Sunday Edition: Sugar - The New Epidemic Killer Could Offer Your Portfolio A “Sweet” Low Risk Boost

March 19, 2017

Sunday Edition: Sugar – The New Epidemic Killer Could Offer Your Portfolio A “Sweet” Low Risk Boost

Being somewhat of health nut, a recent article published on FortuneThe Hunt for the Perfect Sugar” caught my attention.

Today, it’s pretty common knowledge that high sugar consumption has been linked to obesity and type 2 diabetes. However, it’s now being linked to dreaded conditions such as heart disease, Alzheimer’s and even cancer – including lung cancer.

Gary Taubes, in his new book “The Case Against Sugar,” claims that sugar has likely killed more people than tobacco, and that tobacco wouldn’t have killed as many people as it did without sugar.

In short, “flue-cured tobacco,” which creates a “smoother” smoke, made it easier to inhale but also increased the sugar content in the tobacco leaves from 3 percent to 22 percent.

Furthermore, the tobacco was marinated in what they called sugar sauce (sugar, maple syrup, licorice spices) to give the tobacco a better flavor. Unfortunately, the leaves would soak up 50% of their weight in sugar, further raising the overall sugar content.

Prior to this “curing process” lung cancer was virtually non-existent. Over the next several decades, lung cancer rates exploded and is now being linked to the elevated sugar content of the “flue-cured tobacco” leaf.

Another industry that’s under a major attack due to high sugar content is the soda industry, where consumption has recently fallen to 30-year lows.

Research firm NPD Group has found that sugar is now the No. 1 substance consumers are trying to cut or eliminate from their diets.

This would explain why Dr. Pepper recently paid $1.7 billion for bai brands, the maker of one of my favorite low-calorie, all-naturally sweetened beverages.

I’ve personally tried just about every all-natural sweetened beverage that exists. Both carbonated and non-carbonated, and consider myself somewhat of a low-calorie beverage aficionado and love bai brands beverages.

But I wasn’t always a low-calorie beverage drinker. Throughout most of my young adult life I consumed large quantities of regular soda (at least 64 oz per day), and gained over 60 lbs between the ages of 21 to 26.

I always knew soda was bad for me because I had a mother who was very much into health and nutrition. Many of the things she would teach me as a young child, about health and nutrition, are now considered cutting edge (I guess she was way ahead of her time).

In my early 30s, when I decided I was going to regain my health and drop a few pounds, the first thing I did was cut out regular soda and replace it with Diet Coke, which is a bit of an acquired taste that I now enjoy more than regular Coke.

However, according to my mother, aspartame (an artificial sweetener) has the potential to cause as many, if not more long-term health challenges than the obesity and diabetes that so often accompany high sugar intake.

After a few years of heavy diet coke consumption, I decided to do the research on aspartame for myself. What I found was alarming enough for me to quit drinking Diet Coke altogether and start my search for a healthier alternative to fizzy water laden with sugar or artificial sweeteners.

That was about the time that several new all-natural low calorie sweeteners, like stevia and erythritol, were making their debuts. According to the Fortune article, stevia is considered to be 100 to 350 times sweeter than sugar. Yet, nearly half the population has an aversion to stevia’s bitterness, which has a metallic and licorice quality that “tastes like sucking on a penny!”

For sellers of lower calorie all-natural drinks hoping to reach mass appeal, this creates a major hurdle. And so the mad dash for a “miracle” sweetener other than sugar continues.  However, most of the industry believes that a blending of ingredients, rather than a single molecule, is the future of the natural-sweetener industry.

And this brings me to my all-time favorite low-cal all naturally sweetened beverage – sparkling grapefruit-ginger Yerba Mate. Yerba Mate is a South American tea and this particular drink is sweetened using organic agave nectar, organic grapefruit juice, and stevia. With only 7 grams of sugar and 45 calories per 8 oz can, it’s by far (in my opinion) the best low calorie drink on the market. No, I’m not getting any kickbacks :).

Now that my shameless endorsement is out of the way, let’s talk about how I believe you can profit from the “evil” sugar market.

Source: TradingView.

As you can see in the chart above, the price of sugar #11 peaked in early 2011 along with many other commodities, and then dropped -71% by mid 2015.

According to the Fortune article, “The Hunt for the Perfect Sugar,” when the history of sugar is written, 2016 may go down as the year it’s image turned (for the worse).

Why then, did the sugar futures market start dropping in 2011, ultimately losing -71% by mid 2015, four years ahead of all the negative publicity sugar is now receiving?

And why is sugar currently up a whopping 80% from the 2015 intraday low, having been up as much as 130% in 2016 – supposedly the year sugars image turned for the worse?

The answer lies in the fact that financial markets are forward looking and discount everything. By the time the fundamentals catch up and become “obvious,” the lowest risk entry points are but mere historical swing highs or lows on the chart.

So, is it too late to profit from a rising sugar market?

In my opinion, the answer is a no. I believe the most recent pullback in sugar #11 to 17 to 18 US cents per pound, and to $38 to $40 in SGG (the most liquid sugar ETF – but still only $36M in assets), is offering a second chance entry into a new bull market still in its infancy.

I would prefer to see sugar futures drop to 15.50 to 16 US cents per pound. But the risk of waiting for a deeper drop in sugar prices is that you could miss out on a great opportunity, or be left chasing sugar prices higher if they don’t drop further.

If you agree with my bullish assessment of sugar, then I think opening a partial position here makes sense and you can add to it if prices drop even further.

As far as reducing the sickness and disease in America, I believe the answer lies in reducing our sugar intake, especially in the form of sugary drinks (never drink your calories) and increasing water intake to healthy levels.

Then find yourself a low-calorie all natural sweetened beverage that you enjoy to satisfy that urge for something sweet and fizzy.


Shane Rawlings
Founder, Investiv

By Shane Rawlings Commodities Investiv Daily Sugar Sunday Edition Share: