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Honored Advisor
Posts: 8,792
Registered: ‎07-18-2011
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Re: I guess there is always an excuse

The" simple laws of economics "..................

! .  stops the minute governments intervenes with regulation & law (implied or ignored) that contain ever "redefinable" words........ ...... even embargos... or price fixing (china)    all  destroy simple law of economics .  

2.  Not to mention that nearly every "fact" of data discussed in the realm of marketing cannot be distinguished from the fiction of scenario projection that is pervasive in the business.  Take a look at piles of grain. -- The fact of bushels within is held by entities or individuals that are not providing public information.   What we "bet" on is the drive by guestimation or worse the "betting" of a few federal employees that "at best" look at a white blob on a satellite image.

3  "simple law of economics" is alive only in a class room........ then you go get an education in the real world...... True in nearly every field of study.

 

 

Honored Advisor
Posts: 8,792
Registered: ‎07-18-2011
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Re: I guess there is always an excuse

[ Edited ]

Wrong again Ray ....... make that announcement ....... market will ignore it because we all know you'll be in court or jail for years......

Price fixing laws ignored for campaign contributors like ADM will be dusted off and that farm organization will be hit in the face with it.

 

The market knows that and will ignore your announcement...

Senior Contributor
Posts: 524
Registered: ‎09-20-2018
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Re: I guess there is always an excuse

I have to disagree with you on this one. The laws of economics can be denied for only so long. Even if its a government. I could give you a dozen or more examples of governments who thought they were bigger and stronger than market forces who wound up being steamrolled by them. Bank of England in 1992, Southeast Asian governments 1998, Argentina since 1947, China 2018, US debt 2020's. No government edict can overcome the natural laws of supply and demand, the effect of fiat currency printed at will on prices of goods and services, the debt trap created when interest swallows up a critical amount of revenue. 

 

Sure, often it takes time for the market forces to exert their will on government manipulation, but when that happens, the resultant outcome is far worse than had the governments not tried to bend the laws of economics. The classroom you refer to is the real world. Its not like people write books expecting the world to conform with their theories. No, its the other way around : researchers observe the real world and try to explain what and why the events happen. 

 

Regarding data, there are three choices you have : either 1) believe the data; 2) believe nothing; 3) have actual information across a broad survey spectrum that proves the data wrong. From what I see of people who deny the data on agricultural products chose number 2, because they always deny government data because its not what they want to hear, yet they cannot prove it wrong. So they do nothing. The problem is the supply grown in the field has to be placed, and the decisions of buyers and sellers of that supply is based in part on the data that is known at any time. Some people will choose to live on hope that the data will say what they want it to say to maximize their revenues, and those people become slaves to the decisions of others. The wise people accept the data that they cannot dis-prove, and then listen to what the market is telling them about what price is cheap and what price is expensive for their supply relative to what is known.

 

I've always believed it better to have some say in my decisions rather than be a slave to other peoples' decisions, so I choose to accept the data as it is and then see how the market interprets that data into formulating price. At least I have a say in my own financial destiny, and don't have to rely simply on hope to make a living. But that's just me, everyone has the right to do as they wish. At the end of the day it becomes a zero sum game insofar as whether or not you survive as a supplier. When you consider that half of the people in any market (the buyers) want to succeed at the expense of the suppliers, you realize how difficult it is to succeed. When you add to that the fact that your fellow suppliers do as much to hurt your business as you do to help it, you realize how much the odds are stacked against you. Hope usually does not succeed in that type of environment. 

 

Which means that if you want the best chances to survive as a supplier, you have to be like a turtle, and recognize that you can't get anywhere keeping your head in your shell, and you only make progress when you stick your neck out. Spend as much time reading what the data and markets are telling you as you do deny the tea leaves produced daily by the bean counters and markets , and you will increase your chances of success.

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Honored Advisor
Posts: 8,792
Registered: ‎07-18-2011
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Re: I guess there is always an excuse

My friend in the Ukraine says you need to get out more......

His family has been waiting for "your" claim for about 4 generations.

Veteran Advisor
Posts: 4,547
Registered: ‎05-13-2010
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Re: I guess there is always an excuse

Would  someone  get  another  Hunt Bros., early,   Silver  Market   attitude ,  and  tune  these  markets  UP  Smiley Surprised -    -   -

Senior Contributor
Posts: 524
Registered: ‎09-20-2018
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Re: I guess there is always an excuse

Ukraine ? Really ? 

 

There's an old saying that you can't make chicken salad out of chicken *****. 

 

But the laws of economics still apply in socialist/communist economies the same way they apply in capitalist/democratic economies. The difference is the outcomes take longer to see, which is why your Ukranian friend has been suffering so long. 

 

Case in point : the Soviet Union violated every law of economics they could through their centrally planned economic structure that paid little attention to market forces and instead do what you do, believed what they wanted would necessarily be the outcome just because they wanted it to be. And over the course of time, their economy failed to greater and greater proportion. They tried to camouflage their failures by disseminating false information and spending government money foolishly trying to prop up industries in which they held no competitive advantage. The foolish strategy that denied the laws of economics finally failed beyond the point that the government could control, and in 1991 it all came tumbling down in a Depression far worse than what the Americans faced in the early 1930s. 

