POT, Potash update, Live by the sword …………………… .

POT july 30 2013

We commented  just 4 days ago (see previous blog)  that this stock should accelerate to the downside soon. 20% in a single day is more than we expected but also nowhere near where we think it will end (about $10 ). For today it is probable a bit overdone but clearly today’s move is a third wave of some degree so , as a minimum, expect a 4th and 5th.

Today’s comments on BNN and I am sure other entertainment channels are interesting for their complete and total stupidity. One commentator suggested that this was entirely predictable (inventories are 37% above 10 year averages, wheat is selling at substantial lower prices and China is less hungry or is now producing it’s own.) In reality, of course the cause is pretty simple. A monopoly (and almost all of Canada is a monopoly or oligopoly) allows the producer to manage (restrict) supply and collect “rents” well above their wildest dreams. Often this is confused with good management. Under globalization these setups that used to be illegal (see anti trust laws etc.) are increasingly attacked by the market itself. Takes a long time (see banking, telecommunication, dairy products, wine etc.etc) but eventually it happens. The surprise is that in this case it is the Russians (not known for their free-market leanings) that gave the impetus to this change leaving the Canadians as swing producers instead of price setters. Those that bought Mr Brad Walls story how Pot. was worth more than the $62 take-over price now may regret not having sold. If not they probably will in the future.