Quaker

How Will Markets React to a Dollar Rise?

The dollar should strenghten against the Euro now that the election is over. It will stay the same against the Yuan. That makes the yuan a defacto dollar. If the dollar weakens and commodities rise it'll collapse the Chinese ecconomy. Like the USA in 1931, China is far more affected by a commodity shortage than anyone else.

The one thing that could really cause the dollar to go up is the collapse of the Japanese economy.

The Recovery Was Too Expensive

GDP is really a money flow number. It really bears little resemblence to the economic activity going on in the country or to earnings power. This is why GDP went down so little yet personal income tax reciepts to the government went down 35%, the biggest drop in history.

Corporate taxes right now are about 8% of total spending. Personal income taxes are about 35% of spending. The rest is mostly borrowed.

Given baseline budgeting for entitlements, there's little question that Bernanke didn't really do anything other than kick the can down the road. The fact that he considers this a victory shows how shallow and bureaucratic his thinking really is.

The fact is, all we really did was hasten the collapse of the federal government. The key flaw in peoples thinking is the perception that things that change gradually will always change gradually. When this thing stops, it's going to stop like a june bug stops when it hits your windshield.

Will Chimerica's Demise Take Down Global Economy?

A better, more consise discription os the situation I haven't seen. Good writing.

I think another slant on the argument would come from a Nassim Taleb like look at biological systems.

This argument is actually an argument over the difinition of trade and a comparison to nature. If I give you a duck and you give me a chicken that's trade. If I give you a duck and you give me a paper saying I owe you a ducks worth of dollars, it ain't trade.

The "trade agreements" with China were never trade. America's main exports are scrap, royalties on US patents and trademarks and tourists changing Euro's into dollars in NY. This also ain't trade.

This system is finished because it's run it's course. Like any natural system, it doesn't need a reason to end. It doesn't necessarily need to be anybodies fault. In fact, blaming politicians gives them a significance they don't have.

Like 1940, there's a global excess of manufacturing and productive capacity. It was built based on economic assumptions that never really had a chance even if the system was run by geniuses.

Recent Oil Rally: Another Crowded Trade

I was a petroleum engineer who worked on South Ghawar field for 6 years in the 80's.

You really should stick to posting things you have a capacity to understand. Ghawar's water cut is irrelevant to the concept of peak oil.

The only thing more oversimplified than the concept of peak oil is the moronics involved in debunking it. You could fit all the knowledge of oil on financial blogs in a thimble.

Perhaps There Are Unseen Green Shoots

I believe that we're in a systemic change in currency and trade regimes worldwide, similar to that which happened in the late 20's in Germany and in 1870's in London and Amsterdam.

The changes we're going through are more historical than economic. The reason we gor into trouble was the China, Saudi trade caused an excess of dollars to enter the market and and excess of IOU's to be issued. This caused interest rates to get absurdly low and destroyed worldwide equity.

Nothing we do is going to change this until we get either a new trading regime (a replacement for fiat reserves) or we take it on the chin and write debt down 30%. In fact, both are happening. China is using the Renmimbi as a trading currency with select partners, certain commodities are not following the spot markets, (Iron ore and heavy middle eastern crude) and countries are cutting side deals with each other outside US and Euro influence.

In fact,this will be exasperated in the coming year. Why would China expose itseld to bubble prices in commodites caused by wreckless Goldman Sachs traders? Why would they expose their trade wiith Brazil to the whims of a intellectual moron like Ben Bernanke.

Most people, especially economists, lack the ability to see the world in three deminsions. Currency's are nothing other than tradable debt instruments. Throughout history tradable debt instruments have become worthless as the worlds traders shunned them. This time is no different. If the world economy is going to grow again, it's not going to do it carrying the weight of 30 trillion in loans on it'sback.

The Austrians Are Right: Consumer Demand Does Not Drive the Economy

Heavy objects don't fall at the same rate as light objects. The rate at which an object falls is based on it's size, shape and density relative to the medium it's falling in. That's why leaves sink in water and supertankers float.

The rest of your article pretty much follows the same stock blog simplicity we've come to expect out of seeking alpha.

First, farmers don't sell wheat for $100 to "millers" who sell it for $110 to "bakers. There are many ways farmers sell wheat. Some are contracted to grow by food manufacturers, some sell to grain brokers, some sell in the futures market and some silo it and sell it as the market presents itself.

