Farmer Diaries

take bullshit artist in a financial institution to say that there is a floor in the price of Bitcoins.   There is no floor because the price rose so quickly that there is no concept of floor in that kind of speculative bubble.   The price may pause for a time but like a speculative bubble there is one floor and it’s zero. Although i must say that at $10 a bitcoin it becomes a nice cheap option

So early this morning the futures for the S&P 500 were pointing up, and surprise surprise at the opening at 9:30 the market opened up +15 points.   It's now 11:30 and the markets are flat for the day.  How will it go from here is unclear.  The rest of the world is not doing so well, the FTSE is down 0.74 and the CAC40 is down 0.35 (now both are closed for the day). The market seems to want to go down, despite economic data (backward looking) showing a healthy economy -- GDP growth at 3.5%, unemployment at a historical low, consumer confidence and PPI at all time high!  Nevertheless, most commentators feel that a recession is increasingly likely, first a substantial portion of the GDP growth was caused by the massive corporate tax cuts that were put in place late in 2017.  But the hangover is on its way -- government deficit is massive (despite what the GOP said when they enacted the tax cuts) and the only solution is to cut entitlement -- since neither Democrats or Republica

1.  Rumors are that France's 2019 budget deficit may be higher than Italy's planned budget deficit -- of which the EU said this is unacceptable.  Next game of chicken 2.  Russia just sent a large number of nuclear-capable long-range bombers to Venezuela....I'm sure that Trump will like that 3.  China arrests Canadian ex-diplomat in what appears to be a "tit for tat" move against the arrest of Huawei's CFO 4. Brexit vote delayed -- cause May doesn't have the vote and a rejection of her plan would almost certainly lead to elections (and possibly a new referendum).  A game of chicken is being played between May and the parliament:  "Back me or we have a hard Brexit" 5.  Trump's position is getting very uncomfortable.  It appears now that the Russia discussions were not only over an 18 month period but involved a large number of players -- on both sides.  This was not a single meeting and a single conversation, but 6.  As long as the GO

more than 4 years ago during a long walk between Burgos and Santiago de Compostela a conversation took place between my father and me.  The topic was the likely advent of autonomous vehicles.  I told my father that the first self-driving car would emerge in 5 years, my father thought that 10 years was a minimum!  Imagine our surprise as we walked out “of the woods” that Tesla had just announced the launch of its first "level 2" self-driving car — which still means substantial supervision by the driver. Last week the LAPD arrested a man in his Tesla 3 who was fast asleep at the wheel of his car.  Again a very dangerous situation since the level 3 technology still require substantial driver supervision. Then again this morning Waymo announced that it is launching, in Phoenix for nearly public use, its autonomous taxi; and that if everything goes according to plan, the fleet of autonomous taxis will be available for use by the general public early in 2019. This is the revo

Sooo On Sunday the American president announced a major breakthrough in is trade confrontation with Xi the president of China.   Since then complete radio silence from both sides, the market today (Tuesday)now seems to believe that there was no agreement to a 90 day moratorium on trade barriers and that American farmers will not actually get the relief Trump told them,  is tweet, that they would get. Today the makets reaction was brutal; the S&P  is down nearly 3%.  Now there are other issues at hand that take precedent too -  GM took $3 billion in restructuring provision and that seems to be leading to at least 15,000 job cut...Ford took a $10 billion cut but has not announced any plant closing...yet -  Lots of US corporate debt was dongraded yesterday... -  yield curve for the 2&5 is inverted, usually a sign that recession is imminent -  Trump “announced” that he will cancel the NAFTA to force congress to pass the USMC agreement (all this befor the Christmas break...

I think its 6 trillion, but anyway, its a lot of money.  Over the past few years, American companies have aggressively raised low covenant debt so that they can retire equity... The reason, of course, is that its a great way of driving up stock price without any CAPEX, the debt will someday be someone else's problem. Traders have been moaning about liquidity issue, whereas a few years ago selling $ 100 million of a high brand name bond was easy, now it's difficult.  The same in the other markets too! The story here is that with the end of QE, and the overdue decision by the FEDs to finally seriously take the punch bowl away from the party, interest rates are rising, which impacts stock prices, and debt price.  Not only is it becoming more costly to issue debt, but the equity it is replacing is also dropping in price -- funny enough when stock prices drop there is very little appetite in corp boards to execute buybacks. The issue here is even more serious, because whereas

