Is Agriculture Dead?

Ag is dead - or so says the MarketBeat blog.

The post lists all sorts of related companies, noting how much they are down, and throws in a comparison to Microsoft (MSFT) and the tech bubble.

The ag companies have earnings, and there is clear and obvious demand for their product as part of the resource theme and the global ascendancy theme, as opposed to internet stocks which were valued based on eyeballs.

So clearly ag is different!

Hang with me here, I'm not going where you think I am.

I do think ag is different, but that may not be right. The fundamental case for ag in terms of the world needing their stuff seems different - but that may not be right. The ag companies make a lot of money and trade at valuations that can be measured - but that may not matter.

Ag is either different or it isn't. If you have a 2-3% weighting you don't have to be right about it being different. It would be better if you could be right but you don't have to be. If you have 10-15% or more in ag, well, it does matter whether you are right or not.

I have had Monsanto (MON) for a long time, bought on the way up in the high $80s, sold some in the $120s and still have the stock down here, a few points under water. The way things have worked out, it is maybe 1% of the portfolio.

There is no convincing me that the name will not be a moon shot. I like the name so much I would have it over to Thanksgiving dinner (trying to inject some humor). If I am wrong and the name goes to zero, that will be bad but not ruinous. I preach on and on about moderation in themes like these for this very reason.

If you follow the logic of the MarketBeat post, then we can conclude that there are people who made the same mistakes with ag as with tech from way back when.

All ag stocks are down a lot. All mining stocks are down a lot. All emerging market stocks are down a lot. All oil stocks are down a lot. All industrial stocks are down a lot. All financials stocks are down a lot. Owning some of these is not a problem. Owning too many could be. This might sound subtle, but in terms of portfolio impact it could be quite meaningful.

(By the way, I am not suggesting anyone buy Monsanto. It is just an example; I assume you have stocks that you would like to have over for Thanksgiving dinner too.)