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Veteran Advisor

Here is another article about our dumb money policy.

Until Bernanke Is Brought To Heel
 

this is not going to stop:

Prices in my local area hit $3.83 at the local station that is one of the best-price options around here that I have been monitoring.  It was at $3.59 for quite a while, but took two hikes today.  This is not good, considering that the present time is the weakest gasoline demand of the year.

What's the cause of this ramp?  Don't believe "supply and demand" for a second.  Cushing Oklahoma, which is where the NyMEX light sweet crude contract is delivered, is at historical highs for the amount of oil stored there - to the point that people are bypassing it as their tanks are full.

Notice when the ramp job started.  Right when Bernanke started the latest round of his monetary games.

No, this is not "supply and demand."  It's excessive liquidity in the market which is being created by Bernanke, on purpose, with the intention of driving asset prices higher.

The problem is that there's only two things that are going up: Commodities and stocks. 

Among things definitely not going up are wages, houses and consumer sentiment - that is, the willingness to go out and spend.

Guess what else is going to go up?  Groceries and other goods.  Why?  Because as I've reported since August, the increases in commodity prices started showing up in the PPI reports at that time, and once that goes into the pipe it will come out - either as crashed margins or higher prices.  It cannot do otherwise.

Our economy will not "withstand" these oil and gas prices.  Not without a massive contraction.  I am already seeing it - again - on the roads around this area.  Less traffic, fewer shoppers.  The so-called "recovery" that was spiked through all of the monetary drugs by Ben has now resulted in loose-money drug poisoning, exactly as it did in 2008.

This same scheme was run in 07 and 08 and did not work.  It will not work this time either.   But we have blown an additional $4.5 trillion in government deficit spending between then and now, which is new debt that now has to be paid out of diminishing tax revenues.  That in turn will eventually result in either Uncle Sam's credit card getting cut up or the rug will have to be pulled out from under this scheme by Bernanke before it happens.

The manipulation and attempt to get private debt additions going again has failed

All that has happened is that speculation has gone through the roof and the corporate leverage index stands near all-time highs - higher than 2000 or 2007.

We're not going to get out of this in one piece folks, and there's nobody in Washington with a set of balls that will tie Bernanke to the mast and force him to stop this crap under penalty of The Fed being de-certified and thrown into the Potomac wholesale.

I hope you're prepared.

13 Replies
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Re: Here is another article about our dumb money policy.

Hi JR,

 

Kudos on an excellent post.

 

But I'm nevertheless clueless as to the end game.

 

At the time of the QE2 announcement, everybody predicted 4% plus GDP growth from the boost. We aren't getting it but asset prices don't care.

 

Japan probably asures tepid world GDP growth for a quarter or two as well. But assets like the liquidity that the yen capping effort produced.

 

We hve entered the Matrix, where reality is entirely different from what your experiences would indicate.

 

Best, h

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Senior Advisor

Doesn't make sense

The internal logic of the argument and the thin anecdotal support for it are hardly evidence for the cause. And this is the same viewpoint you guys have pushed for a long time but, without much more than looking for evidence for a predetermined belief.

 

First you all were warning that ag prices were going to crash and margins be crushed. That will happen some day, but anyone could say that and yet have opposite views of what the markets are currently doing. The idea that prices for food are speculative in the face of possibly the lowest percentage corn CO, huge utilization of soy and threats to wheat production are very dubious.

 

Most industrial economies are  becoming more stable, and Germany is becoming a bigger powerhouse than it already was. China appears to be coming into a soft landing. And we seem to be weathering a severe Japanese disaster fairly well.

 

If your discusasion had a broader base and allowed for some doubt there are points worth considering. But attributing everything to a 'sky is falling in syndrome' just does not address the actual situation IMO.

 

 

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Advisor

Re: Here is another article about our dumb money policy.

   Thanks for reducing complex info to my language JR.  A local anecdote:  I stopped for lunch today at the local joint for a quick bite on my to the Deere dealer.  The owner, a friend from way back was commiserating on slow business, like it was in 08-09.  Going out to eat is the lowest of the low hanging fruit to be picked when gas prices suddenly spike.  Road diesel $4.06 here

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Veteran Advisor

Re: Doesn't make sense

Pal, good evening.  I think you miss understand the point of watching the dollar as a signal for when to sell and also why it has impact on the price of corn, beans, wheat, and oil. Also how it has an inverse impact on the value added livestock sector.

