Excellent Article On Where US Economy & Asset Prices Are Heading

[sw363535]

Lower prices.
Low prices fix over production—- unless government support is involved.
Think milk producers will ever reconsider what they asked for?

[deasmatt90]

In regards to ur last post. I'll have to say imo opinion the advise you are giving is very sound. I was told the same thing about investing in companies you do business with by an agriculture economics professor from UF 20 years ago. But would you be willing to invest in John Deere right now? I wouldn't. Why? Two words, distribution phase. So now what? Do we go to a stock salesman that will only push us stocks that institutions are saling at retail prices?
Don't get me wrong I definitely believe in being diversified but where are the deals outside of ag? Real estate ( all time high) stocks ? ( all time high, Dow in distribution phase) first rule of investing is find a bargain and don't chase!
As an investor correct me if I'm wrong, please. How many times have you lost chasing stocks or commodities?
I'm sure as a successful investor you are disciplined and do not do that, and neither should we. Am I right?
If we find a stock salesman to buy for us will he chase with our money because we are retail investors?

[rayfcom]

Here's how I analyze the corn market : I don't get tied up with the under the hood analysis of stock to use ratios and so on, I leave that for other analysts at the big investment houses to do, their work will show up in the price movements anyway.I focus on macro-economic factors of the overall global and US economy, and also on the momentum of price trends in the market place.

The way I see it, corn presently has an absolute drop dead price bottom absent of major macro-economic factors at about $3 a bushel, because it traded there for a New York minute in August 2016, immediately bounced higher by almost a dollar a bushel in the succeeding year, and has never re-visited that price since. At very worst, if the stock market were to make a rather sudden and encompassing correction downward, such as you have seen in the crashes of 1987, 2000 and 2008, that ultimate bottom of $3 would decrease by the same percentage correction as stock prices endured. So if the stock market were to have a pretty typical 20% downward price correction that translated into a negative wealth effect recession, as happened in 2000 and 2008, I would reduce the corn bottom by 20% to $2.40. That to me is the buy of the century at least for now until some aliens come down to earth and give us secrets that would take us years for us to figure out on our own regarding the cost cutting of production factors. 

So that's how I figure out where the ultimate bottom should be where I and most everyone else who has cash to burn will step up to the plate to buy. 

Next I try to figure out where a rally off that bottom would ultimately run out of gas, for that will be the top side of the absolute range for a good long while (several years) to come. I rely on prior price trends as displayed on longer term charts for this calculation, because a price chart to a trader is like an xray to a doctor., The price chart is an xray of the collective psychology of a market. Looking at corn, its pretty clear that the present psychology of the overall market in the aggregate would be happy to give you all the corn you want between $4 and $4.50 per bushel, which has provided a top for corn since the beginning of 2015. So then I look at periods where the price of corn stayed fairly stable in that top zone since that top zone was established as such.

The autumn of 2014, the summer of 2015, and the Spring of 2016 were three periods in the past four years when the corn market price stayed in the top zone for long enough to have some relevance in terms of the fundamentals that were in play at the time. So if I want to know where the various data indicators such as stock to use ratio, unit production per acre, and carryout end-stocks need to be to support a price above $4, I look back to those three time periods and see what the desired data levels were during those periods. My guess is that's where production levels have to return to in order to keep corn prices in that top zone for long enough that producers can sell a meaningful amount of their crop. 

[rayfcom]

When it comes to individual companies, I try not to have preconceived notions about where their price should be. There are a lot of factors involved in determining whether a stock is worth buying, and I rely on those rather than on a typical concept like Deere is trading at its high of the year, its too high to buy. 

But if I am a farmer and I find out that the major fertilizer companies who supply my industry are raising prices by 25%, I would be inclined to buy that company's stock. I would first look to see if the stock already has had a recent jump in price, because if it has perhaps I am late to the party and the price increase information already has been known. I also consider where the overall equity indices are... if we are trading at all time highs I might commit less capital to a stock than if the overall market had not already made a big move upward. It also depends on the product the company sells and whether people absolutely need to have it. Fertilizer is a must, tractors not so much. So I would be more apt to buy the stock of fertilizer companies when they announce a 25% price increase than I would to buy Deere when Deere makes the same price increase. 

