I would personally like to thank those investors who are willing to invest in any stock as long as it is rising, preferably at a really, really fast rate; who ignore economics and valuations; who ignore politics; who believe it is different this time or could not care less; and who think potash prices are going to stay at $800 a ton for any appreciable length of time. Without you, none of this would be possible.
For my family has owned Potash Corp (POT) since its IPO. As one-time residents of Saskatchewan, we were able to participate in the privatization of PCS (as it is known in the province) when the government was selling a portion of the company to residents of Saskatchewan nearly 20 years ago.
I was even employed by PCS during the company’s privatization. PCS hired students from the College of Commerce at the University of Saskatchewan to man the phone banks and answer questions from inquisitive residents of the province who were clamouring to get a piece of the offering.
And why were farmers, nurses, housewives, gas jockeys and so many others in the cradle of North American socialism wanting to participate in the sale of a government-owned entity? Because the government was giving the company away!
The offering unit, which – if I recall correctly – was comprised of stock and a convertible note valued at par, or $100. The issue was so over-subscribed in the province of less than a million people that the maximum amount allotted to anyone was around $6,000. On the opening day of trading, the units hit $142. (We purchased more later.)
I was very grateful that the government saw fit to dramatically mis-price an asset it was selling. It reinforced my view that government was inefficient or irrational or just plain stupid. “Best things are left to the market”, I thought. “It is a more efficient, rational place.”
Then, I entered the investment business.
Out went those notions.
In the so-called efficient market, we have experienced the technology bubble, the housing bubble and now the commodities bubble, all within the past 10 years.
Bubbles are marked by a specific mindset. You cannot have bubbles without investors buying extremely high in the hopes stock prices go much higher. You cannot have a bubble without momentum investors who will buy at any cost. You cannot have bubbles without investors suspending their beliefs in the laws of economics. You cannot have bubbles without investors wanting to believe it is different this time. You cannot have bubbles without investors believing that potash approaching $1000 a ton is a real price.
And to those investors, I thank you immensely. Truly, I do. You have given me far more profits from an irrational pricing mechanism than the government ever did.
I am selling my Potash. I have been scaling back my position this year. I intend to do so again shortly.
I will hold on to some of my holdings to play out the ultimate top. What price is that? $300 a share? $500 a share? I have no idea, but after seeing the insanity of the tech and housing fiascos, anything is possible. However, I definitely know I do not want to be on the other side of the trade when it inevitably collapses.
As an aside, I would also like to thank Alan Greenspan and the Federal Reserve Board, whose actions and policies made all these bubbles possible. Yes, you created enormous excesses in the economy, and underwrote a financial put that has skewed risk and created tremendous danger in the financial system today, but I’ve profited quite handsomely and that’s what matters.
Thank you kindly.