If wheat was sold at a 10% markup to "millers", farmers would be billionaires. Most of this years wheat crop was sold for between 5 and $8 a bushel. There are 70 loafs of bread in a bushel of wheat. That means 3-5% of the price of a loaf of bread is wheat. The analogy isn't $100 + $110+ $120 = $330, it's 10 cents + 17 cents + $2.00 equals $ 2.27. This is why importing bread doesn't destroy GDP.

The VAST VAST majority of gdp gain in products is in the retailing. This is why free trade had such a collossal positive impact on US GDP in the last ten years.

As to the "Austrian School", ever been to Austria? I used to live there. It's a socialist shithole. The only reason it isn't bankrupt is because of German tourism.

The whole idea that production is more important than consumption to GDP growth is insane. The reason the US economy is collapsiing is because we don't have enough money to consume. Capex spending doesn't lead consumption it follows. TIf Capex and production were more important than production we wouldn't have had 3,000 dotcom failures.

AS usual, with most "studies" in economics, common sense is the first thing flushed down the crapper.

Kool-Aid and GDP: The Delusion of Economic Activity

I used to parse these insane statistics myself, until I came to the realization that they were not only a waste of time, they were really hurting my trading.

The Real Crisis Is Food: Beginning of the Bull for Agriculture

Not many people are going to listen to you.

I live in an ag area. Last year, local corn production went from 100 bu/acre to 270! IN ONE YEAR.

Even with local ethanol plants running full tilt, we had a glut of corn. Weather was excellent and new hybrid corn VASTLY exceeded expectations.

Milk prices are collapsing. Why? Demand has all but disappeared. It doesn't occur to the ag perma bulls that in recessions, people eat less. Demand for Cappucino, milk based soft drinks and processed milk products got hammered. Milk prices fell 50%.

America consumes about 1.2 trillion calories a day. For the Average American, that's about 650 bn calories more than they need or should.








On Jun 22 05:15 PM Tony Petroski wrote:

> These scare stories are always amusing. The author writes "Thus,
> since the ‘60s we’ve added roughly three billion people to the planet.
> But we’ve actually seen a decrease in food output." He then describes
> "For example, in 1985 the average Chinese consumer ate 44 pounds
> of meat per year. Today, it’s more than doubled to 110 pounds." So
> food production is both going up and going down.
>
> Global warming supposedly will cause water shortages with devasting
> effects across the planet. Now while I believe global warming is
> a fantastic hoax, if it's not, it's going to bring into play vast
> areas of land that are now too cool to reliably produce crops like
> wheat and corn and will prove to be a boon to food production.<br/>
>
> These commodity plays were out there last year. How many got suckered
> into them last year. The second time around there will be fewer suckers.
>
>
> The unreported story is the demographic collapse of the western world,
> soon-to-be-declining populations in Europe and Japan, and the recessions
> caused by reduced demand for land and commodities.

The Prospect of Deflation and What to Do About It

Food demand is collapsing.

Nusbaum on Ritholtz: A Review of 'Bailout Nation'

Having read The Black Swan more times than I want to admit to myself, I find narratives on "how we got there" a bit annoying. (Though Kudos's to Roger for a good recommendation. I'll definately take his advice and buy the book.)

Most people missed this collapse for the same reason they're going to miss the next one. To truely understand why we got where we were, you have to combine the histories of guys like Fernand Braudel, Niall Ferguson and, not to sound too ridiculous, Pat Buchanan.

Free trade doesn't work. Free trade has never worked anywhere it's been tried. Free trade combined with fractional banking is a disaster. It was a disaster in Venice, in Lisbon, in Amsterdam, in London and now in New York.

Free trade for the consuming country is nothing other than monetizing your manufacturing equity and arbitraging your labor force either overseas (as in China) or internally. (In terms of illegals) for the purpose of churning money that banks can take a small cut of.

For the record, the Fed didn't create a single nickle of reserves in the decades from 1987 to 2007. Adjusted for inflation, Fed reserves plunged. All this money was created by Saudi and Chinese central banks converting their nations excess capacity to dollars. When inflation drove prices up, the dollar trade became absurd.

Banks arebeing blamed for doing what they're designed to do. Create financial products. It's up to government to decide when a nations currency is out of control and to correct for it.

