Skip to main content

Euope and Da Banks

Reality of the European crisis are finally hitting market prices.  Also this weekend the Saudi oil minister said that SA was reducing production, because there’s just not enough demand to justify the current production level, which would seem to indicate that a good chunk of the current market pricing is driven by financial market hysteria – wow something new.

Back to Europe, over the weekend two developments:  the Finns elected parties that are against further PIIGS bail outs.  The second event was that the British government has indicated that they will no support any further financial aid beyond the help they have given so far under current European agreements.  Then this morning a spokesperson for the German ministry of finance indicated that Greece debt will be restructured before the summer.  

Once it is generally accepted that restructuring is required, the issue then becomes how much of a hair cut will be required.  The generally agreed (and to a certain extent priced) cuts for Greece, Ireland and Portugal is around 30% to 35% for the bond holders.  Implications for many German, French and Spanish banks are very serious, since they still hold huge amounts of sovereign paper on their books (and have much higher leverage than their American counterparts).  This morning’s CDS rates for Portugal (615), Italy (156) Ireland (588) Greece (1225) and Spain (250) were all rising (BTW anything over 400 is insolvent territory).

Another development, largely unnoticed, is that two CFO of TBTF U.S. banks resigned over the past few weeks (Bank of America and Wells Fargo); personal reasons were given, but those who read the tea leaves are taking the view that these CFO couldn’t be pushed anymore.  How to justify that JPMChase was able to further cut loan loss reserves while its CEO was saying that they don’t know what to do with all the homes they’ve owned for more then 500 days, no income and no outlook to sell these properties.  .

Finally about 30 minutes ago, S&P has put the U.S. rating in negative watch.  Still has its AAA/A-1 rating, but negative watch has been implemented.  No one expected S&P to take such action.  

Popular posts from this blog

Ok so I lied...a little (revised)

When we began looking at farming in 2013/14 as something we both wanted to do as a "second career" we invested time and money to understand what sector of farming was profitable.  A few things emerged, First, high-quality, source-proven, organic farm products consistently have much higher profit margins.  Secondly, transformation accounted for nearly 80% of total profits, and production and distribution accounted for 20% of profits: Farmers and retailers have low profit margins and the middle bits make all the money. A profitable farm operation needs to be involved in the transformation of its produce.  The low-hanging fruits: cheese and butter.  Milk, generates a profit margin of 5% to 8%, depending on milk quality.  Transformed into cheese and butter, and the profit margin rises to 40% (Taking into account all costs).  Second:  20% of a steer carcass is ground beef quality.  The price is low, because (a) a high percentage of the carcass, and (b) ground beef requires process
Post a Comment
Read more

21st century milk parlour

When we first looked at building our farm in 2018, we made a few money-saving decisions, the most important is that we purchased our milk herd from a retiring farmer and we also purchased his milking parlour equipment.  It was the right decision at the time.  The equipment dates from around 2004/05 and was perfectly serviceable, our installers replaced some tubing but otherwise, the milking parlour was in good shape.  It is a mature technology. Now, we are building a brand new milk parlour because our milking cows are moving from the old farm to the new farm.  So we are looking at brand new equipment this time because, after 20 years of daily service, the old cattle parlour's systems need to be replaced.  Fear not it will not be destroyed instead good chunks will end up on Facebook's marketplace and be sold to other farmers for spare parts or expansion of their current systems. All our cattle are chipped, nothing unusual there, we have sensors throughout the farm, and our milki
Post a Comment
Read more

So we sold surplus electricity one time last summer...(Update)

I guess that we will be buying an additional tank for our methane after all.   Over the past few months, we've had several electricity utilities/distributors which operate in our region come to the farm to "inspect our power plant facilities, to ensure they conform to their requirements".  This is entirely my fault.  Last summer we were accumulating too much methane for our tankage capacity, and so instead of selling the excess gas, that would have cost us some money, we (and I mean me) decided to produce excess electricity and sell it to the grid.  Because of all the rules and regulations, we had to specify our overall capacity and timing for the sale of electricity (our capacity is almost 200 Kw) which is a lot but more importantly, it's available 24/7, because it's gas powered.  It should be noted that the two generators are large because we burn methane and smaller generators are difficult to adapt to burn unconventional gas, plus they are advanced and can &qu
Post a Comment
Read more