Evening Trade 1/16

[NCcorntrader]

Good evening all-

CURRENT POSITIONS:

LONG DEC @ 566.25

LONG DEC @ 561.75

LONG DEC @ 560.00

RECENT TRADES:

NONE

I guess its pretty obvious my opinion at this point based on my positions. I think the report last week was WAY overplayed and I am looking for some buying in the near term. I am in the Dec contract just because thats what was bought last week on report day so I have stuck with it. Seeing several stories now on QE3- if the US and Euro governments are going to start pumping more money into the system then prices can only go up. I personally think inflation is the only way out of the current debt situation world wide, and it is just a matter of time before everything is more expensive in nominal dollars.

1955 ET

Mar trading at 605.50 with light volume. Dec at 559.

2050 ET

A little bit of trading going on. Mar at 606 and change, Dec at 560.

[giolucas]

NC,

Thank God I am not the only person that is long.  I bet for a bullish USDA and it was bearish.  I worked at it on Thursday and sold at the open and bought some more at good prices.  I made some recovery in the night market on Thursday but did not do anything in Friday's market.  I am still long March Soybeans.  My breakeven point is 11.83. 

I am also looking for a little bounce this week from the recent price drop.   I think that there are too many unknown variables that can take us up or down, like, South America  weather, devastated yields, Europe, our current warm weather in the Midwest, .....is there enough seed for the amount of crop we look to plant this year?  Too many variables.  

I am not married to my position and if I see support levels get taken out then I am going with the crowd.  Good luck this week.

[Palouser]

I have my doubts on the effects of QE3, let alone QE2. But, for the sake of argument ......

There have been numerous arguments that QE2 basically had no effect at all, and couldn't have. Why? Because it was given to banks and never lent out - therefore has not circulated, therefore had very little stimulative effect. If that's true (tell me if it isn't) then the only way the money could have affected commodities is if the banks were betting on commodities, which means we're back in the game of banks playing irresponsible speculative games - or they are lending the money to speculative organizations that are doing it (again crossing the boundaries of responsibility for institutions that are even bigger than 'too big to fail'). 

If speccing commodities is where the money went, WHO got the money to play with?

I'm saying this doesn't add up. I am extremely skeptical the story as been told is true. If it isn't, it's never been true.

I believe the economy is likely stale because the consumer is tapped out, wages have fallen for a very long time, and the combination of loss of wealth from the popping Wall St bubble related to real estate, health costs, and scraping together a retirement, or having to live on it before even retiring, and being out of jobs (and Lord forbid, it is clear all the above are happening to some people) means the economy goes almost nowhere. Unless there are some real jobs programs.

My 'explanation' means no real inflation for the foreseeable future. We are not overproducing food commodities. Fuel is largely subject to growing economies around the world and political situations - not inflation. It also means commodities are really not affected by the monetary policies to date. Demand sure isn't.

[NCcorntrader]

Pal

Wow what a can of worms- I will start by saying that if you ask ten people about QE, you will likely get ten different answers- so Im not trying to refute anything you have said, Im just giving my take because I think it is interesting.

First, keep in mind the only reason QE exists in its present form is because the "fed rate" is effectively zero. Usually quantitative easing is accomplished thru the lowering of interest rates- well so much for that.

Now, the way I understand QE to work is the Federal Reserve Bank actively purchases long term treasury notes- the effect of this is large financial institutions dont buy as many (because the return rate is kept down "artificially"). So, as the large banks buy fewer notes on a going forward basis, it frees up cash to do other things- but, the asset base of the bank is unchanged. It basically converts long term assets into short term liquid assets (cash). This is good for the stability of the banks and was necessary in the recent past as I think everyone agrees. With that said, I believe QE1 was simply hoarded by banks to shore up balance sheets as described. QE2 I think is another story- a good portion of QE2 IMO was dispersed from large banks to their "first tier" customers, which , by the way, is not you and I. It is the hedge funds, coroporations, investment banks, etc. By the way, almost all major banks have a seperate business called the "investment bank" that does engage in speculative trading.

So, to recap, and to answer your question, the money went to investment banks and large net capital entities. They, in turn, invest in whatever they see fit. I am speculating here, but my guess is that these entites then invested in high leverage speculation (e.g. commodities) to maximize profits. Ergo, higher commodity prices.

Disclaimer: I am a firm believer in capitalism and I am not making any judgements on the process I have outlined above. Simply describing the situation as I see it. 

[Palouser]

I brought this up because I have seen multiple stories by those who are supposed to be experts on the economy that QE2 money has not circulated enough to make any difference in stimulating the economy. If it went into equities and speccing commodities then that is proof the banks need to be separated from their investment activities and return to the previous structure of not many years ago when banks were prevented from speccing on their own - for what now appears to be good reason.

IF money from QE2 is going into commodities then it would be a monstrously irresponsible act, and i don't see how any accounting could construe that it is 'shoring up' bank balance sheets. It would be one spec trying to take money from another in the market because paper is  a zero sum game in that some one loses and someone wins on each contract. BUT the value of the contract can be determined by the actions of a few, meaning a lot of money could be lost in a short time with no hard investment assets. POOF! It's all gone! 

I don't buy any of this. I think it's entirely possible the money is still sequestered and has never affected the economy to any great extent (@ 0% interest there isn't any liability to the institutions). IMO the grain markets aren't a bubble and haven't been. Ag has done well because food is the top priority and demand grows - and of course ethanol and growing economies are a big part of that. If so, then the explanations of the markets by many, depending on economic policies as an explanation for grain prices, are dead wrong.

I'm in favor of breaking up the banks.

[justinbarnes710]

Sometimes when I read comments such as the two of you just posted I realize how under-qualified I am to post my thoughts.

This is truly a case of a pupil among mentors.  Thank you so much for your insight and for expanding my knowledge in the world outside of my tiny chunk of land.

[sw363535]

Pal I agree on banks,

but we just spent a lot of money doing the opposite, to keep from hitting the wall too hard.  Not sure how we could accomplish it.  Isnt andrew jackson the only one to accomplish something like that?  

[Palouser]

That would be 'Teddy'Roosevelt I believe.

[NCcorntrader]

Pal-

Just so we are clear- I dont think the banks themselves are speculating on commodities. Third parties that are receiving "loans" from banks most certainly are, and will continue to do so, especially if liquidity is added to the monetary base.

[Palouser]

I understand you, and my guess is banks are not speccing commodities either. Ir regulators didn't clamp down immediately on that kind of behavior then I'd say we hadn't learned much from the Wall St collapse based on leveraged assets and fraudulent assets.

On the other hand, if banks are lending money to those who are speccing they are lending to institutions who are highly leveraged in the market. That means everything can be easily lost in a heartbeat (exactly the scenario of MF Global, except even more volatile of underlying investment). In that way banks would be literally in the same position as if they were speccing themselves (maybe not exactly, but close enough). If the banks were doing that then I'd say shoot the CEO's and the CFO's. If regulators are allowing this on the part of banks as loans (essentially w/o collateral) then line up the regulators for liquidation too because this country can no longer afford this kind of financial BS.

Frankly I don't believe this is happening either. I just think it would defy reason to allow money of this magnitude to go into speccing. If it is I'll drive to my representatives office and make a complaint in person. And I think when citizens actually show up they get nervous.