 

First anyone and everyone knows that there are three major influences on price. Think of it as a three legged milk stool.

The two fundemental legs are supply and demand. Those two can change and should change with weather, technology, population growth and a miriad of other factors.  I am not trying to peg down each variable I know that they are immense and can each have a game changing effect.

 

The third leg is valuation. As the dollar loses it's buying power it requires more dollars to purchase a product with. therefore in a static supply demand situation the price will increase solely becasue of a weaker currency. Supply may be ample as is the case right now with gasoline yet the price contimues to increase due to a weak dollar.  Remember corn is the same way. And wheat is even more influenced by the weak dollar. The currency play has really played into the endusers who import wheat. 

The minute we have a strenghtening dollar ( by that I mean something over 80 with a higher trend) You will see exports fall right off the map.  You will also see the oil price drop by one third over night.  The variable costs in production ag will begin to drop in line with the currency just like it did in the 80's the problem is that the debt which has been incured will need to be repayd in the lower commodity price era. This is what the 80's are all about

This will not happen this time A devauation of the assets would totally do away with any gains in the economy we have seen so far. So it is balls to the walls printing. 

I have said repeatedly that corn is going higher. it will continue to do this even in the face of burdensome ethol supplies and good whaet harvests. Any supply problems will certainly send us higher. and I have already gone out on the limb and said that the real possibility is for the price of corn to go to 10.40 this summer. 

So while I am fully expecting  TSTHTF I do not htink that corn will go to 3 dollars either.  But maybe I should go back to movie making instead of interjecting into the marketing thread! HE HE

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Advisor

Re: Doesn't make sense

   Hope my cattle like an all forage diet with $10.40 corn.

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Senior Contributor

Re: About that dear gasoline

This expensive gas is going to ruin your economy???

Boy there are a lot of economies in the world that must really be in the tank.

 

Take Canada. Gas $1.30 or more a litre and you are having to pay $1/litre and think that will tank the economy.

And of course we export lots of our oil into your country to produce cheap fuel. Cheaper than we have at home

 

If cheap fuel is what it takes for you to improve your economy then you are doomed. The age of cheap fuel has come and gone.

Time to catch up to the future the past is past.

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Senior Contributor

Re: About that dear gasoline

    Your fuel is not any higher than your last pickup,combine,tractor,building project,health ins. bill,fertilizer invoice,pair of boots,taking the wife to the movies,daughters tuition,or any other thing that comes to mind.Your corn,wheat,soybeans,beef,hogs,or any other ag commodities are still very good buys in rellationship to the cost of living.Producers that do not see it this way must be the ones that grampa,and dad set up!

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Senior Advisor

Re: Here is another article about our dumb money policy.

Your example is exactly what I am pointing out in regards to liquidity 'chasing' fuel, etc. It is a contradiction.

 

If liquidity is chasing fuel, why not sandwiches and drinks at the local eatery? Liquidity in the economy is either due to the amount of dollars or the speed it is changing hands or both. Liquidity describes a general condition in the economy. So if liquidity is the problem then oil price shouldn't be a big problem with plenty of $$$$$.Yes, it might be higher, but where is the evidence of the liquidity in the rest of the economy?

 

I can make a case for oil rising or grain rising WITHOUT blaming liquidity. But if it is liquidity why isn't the whole economy heating up?? If it is liquidity then wages should  be going up, sales roaring and job gains to be rapid.

 

JR, I understand fluctuations in currency, but I don't accept that the current situation with currency is THE driving force for either oil OR grain, even if on some level it affects both. You do.

 

We can agree to disagree. And I disagree with the idea that the current situation in oil or grain is due to currency liquidity. I believe it is due to global demand, global insecurities, and ending stocks. Not the US $. Maybe in the future I will think that's the case, but not now.

 

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Veteran Advisor

Re: Here is another article about our dumb money policy.

PAl I have a very busy next couple of days. Meetings today and a piano recietal tomorrow along with farming. I' ll get back to you with my supporting evidence Sat. night or Sun. I hope all the wet weather in the PNW isn;t damaging your crops.

Yea I can agree to disagree but right now I am to busy to do either! HE HE.

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