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Advisor

Earlier column....

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Esteemed Advisor

Re: How

Very interesting. Thanks Bruce.

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Advisor

Re: Cold War part deux

First, to reprise Bruce from elsewhere- about things "you just know" and the ignominious end for the world's greatest bond investor.

 

A cautionary tale for all.

 

http://krugman.blogs.nytimes.com/

 

Well, for better than 80 years the farming business, like most wealth generation, has effectively been a function of controlled debasement of the currency.

 

I've referred to it too many times but years ago a Purdue Ag Econ prof did a long term study of farm families that had been part of the farm records system for decades.

 

The conclusion was that over the long term the successful survivors had retained little in the way of profit. They made enough money to float living expenses, held things together and let inflation do its magic over time.

 

That's the way our system is built to work. The troubling thought is what happens if you reach a point where all assets are so overvalued relative to the real economy that it gets increasingly difficult to inflate them further.

 

I'll submit that perhaps that's about where we got to in '99, which didn't stop us from trying to inflate a housing bubble to offset it, or set off a commodity bubble by driving the dollar relentlessly lower and engendering a massive short carry trade.

 

 

 

 

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Advisor

Re: Cold War part deux

BTW, WTI futures breaking 90 pretty easily this AM.

 

Maybe I'm hallucinating but I think I hear Bill Casey cackling from his tomb.

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Veteran Advisor

Re: Cold War part deux

Kinda funney how when the dollar strengthening everybody. Sees the correlation. But when it was weakening and causing grains to explode hardly anybody gave that line of thinking any credence.
I still say that we will lose reserve currency status within ten years(probably 5)
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Esteemed Advisor

Re: Cold War part deux

Krugman is pretty much an idiot if you look at the long-term impact of all this. Sure, it is working now, but there is nothing underneath the planks of this bridge to neverland.

 

Also, disagree with that Purdue prof Hardnox. That might be true of the average back in the 60's, but it not true of the top 20%. Many have gone from zero to 10 digit net worths in one generation, that is not inflation, it is profitability.

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Honored Advisor

Re: Cold War part deux

Time

since we don't really measure inflation anymore, it must not be a problem.

 

 

That has got to be the sarcasm winner for the day Smiley Happy

 

 

The Purdue prof. makes the same mistake most professors do.  They think they can leave out the details that disprove their theory.

 

Someone had to acquire the assets with something.  Profitability is key at some point, and the desire to convert profits to  appreciating assets and limit the acquisition of nonproductive assets is usually present as well.

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Honored Advisor

Re: Cold War part deux

How do three investment choices for profits compare over decades of time?

 

1.  Savings ---- cash interest

 

2.  Stock market.

 

3.  Farm Land

 

 

What are the worst investments farmers make?

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Senior Advisor

Re: Cold War part deux

Tough question to answer SW.  Someone who farms 1000 acres has a whole different set of investment needs opposed  to someone who operates a farm of say 10,000 acres if we are considering equipment as an investment.  Also, location has much to do with this question as well. Being from an area that is prone to drought much more often than other locations, I'd consider anything that would offer some sort of diversity to be a wise investment.

 

Investing might not always be considered from a financial stand point.  For example, some young producer could invest vast amounts of time helping a producer nearing retirement age in hopes of setting up his future when that aging farmer does decide to retire.  Many angles to look at that question from.

 

Great post.

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Esteemed Advisor

Re: Cold War part deux

Great points Shaggy and sw.

 

For our little world, cash is not an investment, it is a depreciating asset. Thus we don't have very much of it. Actually, after mortgages we are short the cash market and have been for about 4 generations, which has worked well since it is down about 94% over those 4 generations. :-)