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Advisor

Banker buddy

Sat with an Ag banker at an American Legion baseball game this evening. A good friend and a very smart, highly perceptive individual and he was morose, at best, in what he had to say about prospects for the next couple of years. Said that the best kept secret around is how much re-fi went on coming out of 2013 and in to the current crop year. Talked about how previous capital investment for purposes of tax avoidance was going to be shown to have been a "suicide pill" for a new generation of what he referred to as "toy collectors". That the reign of fiscal policy driving everything will make for an extreme lack of flexibility in the credit sector. No vehicles in place for a process of forgiveness or balance adjustment in place as that of 25-30 years ago. Said a repeat of that would be absolutely impossible. Long faced, he was, about it. That before the local corn is even tasseled. He also speculates that it may well take an infusion of money from new places to even remotely hold the supply sector together. I bought him a beer but passed myself as I thought I might say something here that Red might read
29 Replies
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Senior Contributor

Re: Banker buddy

Being a banker who usually likes ripping off the punters, he would say that though wouldn't he?
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Honored Advisor

Re: Banker buddy

There is a "day of reckoning" coming Bruce.  Some farmers scoff at that feeling that they are bulletproof, saying land can`t come down because "too much was bought with cash" well, that depends your definition of cash, alot of skilled money shuffling took place to get that "cash" such as going from not needing an opperating loan to borrowing 100% to put in the crop.  Which is basically going into short term debt, that makes them very vulnerable to interest rates.

 

This section 179 rapid depreciation is no gift to the farmers and we`re seeing that starting to play out before our very eyes.  New paint was bought to avoid taxes on $7 corn, now going forward payments will have to be made with AFTER TAX $3 corn....it was no gift.

 

Unless there`s a drought or Janet Yellen in some way bailing out grain prices, there is a blood bath coming.  Right now $3.80 corn, way below many`s C.O.P., with a big crop coming a easy buck could come off that.  Crop insurance will buffer for this year, but next year if the tide is still out we will all be standing around naked as Jay birds. 

 

No hobbyfarm, I am not complaining, I am agreeing with Bruce and unless there is some sort of event that changes what is coming it will be a cascading bloodbath.  Land and machinery will have to be liquidated to maintain "cash flow".   I remember the 1980`s farm consignment sales. Farmers sold extra cultivators, augers, duals...all dirt cheap just to get "cash".  Everybody squeezed out the exit door at the same time, making the problem worse for a few years.

 

If one is of the conspiracy minded, perhaps this was a planned reaping?

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Senior Advisor

Re: Banker buddy


@bruce MN wrote:
Sat with an Ag banker at an American Legion baseball game this evening. A good friend and a very smart, highly perceptive individual and he was morose, at best, in what he had to say about prospects for the next couple of years. Said that the best kept secret around is how much re-fi went on coming out of 2013 and in to the current crop year. Talked about how previous capital investment for purposes of tax avoidance was going to be shown to have been a "suicide pill" for a new generation of what he referred to as "toy collectors". That the reign of fiscal policy driving everything will make for an extreme lack of flexibility in the credit sector. No vehicles in place for a process of forgiveness or balance adjustment in place as that of 25-30 years ago. Said a repeat of that would be absolutely impossible. Long faced, he was, about it. That before the local corn is even tasseled. He also speculates that it may well take an infusion of money from new places to even remotely hold the supply sector together. I bought him a beer but passed myself as I thought I might say something here that Red might read

I think the guy is dead on accuate. The newest tracror we have was built in 1980. Our combine 1990. We are ready for a crisis but Almighty Big Government will come with a bailout. It's not 1986 any more.

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Senior Advisor

Re: Banker buddy

$7 corn and a fast writeoff and you still have to borrow to pay for your tractor or pickup? So the $7 corn wasn't a windfall. Just a taste to enable incurring even more debt.

 

And that is exactly what was wrong with the advanced depreciation. Allowing businessmen to depreciate a high dollar implement this year next year and the yearafter. Supporting reckless spending subsidized by other tax payers. And then the **bleep** fools don't take advantage of the huge gift in the tax code.

 

I know it is also available to me but I prefer to buy what i need instead of the toys I want. Heck i could buy a new john deere and use it for a lawn ornament. Oh maybe take a spin down through the crop once or twice a year.

 

Thats how brainless it is to allow depreciation before it occurs.

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Advisor

Re: Banker buddy

Yeah that was during the period when Volker jacked rates and was quite proud of it.
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Advisor

Re: Banker buddy

You're just all over the board Don. You were all in favor of taxpayers bailing out GM and Chrysler.
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Senior Advisor

Re: Banker buddy

Yes, I was in favor in saving thousands of jobs and preservation of our economy. Blame me if you wish.

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Senior Advisor

Re: Banker buddy


@kraft-t wrote:

Yes, I was in favor in saving thousands of jobs and preservation of our economy. Blame me if you wish.


Just think of what Detroit might have looked like if not for your generosity with other peoples money

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Advisor

Re: Banker buddy

In the last 8 years a smart person sat on the cash and took out a low interest loan.   The threat of deflation you know.

 

So things fall apart again, is it the fault of central planning or is it deregulation, bad bad individuals behaving bad badly?  Or heck is it that .gov didn't spend enough money again?