The new Mexican President is reviving an old idea of having a "high speed" train that would circle the Yucatan Peninsula -- liking Cancun, Merida, Campeche, Palenque, Calakmul and Tulum -- a US$ 5 billion venture (the figure is between 5 billion and 8 billion). First, let's do some math: Assume that the project will cost US$ 5 billion Assume that 30% will be equity (from the Federal government with zero return) Assume 70% debt, guaranteed by the Mexican government The result is US$ 3,5 billion in a 10-year bond The yield on this bond (issued in Peso) would be around 9% (today's 10-year bond is priced at 8.89%) This will lead to annual interest payments of US$ 315 million Operating costs for this rail project will be a small fraction of the total -- let's say there are 300 people working for the railway -- at an average salary of US$ 20,000 (which is way overestimated) and we get a total of US$ 6 million per annum.  The financing costs are US$ 315 millio

It was bound to happen!  Something that had seen a wild price rise with no "real world use" was a bubble and now its price is dropping as those who invested in the bubble are looking to get out.  Bitcoin is now trading around $4,000 -- it was $5,000 just two days ago!  If you read the press you will see comments about all sorts of technical reasons why this is happening -- which by the way may be true, nevertheless, the real reason is that there are few real-world application for bitcoins (and cryptos in general) and they were seen by most as an engine of speculation... The question is where's the floor!  But it's not a question, in reality, bitcoin has no intrinsic value (granted nor do fiat currencies...but they have the support of national governments).  So Bitcoins and their friends will have to find their own support level.  Since the price changes have been mostly one way (up) there are no support charts, there is no concept of minimum support price -- S

Two commodity rule the world; oil and copper -- they are the foundation of our world!  Both have had a bit of a hard time of late.  It's hard to remember that on October 5th, 2018 oil prices peaked at US$ 75 bbl -- they stand today at US$ 56/bbl -- which is a 25% drop -- in fact oil prices are now at the same level they were a year ago. Last week a prominent analyst "predicted" that oil prices may drop to below $40/bbl.  who knows, but one thing for sure, the cost of production have dropped. In other news -- Germany's car production is now in negative growth territory

$1,400 for a portable phone that does little more than the old iPhone that I bought two years ago (I have an iPhone 6s), this is insane, what possible advantage will this phone bring that my phone doesn't have: Its faster (ok I cannot tell the difference) The camera is better (I don't really use the camera very much The battery is twice as powerful (lasts just as long -- 10 hours)  Screen is bigger (I don't want bigger) iphone Xs has lighting jack -- (which Apple is ditching) iPhone 6s has a normal jack (which is fine by me) That's it!  All that for $1,379.00 (plus VAT obviously so a grand total of $1,613.43) Ok so sometimes technology doesn't add value (to me at least)

So this morning I was reading Zero Hedge -- useful and weird source of financial news.  This morning Bill Blain posted that Netflix was a Ponzi scheme. Frankly, I'm not certain that Bill understands what's a Ponzi scheme, nevertheless.  So, there are three funny things in this post:  (1) the aforementioned "Ponzi" scheme idea, (2) that there is both nothing to see on Netflix but that they spend too much money on content, and (3) That what on TV is better than Netflix. Now, a Ponzi scheme involves paying off old investors with new investor money.  Since Netflix provides a service to more than 125 paying customers...not a Ponzi scheme, and since the company is making money (it seems that its net margin is around 10%) then on US$ 12 billion, it's not a bad business. So, its clear that Netflix is not, in fact, a Ponzi scheme (although its good clickbait -- if it was refuted elsewhere). The second issue is content, which I admit is less than fantastic at times

You would think that this is the start of a good joke, but it's not, and it showed the level of disconnect when you assume that the meal will be driven by disagreement.  It turns out, like all things to be completely different. The subject (one subject at least) was the confirmation process of Kavanah, who neither of us knows or even knew.  I saw the pictures of his high school photo book -- and I can assure you that we had the same kind (well slightly less crude) in our boys only high school too. Less alcohol than these guys but the same stupid attitude that Kavanah and his friends seem to exemplify. What bothered everyone around the table was his defense last week, and his lies the previous weeks.  I mean if at 17 you are the president of the Keg club -- I can guarantee that you like beer.  Its too much trouble (without a car) to get those things. His best friend in those years talked (in a book he wrote while in a disintoxication cure) on his wild ways was a youth -- with