This entire escapade can be pointed directly at Bill Clinton and his side kick George Bush, who never took the time to think that maybe lobbies interests aren't the countries interests.

The next collapse is going to be in short term government securites. It's going to make the last collapse look like a walk in the park. I can assure the readers, everybodies going to miss this one also. I know this because they're already missing it.

Treasury issues $140bn in government debt of which less than 20% is bonds, half of which are simply monetized by the fed and it sends the bondmarket into a tail spin and CNBC calls it a successful auction. When we getour asses kicked this time,don't blame me.

7 Reasons Not to Buy Berkshire Hathaway

BTW, Kudo's to Hoa for his synthesis of Berkshire. Absolutely 100% correct. Only one thing to add. You don't know misery until you've had to get service from GEICO.

7 Reasons Not to Buy Berkshire Hathaway

There's really no argueing with Buffett lovers. It's a cult.

IMO, Buffet has been perfectly worthless over the last 10 years. He may have beaten the S&P 500 over the lastt en years, but any idiot could have beaten the S&P. I kicked the crap out of the S&P.

The trade since 2000 has been commodities,plain and simple. Buffet had one big play there, Petro China. I trade stocks from my sofa and I had Petro China a year before he did.

My biggest problem with Buffet is that I simply can't stand the guy. He spends his entire day looking for a camer to to get in front of. His investment philosophy is, "give me your money, you ain't getting it back".

Then there's the nauseating "Habits of a billionaire" crap he throws out. Warren drinks cokes, Warren eats hambergers, Warren doesn't tip, Warren jerks off... As Katie Couric once said,in talking about twitter. Only an idiot would care what I had for lunch.

Buffet said gold would fall. It went up 400%. Warren missed on oil. It went up 1,400%. Warren missed on agriculture. The biggest plays in the decade were Agrium, Monsanto and Mosaic.

His only major hit in this was BNI. Over the last ten years, a managed portfolio of MOS, AGU,MON, BNI and a couple oilcompanies, along with a 50% holding in ten year treasuries would have beaten Berkshires pants off at a small fraction of the downside risk.

More Signs Recession Is Running Out of Steam

Your analysis of the data is like something out of a high school paper.

New Claims are up 60% YOY. Continueing CLAIMS are down because benefits are running out. Name an industry hiring.

As to teh "leading indicators", take out the stock market advance and they're all negative. Every "advance" metric is still negative. Truck volume, trade volume, imports, exports, inventory build, mileage driven, truck milege driven, ultilty demand, capacity utilization, hotel vacancies, capex.

Most mall retailers are cutting stores and reducing capex. Companies are shifting health care budgets and cutting bonuses. Income tax revenues had record drops in April and May.

The ONLY thing going up are government statistics.

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Ferguson or Krugman, Which One Is Right?

Neither Bernanke or Obama's "plans" had anything whatsover to do with the US economy. The primary purpose was to insure that the same 12 guys who run the world on Friday run it on Monday.

These "economic debates" are like having a wife that's a slut and debating how much she loves you. The majority of money created between 2000 and 2007 were not created by the fed, it was created by trade deficit financing. To understand the problem the US faces, neither Ferguson or Krugman has the perspective to help you.The guy to focus on is Fernand Braudel.

Obama and Bernanke's "plans" won't work because they're not designed to work. Obama's trying to control Washington. People who think politicians care about them are morons. How in the hell are you going to get an economic recovery when the people who ultimately pay the bills are up to their eyeballs in debt? To close a $3.2 trillion deficit you need $15 trillion in new GDP. This from a country where 25% of the population is negative on their house, 75% of the population is negative on their cars and ATV's and has $8,000 in unsecured debt?

The only reason we're coming out of this recession is that the government is manipulating the dog shit out of the statistics. According to last months jobs report we created 43,000 jobs in construction and 67,000 in Leasure and Hospitality.

Ifyou believe that, you deserve Krugman, Ferguson and Bernanke.

Is the Employment Picture Really Better Now than in 1933?

I live in a farm area. There are VERY few Americans working on farms. I'd estimate maybe 1 in 10 during the off season and 1 in 30 during planting and harvesting. Everybody is Mexican and Guatemalan.

I also live in the northeast. A HUGE % of the population is either retired, (early) disabled, (BS) or working for government directly or institutions funded by government.