Skip to main content

Thursday Already

To quote on of the good guys:  "We follow the bouncing ball of Risk on, Risk off.."  The past 10 days saw no real reason for a 100 pts bounce in the S&P500 (or a 1,000 point on the Dow Jones), so today we get a 1% correction on "no news" (OK so Chinese trade data came out...nothing really that big except trade deficit with China rose again (all time high)).

On the other hand looking at the hard data is scaring the crap out of me!  One of my favorite bloggers, Bruce Krasting (a fellow bear) has a couple of graph that are worth a look, but bottom line the PrimeX disaster of last week is now explained by the death of new issuance in the sub-prime market.  Issuance has gone from $60 billion a quarter to ZERO in Q3/11 (look at the chart below), that's how much sub investment grade bonds have been issued in the past four weeks.

This is a liquidity crisis in the making, if you look at the SME market you notice that the primary reason for a terrible business environment is not regulation, but the lack of demand.  There is no demand, as consumer (America) are tightening their belts.  The job market is lousy and national income is dropping or flat.  BTW I only found out yesterday how much health insurance cost the average family -- $14,500 per annum.  America, where the average take on pay (for a family is around $50k per annum) must pay federal, state and local taxes plus FICA, house and feed themselves and then pay $14k per annum for health insurance.  No wonder that 15% of American forgo insurance.  

I mentioned in an earlier blog that in America consumption was around 75% of GDP (55% in the rest of the OECD) and around 35% in China.  The two outliers will eventually have to move back to the mean -- which they now seem to be doing (at least for America), in China a slow down in construction will reduce GDP growth (not the way you want consumption to be a greater percentage of GDP...).  A new age of austerity may be rising in America.  Most of the 2009/2011 personal debt increase has been for education purpose -- if a 20 year old cannot get a job might as well get a degree (don't laugh that's exactly what I did in 1984 when Canada had a very bad recession).  It is a lot more fun to go to class than to wait in the unemployment line...

The CAD continue its "march upward" despite oil prices dropping a few bucks -- BTW the main indicator of oil prices is now Brent Crude and not WTI (for prices at the pump it has a better correlation factor).  Thing $105/bbl and not $84/bbl.

Some scary graphs:

SME owners view of the Economy (they're not talking politics but growth)

CCchart

From Bruce Kastring



From Financial Armagedon Blog:

Doctor's visit down 8% -- Americans are not healthier, they are too poor to go!

Businessinsider





Comments

Post a Comment

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