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Veteran Advisor

China is holding the exit door

China came in and covered the Portugal and Spain bond issuances and smeared bond dealers and currency specs against the windshield. The positively correlated trades- the equities and commodites- in the short dollar/long anything trade, went down.

 

There is a historic crowd and extraordinary complacency in the long equity/commodity trade. They may in fact be right in their complacency if Ben willk backstoip them no matter what, we shall see.

 

But I'm thinking that the current reigning Maoist authoritarian capitalism model that we have adopted in the US since the 90s may in fact have a bit of work yet to be done on it. That Adam Smith guy may have actually been onto something after all. The future will enlighten us on this as well.

 

But anyway, if I was a hedgie or bank prop trader I think I'd be thanking the Chinese for holding the door and slip out before somebody yells fire.

 

fwiw, h

 

 

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7 Replies
Veteran Advisor

Re: China is holding the exit door

Noxie my dad told me and I haven't been able toconfirm it just yet, but it sounds like to get Japan to buy up the old EU's bad bonds they had to double the intrest paid up to 6% that is why the dollar has been lower all week as soon as we match that interst on the treasury bonds look out guys the end is at hand. better lock up the interest right now!

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Senior Contributor

Re: China is holding the exit door

I've been thinking this for quite some time.  We all knew that interest really couldn't go any lower, so there really hasn't been much risk for being wrong because once at zero it can't go lower.  I don't borrow any money, so it doesn't really do me much good to lock in interest.  However, those that do borrow should have already been doing so.  Eventually, probably sooner rather than later, the U.S. debt rating will fall from AAA.  This in itself will cause interest rates to jump. 

 

Interest rates remind me of the time hogs got to somewhere around 8 bucks.  We all knew they couldn't go much/any lower, but very few of us bought them either.  I'd venture to guess it will be the same with interest rates.  In a few years, all we'll hear about is guys whining about double digit interest on loans. 

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Senior Contributor

Re: China is holding the exit door

Nox, this grain market is one of the great rides. I expect it to continue until conditions exist that indicate a supply is likely assured. But I keep thinking, what about your 'sky is falling' outlook? It appears to me that if the sky doesn't fall you'll have missed one of the opportunities a producer needs to take advantage of. The other question is whether this idea is influenced too much by ideology rather than reality. Granted, these situations are hard to decipher, and being able to differentiate the zero sum part of the equation from other factors mixed in is difficult.

 

The sky could fall, but I doubt to the extent you are afraid of. There is a large pool sized amount of cash in the globe looking for returns, and why some will gravitate to cover the higher risk issues. No surprise.

 

Right now in grains there is money to be made. And those who kept their eye on the basic fundamentals and gauged the trends are getting a pay off. Part of that reward is having stayed in the game long enough to see other trends develop that support the main trend. There is an end point, but it's beyond the horizon at the moment. If price were a matter of inflation then it could evaporate quickly, but I think it is much more than that. Food security and inflation is an animal all its own. The moves so far aren't parabolic as they became during 07-08. We,ve been there and done that. There is more calculation than fear this time around IMO.

 

As for jr, dairy has some of the most viscious cycles known. Frankly, I wouldn't do it. I'm not that long range enough a thinker to deal with it. Part of it is the enormous and constant cash flow. I just made my first sale of some 2010 crop yesterday. Can't be that strategic with milk.

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Senior Contributor

Re: China is holding the exit door

If Nox has locked in grain sales that are profitable, how has he missed an opportunity that a producer needs to take advantage of?  If one isn't out to buy more land or rent more land, why do they "need" to take advantage of anything?  I heard the same rhetoric in 2008 only to hear about farmers selling corn below three bucks cash at harvest.  As near as I can tell, corn hasn't gone up enough to even cover the cost of the amount fertilizer has gone up.  Those who sold early got their inputs bought at much better prices.  If one's marketing plan is to hit the high every year, I'd imagine they'll be both disappointed a lot and not farming very long. 

 

 

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Contributor

Re: China is holding the exit door

P have to agree with you. The fundamentals are just there. I remember when my ship was in Hong Kong harbor when I was in the navy our ship was painted for our garbage. Remember it well, potatoes here green beans there meat over there, didn't eat that much, People coming over the boarder from then Red China. Think about it, will these people go back to that? Maybe to some prissy looking book worm. Other wise it would be unthinkable. As a farmer I am honored to do my part  in the grand scheme o f  the   defense of our nation, more so then shooting bullets in the middle of the night.

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Senior Contributor

Re: China is holding the exit door

First, I'm not criticizing anyone's sales. We all have different situations and approaches. My caution is emphasizing what could be characterized as 'black swans' over the the known fundamentals of the current grain market. For that matter, selling into the market implies keeping some powder dry. That is not to say that one is holding all for the top, though I have no reservations regarding going to the top and having crop to sell on the backside if need be. The wisdom of that may lie in how parabolic the market goes and when to get out and how much one is holding for that moment. And the generalization that those who sold 'early' are the ones who locked in lower inputs is an overstatement, as is the old saw that 'if you go for the top you won't be farming long'.

 

I think the idea that one who holds some for high prices is likely to sell at the lowest prices is way too apocalyptic and more a cautionary tale than reality. But there can't be any doubt that having nothing to sell as the market rises for fundamental reasons IS a missed opportunity (whether it be physical or future sales). There are those whose financial situation allows for less risk and there are the ever present cash flows (which I put the absolute highest priority on) that one should never back themselves into a corner on. In my market, when I know that 85% of the crop has changed hands and the demand will continue this early in the year I am going to have crop to sell in the future. Perhaps I am one who accepts 'corrections' as part of the pattern and it doesn't alter my understanding of what the fundamentals mean or make me nervous. Experience is helpful.

 

Bottom line, I'm making the case that a marketing plan in the current conditions should have the flexibility to allow for taking advantage of the trends. A plan that doesn't adjust for a reassessment of where the highs might go is a marketing plan that is missing opportunities. There was a time, recently in fact, when the amount of information farmers had access to was limited and not in real time. That's changed. Our marketing now can be, and should be, flexible enough to follow the trends.

 

 

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Contributor

Re: China is holding the exit door

What would a beginner like me do with the information garnered from people like Palouser,GoredHusker,hardnox, kraft-t,JR,p-oed and others if you guys never posted on these boards?  I've been producing corn and soybeans for 5 years now and the information I've received is  immeasurable.  You hit it on the head,Palouser, when you said it takes experience to gain more insight on the markets.  But, constant uninformed  experience  can run you out of business if  you don't take advantage of these posts and learn from people such as yourselves.  Your "experience" is digested and appreciated  by more  people than you may realize.

Thank You  

     

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