In medieval times it was a common occurrence to salt (expensive stuff at the time) the land to deny the arriving armies the ability to live off the conquered land.   Yesterday, in the Weekly Standard (a right-wing newspaper) it was suggested that if the Democrats won the mid-terms then Trump's agenda (what agenda?) would be stimmed and that he would turn his efforts are killing government as we (well the Americans) know it! Now The Weekly Standard is the kind of newspaper that will suggest that the whole Trump tower was engineered by Hillary Clinton and her numerous friends at the CIA and FBI to entrap Trump...Yeap that kind of crew!  However, there is no doubt that Trump is the kind of guy who seeks out revenge.  Its always been his operating model -- a bit like the Mafia:  They mouth off, and you hit them with a baseball bat...Anyway, the suggestion is not as crazy as it sounds.  Already the State Department has been gutted (maybe staff reduction there was a good idea, but we

"The cost of mining cryptocurrencies, in some cases, is now greater than the value of the coins" It was bound to happen.  Cryptocurrencies were open to manipulation (yesterday's 10% drop) and it was bound to happen.  You know that when a guy starts something called Dogcoin as a joke and it eventually has a US$ 2 billion market cap.... well doesn't take much to figure out that the "investors" are really just punters trying to make cash quickly (maybe). Will cryptos go to zero?  Probably not, but they will lose their "one way sure thing bet"

Lets say that 10 years ago I wanted to fly to Chicago from Montreal -- I call my travel agent (in my case AMEX) and they would book a flight and I would be charged by AMEX.  The rate was the rate and is in Sleepless in Seatle "no one knows what the airline charges". However, for inflation purpose, the data was available to the government's statistical office.  Taking a large number of Flight Montreal to Chicago you got a price for the flight! Now move the clock to 2018, you want to buy a flight from Montreal to Chicago, you take your phone and open Expedia and take the flight that fits your requirement!  That data also goes into the government statistical office. Now comes to fun part, you've got to provide additional information; at the same time the airline charges you for extra benefits:  Want food on board, want a better seat, got luggage?  All these are now additional fees (and sometimes for a substantial amount of cash).  So a plane ticket that cost $300.00

What a shock! Now I don't know the particulars of all that transpires about the case being discussed in the Canadian press, that has apparently been percolating for nearly three years now, but I got to say that when I saw that Azerbaijan was involved... let's just say that I was not entirely surprised. More than 20 years ago I was the "financing representative" of Bombardier in a team that was sent to finalize negotiations for the purchase of a number of regional aircraft.  To give the reader a sense of how these things normally work, there are about 10 Bombardier representatives (contract, maintenance, operations etc) there to finalize the purchase agreement.  Normally, this process takes 4/5 days.  We all arrived on a Sunday night and Monday morning we had our first meeting (with the draft purchase contract).  By 10:30 am the contract was signed -- for the full retail price for the aircraft! Needless to say that the contract guys were surprised (me too -- ah t

Well Italy now has a new government -- The new prime minister Giuseppe Conte is now the leader of the Five stars and the far right League, although some of their policies seem to be from the far left.  First off, the "draft" memorandum of union agreement between 5 stars and the League had a "Kill the Euro", "Get out of EU" provision that was scrapped in the final version  (remember that for later). The final agreement between the two parties referred to target economic growth via additional state spending, to re-start eh Italian economy.  What are Italy's biggest problems:  (a) High labor costs, (b) excessive red tape, (c) banks that acknowledged nearly 14% of Non Performing Loans, and (d) a toxic, crony-driven political system.  The fault of the high total wages is due to hard unions, truly, but they are also due to Italy, like most European countries entering the Euro at too high an exchange rate (exactly the opposite of what Germany did...).  Th

Ok ok this happened two months ago now!  Having moved out of Canada three years ago, the decision to purchase a new phone is complicated.  First, in most places, you first buy the phone outright.  No "subsidy" of a new phone (with higher rates for telephone plans).  So you got to fork out the cash outright.  Moreover, the local price is "nose-bleed level".  As an example an iPhone X that retails for US$ 999 sells for MXN 26,000 -- that's US$ 300 more (or 30%) than what you would pay at a US Apple store.  So there's incentive to do things differently...at these prices and margins First off, I asked my tech-savvy younger friends what I should buy:  Needless to say that none use the iPhone, I've seen the Android universe -- cannot say that I am impressed!  They are like Windows computer, needlessly complicated. Some of the stuff no longer matters -- I just don't have my music library on my phone.  I use Spotify...less space and works just as wel

Ok, so Facebook saw a massive plunge in users and value following the data scandal:  Want to bet! As of this morning, Facebook stock stood at 185/per share -- its all-time peak is 195 (and in fact, it must have been an intraday thing because I cannot find it in Google Finance.  The highest price there is 190 per share.  So, let's revise this, Facebook is off exactly 5% off its all-time high, but really only 2.7% off its all-time high. Now the market has spoken, and Facebook is chastised... As for users, well that's even worse -- Facebook usage is up 13% on last year (as of the end of April 2018). So there you go, Mark Zuckerberg, you should feel really really chastised!  The market and the people have spoken your business model is broken... Not even a little bit, but reading the press on Facebook over the past few weeks/months you would think that the company is reeling from the financial and social impact of the data breach.