 

Such is the fate of all governments and economies that fail to follow the laws of economics. They have no chance of success because they are constantly moving in a direction that goes against the supply/demand function that ultimately governs all economic enterprise.

 

Government corruption, forced production of unwanted goods, foolish fiscal and monetary policies, and attempts by governments to mask rather than solve inefficiencies, all can combine to make it seem like the laws do not apply to them. And the result always is the same, and the longer the government refuses to face this fact, the worse the resultant crash. Its just as true for individuals as for governments, which is why the bankruptcy lawyers in America do quite well for themselves.  

 

Your argument reminds mo of an old commercial for Fram Oil Filters, the one where the mechanic is standing next to a car engine being replaced and holding a Fram oil filter in one hand. He says to the camera "You can pay me now or you can pay me later, but later is a lot more expensive". That can be said for the farm industry now, where the economics of farming have become quite out of line. Look at what you pay for an acre of land, either if you purchase or lease. Then figure out how much profit net of all expenses you make from farming that land. You will tell me that the problem is that the price of crops is too low, when in fact the price of crops is exactly where it should be based on the supply and demand for your product. The real problem is farmers who pay far more to farm a tract than is economically viable. Its not that the price of corn is too low, but that the expenses to grow that corn are too high. This situation is not much different than the experience of the Soviets in destroying their economy, they too had expenses that were too high for them to even break even to their revenues, and ultimately they collapsed as will all the farmers who are making ends meet now only through the drawdown of savings rather than operational income. 

 

When the day comes that the marginal farmers must throw in the towel for not having any more savings to draw from, that's when the market for farmland will correct downward to the price level where capital can be profitable. Considering that the attitude of most farmers is to increase supply in the face of weak demand, crop prices have no alternative but to drop from the oversupply and the un-economic conditions can only worsen. Same as what happened in the financial crisis, as mortgages started to fail, banks became even more lenient in their offerings, hoping to maintain the desired fee income from loan originations. It was a recipe for failure, because the bankers did not listen to what the market was telling them. As they wrote more loans to people who could not afford them, their additional fee income was no where near what they lost when the loans failed in their first two years. The oversupply of unwise loans caused the bankers huge losses as is the oversupply of unnecessary crops is causing losses for farmers on the margin between profit and loss. 

 

Usually the people who deny the value of a discipline are those who do not understand it nor know how to use it. Easier to say it doesn't work than to learn the lessons of it and then profit from the information. Its a big problem for a lot of baseball franchises today...the old school General Managers say sabremetrics is rubbish, because they do not want to take the time to learn it. Yet the teams that are now successful in both performance and balance sheet are those teams who have embraced the study and implementation of sabremetrics. See the movie MoneyBall to see what I mean. 

 

Economics in its simplest form is a fundamental exercise of human nature. That's why its laws are effective and why the failure to follow those laws spell doom for the naysayers. Rather than deny the efficacy of the discipline, embrace it and profit from it.

 

Senior Contributor
Posts: 524
Registered: ‎09-20-2018
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Re: I guess there is always an excuse

I started working on Wall Street at the time the Hunt brothers tried to corner the silver market, I was fresh out of college and was offered a job at one of the major Swiss banks to become a silver trader. As an example of the stupidity of youth, I turned down the job offer because they wanted me in the office at 6 am each day, and I was more used to going to bed at 6 am at that point in my life than going to work at that what was then an un-Godly hour. 

 

I remember the aftermath of the Hunt brothers fiasco, and it was not pretty. When prices started falling from the $40 high price down through the price levels where a majority of market participants had bought in, the avalanche down was fast and costly. Kind of similar to what happened when corn hit $8 in 2011 or 12...an exhausted bull collapsed right in the middle of the trading floor, and the bears rushed in to take over the territory. 

 

That's not the kind of market that you want to see, because a lot of people lose a lot of money, farmers included. Price distortions lead to poor business decisions, like when the Mexican government borrowed a tremendous amount of money in 1980 when the price of oil had skyrocketed in the second major OPEC oil embargo. When prices plunged in 1984, the Mexicans were left paying very high interest rates on loans that funded the expansion of their oil producing capacity, which laid unused since oil had moved back down to the teens and the Mexican oil revenues fell through the floor. You're seeing the same thing occurring in China now, as the tariffs have pierced a huge hole through the heart of the Chinese economy, and left many real estate moguls gasping for air as their buildings are empty but they have to pay a mortgage payment each month.

 

There are only two good ways to address the shortfall in farm profits today, The first is to reduce the acreage devoted to corn, and the second is to figure out ways to maximize income through financially engineered products while cutting costs of production through the use of technology., Pushing the price up to unsustainable levels thorough short term market monopolization methods will bring short term gains at the cost of long term catastrophic losses.