Tom Dorsey often points out that supply and demand is the one concept from economics that really resonates with him. This article, about the sugar crop in India, shows how clearly supply and demand works all over the globe. In India’s case, the government has gotten involved in trying to fine tune sugar production and prices, which unfortunately has made the boom and bust cycles worse.
Relative strength, because it is purely price-based, is also a measure of supply and demand—in this case, relative supply and demand. We want to own the assets where demand is strong and avoid the assets that are overwhelmed by supply. There will always be big swings in supply and demand from cyclical factors like those described in the article, not to mention government intervention, so opportunities for trend followers will always be plentiful.
