trade cotton then you shouldn’t be trading it at all.

Thu, 02/17/2011 - 11:06 | Link to Comment falak pema
falak pema's picture

I know this guy who recycles PET to yarn manufacturers for their PET/cotton cloth fabric markets. The more cotton flies up the more PET yarn follows. I'll ask him to buy me a free lunch in a top joint. He owes me one and can afford it with his current margins!

Thu, 02/17/2011 - 11:13 | Link to Comment Lone Mad Minute...
Lone Mad Minute Medic's picture

Ummmm.... I got that warm fuzzy feeling all over my body. I'm going up in value!

Thu, 02/17/2011 - 11:21 | Link to Comment vas deferens
vas deferens's picture

They will have to start making my jockey shorts out of that plastic rice they are selling.   Eat my shorts!!

Thu, 02/17/2011 - 12:43 | Link to Comment Triple A
Triple A's picture

Everyones gotta go out in style

Thu, 02/17/2011 - 14:47 | Link to Comment trendybull459
trendybull459's picture

Sitting on their cotton thoose poor viligers in China dreaming on their are big market mooovers and this is right,untill market starts to collapse by cotton from PAckestan,Kirgizia,Khazahstan,India.......I never had see such stupid action from pesents thinking their pup of mother Earth,its absurd and its allways price for such action-punishment by the people whoom you wanted to screw by your pesent mentality-shame of you chineese,world should cool off consumption of your junk up items,try face 3BMW series and sell it at 20k$ in Europe or USA,stop fooling us with things for one time-you Empire had time in past and you lost,now you try maintain the same-forget it,Ben will go home and so all your buble gum industry sponsored by Bey&Obama CEO,without them all your 17% growth will be ihsa fihsa,Stop buying their stuff!consume less,let deflation spiral to take governments down and into canal

Thu, 02/17/2011 - 15:09 | Link to Comment jmc8888
jmc8888's picture

Yep my friend who doesn't believe anything is wrong with the economy, is also an owner of his own clothing line.  Whoops. (he didn't get it a few months back when he was bitching about the higher prices then)

He's good at what he does, but not the business side, just the actual aesthetics and quality of the merchandise.  Best eye for clothing I've ever seen, but absolute tard on the business side. 

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