What do you have faith in? economics

[Artifice]

There is little correlation between commodity prices and the economy.

Look at the late 90s, economy was V, commodities went down down down.

Commodity price primary factor is cost of productrion, if prices are above that,

producers respond and prices go down.

Enmass long index speculation,   is bearish commodities, attrificial length that attracts

output. .

RH

[Artifice]

time that- agree, tard what we know? What we don't know is the only important thing!

How we handicap whjat we don't know determines how we do.

Why trade btw? How about places hadges and live with them.

Art

[timetippingpt]

jrjd....as you might gather....I focus on statistically driven timing techiniques

for managing our exposure to price risk. This does involve entering and

exiting various tools or contracts to accept or displace various risks.

That said, we really don't "trade" commodiites in the sense that it is

spoken about on these sites. Our approach typically ends up in 3 or

4 decisions of substance per year. Some of those decisions can be

quite large by other's standards. Our rationale for fewer and bigger

decisions is simply, as our cofidence in the probability of outcome

increases, we increase the quantity of the decision.

Admittedly most of my timing stuff does require some form of

art as opposed to pure science. The difference in my view vs. what

you said is simple. I "know" that if we get a "Star of Life" chart pattern,

that the odds are about 90% of a big move to follow. PLease note

the difference, I "know" nothing about if it will or not, just that in 90%

of the cases it does. Also, I "know" nothing about what will cause it.

Another example. I know that about 65% of the time Dec corn makes

its seasonal high around April 10th. Selling when the market breaks

below the low of that week, requires us to "know" nothing but rather

to admit we don't know and shift the risk to someone else who

thinks he knows better. Since we were already sold there was no

reason to follow this selling trigger this year.

This year, selling the first trading day in January, was a virtual

certainty to be a good idea statistically. Many reasons, but it was

pretty easy.

Going forward, IF we can get the grains to collapse for the next

2 weeks, it will be just as easy to lift all our hedges around 6/10

on some sort of buying trigger. In that event, we are just willing

to take some price risk going forward. Market could still go down

but we think the odds will favor it raising, so we will take the risk.

(Pritch used to call that speculating)

IF you look at VRBucks Gann post below, it is fair to say that our

approach does not use that fractal. There is a different way to

do it that I find more accurate and helpful for decision making. I

admit it is an art, but one that we have adapted into quantified decision

triggers. Simple really but requires us to ADMIT we know NOTHING

as Sgt. Schult would say. 

Our count came out on 5/11/2010 which was an important high.

IF you make this the center of a multimonth bottoming pattern

similar to 1980, with the first low being 4/10 then the Next

propogation is around 6/10/2010 when we expect a low

after a collapse of sorts. Beans could still make 8.15 nearby but

must collapse this week.

So, yes, we make decisions on things that we think are "likely"

to happen and if they don't well that is why we spend so much

time on cost containment and being a low cost producer!!!!!!

Hope this helps.

Artifice seems like Pritch by another name to me 🙂

I think you will find Palouser and I in much agreement in this

area of life. Chicago is broke and ultimately that will cost

farmers dearly my friends.

[timetippingpt]

"Place hedges and live with them"....

great question......THINGS CHANGE. We merely

retain the right to change our mind if something

changes that alters our risk position.

We don't trade Art.....these hedges we will lift

in june were placed on in May, 2008. (Well before

the high as I have admited often) The non-

manipulated high was in May 2008 is just my

view, or course I am not nearly as smart as

the econ profs the CBOT pays for at the

Univ of ILL.  🙂

So, the simple answer is that once in a while

things change. Since we have been 100% sold

for an average crop, if it looks like we won't grow

one, that is a change that must be managed is all.

[jrsiajdranch]

Time yea I understand where you are coming from.  It has been very succesful for you as I have followed your thoughts over the years. I agreed whole heartedly with your may 08 before manipulation hedge.  I also think like you and Palouser have been saying for a while the CBOT is broke and they are purely the house looking for a contract that brings in equal numbers on each side of the Trade so they can make the real money.  I have said before the CBOT is there to seperate you from your money. Does that mean I haven't used it in the past NO does that mean I won't use it in the future NO.  It just means don't rely on the CBOT to be the accurate judgement of the future through the prism of today! 

