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bullrider685114
Veteran Contributor

QE 3 is coming

The BIG Print is Coming Momentum is a strange thing in general, and social experiments as large and complex as massive economic systems are not immune to its mysterious ways.  Once momentum gets going it is extremely difficult if not impossible to reverse in the near-term.  This is why I have been pounding the table on China not doing anything as things unravel over there.  In waiting so long to try to respond to their major slowdown, they have now seriously risked a hard landing, unless they have a plan (this is not clear as of yet) as I outlined in last week’s piece China Better Have a Plan.

 

 

 

http://libertyblitzkrieg.com/2012/05/24/the-big-print-is-coming/

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9 Replies
jrsiajdranch
Veteran Advisor

Re: QE 3 is coming

Here is the thing. I do agree that at some point in the future they will ......but right now if we have QE3 there is gonna be a spike in commodities led by OIL.

In an election year ya can't have the masses being drained by the oil Sheiks. 

SO I think qe3 is still an early fall or Late winter program. If this infact happens then Corn is in for a long tailing off.  I really think this will happen.

 

INSPITE of weather problems . 

 

The big dog in the comoddities is the dollar trade.  ANd with a strong dollar and weakening everything else there is only one way for our exports to go and that is down. As exports fall so does the price of our commodities. 

 

Value added ag may be the one brightr spot. As the American consumer gets some relief at the pump they will by more burgers and Ice cream.

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bullrider685114
Veteran Contributor

Re: QE 3 is coming

China tieing thier currency to Gold (if they have that much gold in reserve) would save them from imminent economic implosion. But it sounds like our currency is screwed not matter what happens with China as their GDP falls off the cliff.

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jrsiajdranch
Veteran Advisor

Re: QE 3 is coming

They have never had that much gold. That is why they were so anxious for Bretton Woods.  Also why the commies came to power in the first place.  This is just a rinse lather repeat of the 30's and 40's in China.

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Jim Meade / Iowa City
Senior Advisor

Re: QE 3 is coming

I might find this topic more interesting if someone would make some marketing connections.  I use Google News, which is an aggregator, and have topics like Global Trade, China, U.S. Agricultural Policy, Eurpean Union, Economy - World and similar.  I get all kinds of speculation from all perspective on who is doing what to whom.

What these other sites don't offer is a direct farm production markeitng commentary.  Often, this one doesn't either.

Are you buying, selling or holding? 

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jrsiajdranch
Veteran Advisor

Well Jim

I was in a hurry this morning and was just doing generalizations. I am still in a hurry got an open house to go to..........

 

But here it goes. .............. as you know I have long held that the rally in Grains was in large part (85%) due to huge printing of money. 

 

Therefore if we have QE3 we take this grain mkt. to a higher level. 

Since I personally do not believe that we will have the printing I believe that grains are going down. That means it is time to play the LDP like insurance game. Forward contract and then hope the mkt. goes down to reap the rewards of the difference between the cash mkt. and the insurance game. Just like the ole LDP days. We forward contracted beans starting at over 12 and road it up a ways. Glad we did that already.  Obviously not all our production but a significant part.  Also we have not purchased any additional corn for next year as I/we believe it will be cheaper come fall. 

 

On the milk side we have been totally out of any futures mkts. now for about 8 months. Probably should have bought April futures back in Jan. but that would have only been about a buck a hundred to us. so no real loss I guess.

 

Hope that helps.

 

Also remember that when watching the currencies it ain't about just what we do it is about what everybody else does when we do something.  That is the beauty of being the worlds reserve currency.

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Palouser
Senior Advisor

Re: Well Jim

I think the connection to grain, China etc. is mainly ideological speculation. That is, 'it has to be this way because it is consistent with a political doctrine.'

 

First. Year on year in March it was reported that contract volume in the grain pits was off by 40%. How can you make an argument that forced inflation from an influx of $$$$ make sense if that is true? That evidence makes the QE2 explanation for price an impossibility. Beyond that, there has not been any direct evidence that QE2 could be responsible for anything if the cash never made it to the economy, as is also claimed. And the economy as a whole doesn't show the same behavior. Undermining the whole concept. Follow the trail of money and where did QE2 go? From banks to speculating on commodities? Don't think so. Only some insitutions had any benefirt from the actions taken.

 

The fact is, nobody has given any evidence for the mechanism for the claims. On the other hand there are very good explanations based on known market factors.

 

And those waiting for China to implode just seem to ignore the obvious. Their growth has slowed due to global recession - an obvious outcome - but their growth is still vigerous. They glided over the 'Great Recession' by pumping a large amount of money into their economy, and a 7%+ growth rate is enviable. [added] 7% makes sense in an underseveloped economy.

 

 

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rayjenkins
Veteran Advisor

Re: Well Jim

Mark....am interested in the source of the "down 40%" in March grain trading.....I looked up info at CME and it doesn't square....

 

http://www.cmegroup.com/wrappedpages/web_monthly_report/Web_Volume_Report_CBOT.pdf

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hardnox604008
Advisor

Re: QE 3 is coming

Dunno.

 

Near the top I said that you probably needed to see crude near 80 before they had enough room to let 'er rip but things change and that is just a SWAG anyway.

 

I have thought about the following fictititious scenario, though, of how the US quickly incinerates the blessing of its agricultural abundance and a whole bunch of people around the globe.

 

That would be if we really had an '88 type weather scenario looming before us while the authorities simultaneously panic and hit the money button here and elsewhere.

 

The outcome would be a rapid return to a more serious global food crisis and some very difficult policy choices as to whether the US wants to have an ethanol program or livestock. The probablity of this administration/congress/country making the best of difficult policy decisions quickly, in front of an election would be nil.

 

Anyway, for now it seems to me that we have above normal probabilities of an above normal crop as yield potential is being enhanced by dry weather for a while yet;  we also have above normal probability of a below normal crop due to soil moisture deficits.

 

The higher probability is always somewhere in between and remains so this year even if it is less- still will probably muddle through with some drama along the way and come back to play the big game again next year which is whether we rebuild world grain stocks or stumble into crisis.

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Palouser
Senior Advisor

Re: Well Jim

You are correct that the figures don't square unless you look at mini wheat. The article was on this site citing a March on March decline. Truthfully I'm getting foggy and maybe a search will bring it up. I'll try.

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