I guess the over-riding message is that with any commitment of capital, the situation matters., As I wrote about price hedging, there are better times than others to commit to a hedging program, especially when the overall economy seems to be at a turning point. Same with a strategy that seeks to use the unique information that you acquire as members of an industry that those outside the industry may not get until a later point in time. Use the information wisely, be prudent and even conservative., Remember, these are tangential business strategies to the main objective of your work. Use them at times when their employment makes the most sense from several perspectives. 

Once you start incorporating these creative new concepts into your business you will become more sensitive to them. When you hear that Deere is raising prices for combines just before harvest but shy away from buying Deere stock because you don't think many farmers at that late date will be able to take delivery of the machine in time to help them this year, and three months later you see that Deere stock rose more than the overall market anyway, then you will learn a good lesson and the next time perhaps you will pull the trigger. All of these conceptual ways to increase your revenue are ongoing processes which you will develop better understandings of as your consciousness of them increases and you learn from that increased awareness.

Not that I don't like stock brokers, but for the kinds of stock investments that I am suggesting be part of your business, you don't need a broker. Open an account with an online brokerage firm and execute your orders that way. You'll save some money and won't feel like you are being brokered into an investment.

[deasmatt90]

I disagree with the 2.40 price target, but it's not impossible.
Also when did the $3.00 in august 2016 hit? What date and on what contract. Many factors that play in this market beyond macro economics. And "they"the aggregate aren't giving you corn at $4.00 and $4.50 they are selling you paper shorting the market with a commodity they don't nor won't ever possess and those sellers have to cover eventually with buying volume . Add in market manipulation by the market makers and their news outlets along with usda trump resistance, dark pools hiding trading volume ( block trades on cbot). Things in this market aren't always macro!

[deasmatt90]

And is 2.40 possible? Thinking further about it, Get a couple a**holes like George sorros together to short it in attempt to put the last nail in the coffin of the trump base? I wouldn't put it past them. So I really wouldn't be surprised. We have enemies working against us as farmers that we don't even know about.

[rayfcom]

Its possible. Not necessarily probable, but as an absolute bottom its a good estimation if you have a stock market calamity. In times like those, hedge funds who are caught the wrong way in their stock holdings are desperately seeking to find liquidity any place they can find it, and that's when you see the proverbial baby thrown out with the bath water.

We saw it at the bottom of every stock crash for the last thirty years, so this time would probably not be much different. If you blink you will miss it, but its times like that when the best of the best bargains are available to those who have dry powder. Like in March of 2009 when the Dow traded to 66 hundred something. Everyone was afraid to buy, but those who had cash on the sidelines and a pair of cajones did quite well for themselves. 

[sw363535]

Same nonsense.
Raising prices is production does not coordinate with stock proformance.

[rayfcom]

If you don't think so, then please explain this :

https://www.cnbc.com/2018/04/27/amazon-set-to-hit-all-time-high-as-wall-street-gushes-over-prime-pri...

...and this :

http://fortune.com/2017/10/05/netflix-shares-price-increase/

...and this :

https://www.usatoday.com/story/tech/news/2018/01/22/netflix-reels-customers-after-price-hike-sending...

...and this :

https://www.nielsen.com/us/en/insights/news/2016/uncommon-sense-is-it-time-for-a-price-increase.html

...and this :

https://www.icaew.com/archive/technical/business-resources/business-management-and-strategy/strategy...

...and ultimately this :

http://www.marketingmo.com/strategic-planning/will-lowering-your-prices-increase-profits/

Bottom line is the effect on share price relative to an increase in product prices depends on what's called the "elasticity of demand" for your product. Simply put, if your customers have to have your product, as is the case with fertilizer to the farmer, demand will remain constant even if you increase your prices, and hence net revenue will increase. As net revenue increases, this is reflected in share price of your company, since a share price is the net present value of your net revenues. 

[sw363535]

Your examples are examples of stock value rises on speculative tending. 

Tech stock value increases have been totally based on future potential innovation.... not production or asset value.

You are blowing smoke