 I was really shocked when the CME opened the SMP contract that they didn't have some players lined up to go on each side. I really thought they would want to get some action in that pit especially since today was going to be the Fonterrra auction. I figured they would like to pull a little of the action towards them.  Maybe I am just a little to synical of this mkt. right now. I also thought the smaller cheddar contract when opened up would have a greater impact on price going forward after the start up than what we have today maybe that is why they delayed it's open?  YOu gotta love those guys. JR

[Artifice]

markets tend to go down through summer, but have ups and downs,

if on June 10, grains spike up, that is no indiction of a change in trend

grains are likley to keep going down.

there are no magical dates or other vendor tradingg shams.

Copper

Artifice

[Artifice]

"selling the first trading day in January, was a virtual

certainty"

there are no certainities, avoid those who look for what doesn't exist.

Artifice

[Palouser]

I'm not quite 60, so I consider myself young. Young enough that I'm still very curious and still trying to stretch myself in every way. I first got into this market thing after the first F2F policy was passed. There were some things that didn't seem to add up about this 'Brave New World' of ag. The internet was also becoming more usable and I began reading other points of view. One biggie is Daryll Ray, one of the top economic explainers of ag that exist in the world today. I believe he still has a column on Agriculture.com on the marketing page. He has a wealth of historical arguments/proofs that is easily accessed on almost any subject that go back through a lot of ag crisis. His conclusion are often the exact opposite of the conventional wisdom.

The main basis for F2F was the  on the 'free market' and all the wonderful things it would bring. Order, balance, and rewards to American farmers after our ingenuity and energy and technology beat down global farmers so we could grab market share. Oh, at a lower price.  The astonishing thing, and the elephant in the room that ag economist allied with Kansas Pat Roberts, especially, were entirely successful in diverting everyone's attention from was A FREE MARKET IN WHEAT - THE MOST WIDELY TRADED GLOBAL GRAIN - DIDN'T EXIST, AND WOULD NEVER EXIST!!!! Then I realized that ag economists were as likely to be ideological and willing to crap on themselves for attention and grants as anyone else you can think of. Don't get me wrong, there are ag economists I depend on.

Continued .......

[Palouser]

The next big lesson was the 'shortage' of grain in 2007-2008. The question was - will the futures market signal higher production in time to avoid market problems. At the time, the prevailing wisdom was that the 'market' (meaning futures) was always 'right'. It was nearly unpatriotic to question that convention. The next logical question was - then why do futures not converge at contract settlement time and diverge even more between those every other month dates? Hmmmm.

I was following the most basic trends available - Supply/Demand/Inventories. Th picture was not pretty with a definite trend towards a problem. Suffice to say, when I brought this up, the reply was universally, "The market is always right", this is a sign of increased efficiency, and my belief we were entering the 'danger zone' laughed at. The crux was this. If the trends continued we were going to have a problem and it would prove for ever and ever that 'markets are not always right'.  I argued convergence was a problem and found none knew what I was talking about - or why this was another sign the markets are basically crippled. NOW it's discussed, and the 'solutions' have been horrible', to say the least - and certainly not 'free market'.

Frankly I don't CARE what happens technically in the futures market. Get three technicians to agree. Can't be done, and even if they did, the possible actions are often out of the question or dangerous. There is a reason why almost no advisors can beat the market average - but they get your fees.

Follow the physical fundamentals, stay flexible. If you have thin margins due to costs and obligations then futures strategies may be a necessary cost to keep you in the game until you have more freedom.

I don't believe in Fascism in this country. In fact those that do may be the very ones who would be most likely to institute rules that would encourage it - for your own good of course. They specialize in building the 'straw man' to convince you there is a bugaboo out there to fear. They are competing for control over you.

There is more to say, but I've said enough for now.

[jrsiajdranch]

Palouser I just stepped in for a sandwich and saw your post you said " I don't believe in fascism in this country"

Does that statement mean you don't believe it occurs here? Or did you have some other meaning?  I completly agree with you on the lack of convergence.  When I was in college we talked about this in MKAT. class and the prof said it didn't matter for some reason that held no water way back then. I was truly amazed that he thought the mkt. should operate without any real world accountability. JR