Sorry folks, with The Donald in the White House its hard to get very excited about anything political -- I mean the crap he pulls on a daily basis would have normally made the front page of all newspaper for weeks, but because he's so crazy, ignorant and supported by the GOPs own crazies there really is not much to say. Europe, well Europe is doing OK, at least on the surface.  The Italians finally got a government -- which includes 5 stars -- which is as anti-European as can be, and drafted exit words from Europe and the Euro (plus canceling all Euro-denominated debt..) but thankfully these ideas were not in the final governing agreement (but how far are they below the surface).  France and Germany are trying to get along, with some success, but on one side you've got Germany and on the other, you've got everyone else.  How long till German gets fed-up of paying for everyone (actually that's easy -- as soon as Europe stops buying goods and services in Germany).  Ne

In light of the Evangelical "unfailing" support for Trump despite his multiple marriages and (it would seem) too numerous to count affairs you start to wonder about what religion in America is about. As a Canadian, the way Americans talk about their religion (and boy oh boy do they talk about their religion) is somewhat unsettling.  Granted that Canadians have a very "private & personal" view of their religion (at least on the east coast.  It is not spoken about, God is not thanked every two minutes and generally, religion (or the lack thereof) is a very private affaire. Years ago, a friend invited me to join his family to a vacation home on the coast of main for the July long weekend.  First, we were surprised that such an amazing house would even be available at that time of the year, what my friend told me was that the owners were Jewish and because the "enclave" was Presbyterian no children would play with theirs!  All of us, it was a very la

Not really important that Trump lied to Trudeau, in fact, world leaders do it all the time.  Although this may be a first that a politician lied to another one and then went to his supporter, in front of cameras, and bragged that he lied, that he had no idea as to the state of the Canada/USA trade balance, and in the end didn't really give a sh$t! That's new!  I would guess that any world leader now will wonder what's the point of having a head-to-head with Trump.  He's likely to lie about everything and it has no impact on policy. It's not so much that Trump should "go home" rather he should "stay home" because it is evident now that what comes out of his "pie hole" is inconsequential for other nations...not only does he make stuff up, he doesn't care what it means -- why then engage the man!

Living away from Canada you encounter different health care systems; in Canada that provides virtually all its health care on a no-fee basis -- the user pay nothing; the system of allocation of the services is scarcity.  Long wait in the emergency room, for noncritical care, but when it comes to critical care, Canada is second to none with outcome.  Moreover, Canadians don't fear that their family will go broke caring for them. Currently, I am in Mexico, and a friend recently took a bad fall -- nothing life-threatening, but still.  this all happened Sunday evening (imagine the wait at Montreal's emergency room), we arrived at the local hospital (there was a bad cut on a leg) and my friend was immediately rolled into a treatment room -- she didn't wait 5 minutes (in fact she was already in the treatment room when I came back from parking the car. Within 90 minutes she departed the hospital with 8 suture on her leg, and orthopedist had examined her other leg and told her

Last night was a disaster for the GOP, taking Pennsylvania's 18th district that was for the past 20 years a solid Republican stronghold (+20) became democratic.  Yes, the margin was razor thin, but the point is that the GOP, even with Trumps' poor rating should have won this seat.  This is a seat where the GOP usually wins with a 20% margin.  There are more than 100 seats in Congress that are more at risk than PA-18. However, it is still hard to draw conclusions; the fact is that Lamb (the Democrat) won by less than 1% -- however, PA-18 is a largely electronic ballot district, so recount is out of the question, except for absentee and military ballots, and these account for less than the difference between the two candidates (a few hundred). What is interesting here is that Lamb got 80% of the number of votes than his "no chance" predecessor, what is key is that his opponent Rick Saccone got only 53% of the number of votes that his predecessor got (who incidentall

I've got 10 posts in process, but not enough time/interest to get them finished.  To my readers: Sorry

At an Energy conference in Mexico City last week every Mexican political party agreed that there was no turning back from the energy reform that was proposed by the current president and was enacted by the current Congress via a change to Mexico's constitution. The fear had always been, that AMLO (Lopez-Obrador) as he had somewhat expressed in several of his Youtube presentations that he wanted to turn the clock back on energy reform.  Last week, his energy spokesman indicated that AMLO's position has been miss-understood and that he saw the current energy reform as a way forward for the country -- which face regional energy shortages. Although the presidential elections will cause massive administrative dislocation (the first three layers of all department are political appointees) the reality is that much can proceed despite this certain slow down in the policy side of the equation. However, for asset builders, this has often ended up killing new energy projects. 

If you consider that America has for decades actively meddled in many nation's democratic processes the news that Russia did the same to America cannot be a surprise.  Especially since so many of our institutions are more than happy to be corrupted for a few coins! What is amazing is the outrage...then again Americans have always been weird that way --

More than four years ago one aspect of Mexico's energy reform that was unanswered was the ability to finance some of Mexico's state monopoly's infrastructure requirements. Using the electric grid as an example -- especially since assets are difficult to identify and legally cannot be segregated -- the capital requirements (transport, distribution etc) implied massive investment that CFE was ill-equipped to meet, as its balance sheet is already under heavy strain. Moreover, as per Mexican law, it is impossible to segregate assets or create liens against specific assets owned by either PEMEX or CFE (although the former is allowed to sell some of these assets). In comes, the Fibre-E structure (Investment Trust in Energy and Infrastructure, is its full name), which is a listed instrument (on the Mexican stock exchange) that allows the participation of private capital into public infrastructure. Many commentators use a US structural analogy of an "MPL" (used in the

As was foretold Bitcoin has taken a bit of a reversal, from a January 10th high of $20,049, it now trades around $7,200 -- which is a rather substantial correction.  One journalist had the nerve to ask:  "How far can it go", the short answer is that it can go all the way to zero. At zero, Bitcoin would represent a real economic loss, since "mining" bitcoins is not a free enterprise.  It probably will not be the case, still there are some interesting information on the price rise and subsequent fall of Bitcoin:  (i) Two Bitcoin owners were responsible for 90% of the Bitcoin price rise between US$ 45 and US$ 1,000, (ii) Bitcoins are still being mined by Russian and Chinese "Coinfarms" although the economics are starting to be less interesting, (iii) the sovereign currencies are working hard a delegitimizing bitcoins (standard when you run a monopoly) -- but then Bitcoin has a lot to answer for.  40% of all Bitcoins have never been traded...and are owned by 1

Boeing were fools in their attempt to freeze Bombardier's C series aircraft out of the US market (and possibly many more), it was done in a way that almost certain to fail, for commercial reasons, since for the tariff to apply on the C-Series Boeing had to show it suffered harm.  the only play was political, which is why Bombardier thought they would lose. Boeing's errors: 1) Mischaracterisation of the aircraft segment 2) Subsidy directly harmed Boeing  3) Boeing refused to disclose it's launch customers discount First Boeing, insisted that the aircraft was a 2,900nm 130-150 seat category aircraft, deliberately leaving the Embraer aircraft because it was only a 2,880nm range aircraft.  By doing this they were able to say that the Bombardier aircraft was in the US$ 70 million range instead of the US$ 30 MM range.  That was a huge, huge lie and the USITP saw through this very easily -- especially when Embraer insisted that their aircraft didn't have a 2,900

For an entirely different reason, I was looking at the murder rates in Mexican cities Vs. American cities.  Mexico City compares very well with the largest American cities at about 8.4/100,000 so that's ok.  Out of curiosity, I looked at school shooting statistics (following the recent spate of school shootings), I looked at the figures around the world.  To say that the numbers for America were shocking would be a massive understatement.  First, lets for a minute discount school shooting prior to 1920.   Even then it makes no difference.  Canada:  (pop 35 million)   44 people killed in school shootings (1881-2018) Mexico:  (pop 120 million ) 5 people killed in school shootings (2011-2018) Europe:  (pop 300 million)  120 people killed in school shootings (1913-2018) America: (pop 350 million)  68 people were killed in school shootings...in the past 14 months... here   When I first started looking at the American list (which has a separate entry in Wikipedia) I had not see

In 2013, the Mexican government enacted its Energy reform law that should for ever, change the face of the country’s energy markets.   Strictly speaking, the process has been a real success as the markets now prepare to take over the country’s growth away from the regulated monopolies that were CFE (electricity) and PEMEX (oil and gas) and bring Mexico to cutting edge of energy sector from a mid-century (corporatist) system. In truth, Mexico no longer had the means of its expansion.   State monopolies were at some level extremely efficient, but at others inefficient.   These firms were long used as means of providing sinecures to the party faithful, they had bloated administrations that were too slow to changes in the demand/supply matrix. Moreover, as Mexico itself changes its power providers were poorly equipped to meet the country’s growing (and changing patterns) of energy demand.   At the same time, the country made a commitment to reduce its carbon footprint via the intr