Farmer Diaries

First, the CAD is a Petro Currency, it is most affected by the price of oil (and not coal) and for the past few weeks oil prices have dropped dramatically, due in part to the risks of recession (maybe) in the U.S. and of collapse (looking more likely) in Europe.   First, there is no doubt that the Euro is heavily overvalued, from the Big Mac Index all the way to PPP analysis they all scream to the fact that the Euro is just making Europe uncompetitive.   Proof is that the bulk of its trade in internal (this is a newish phenomenon). So the CAD has lost about 6% of its value over the past 3 months – when oil price (WTI was flirting with the high $80s).   So far so good, but the AUD has fallen by 9% and the Brazilian real has loss nearly 1/5 th of its value against the greenback.   So the CAD   has held its value rather well. The CAD’s reality is that it behaves as a petro currency but in fact oil only accounts for a small percentage of its exports (I ...

In 2010 there was a 20 minute flash crash that basically wiped out a trillion dollar in wealth.  Turns out the SEC only interviewed those who caused the crash two weeks after they published their report on the flash crash (due to the sale of 75,0000 emini). An analogy would be a police officer interviewing the store owner only a few weeks after he finished his report on the crime.  It makes no sense, unless there was a pre-determined objective, and that the interview was just an item on the check list. What is the SEC being accursed of?  Simply, that they had no real interest in what actually occurred only wanted to prove their pre-established theory.    What ever the facts were in the case was of little interest.  Wall Street has its wish with the SEC -- window dressing at best.

Yesterday, at 3 pm the S&P was down 2%, the news while not terrible was not good.  ECRI remains in the doldrums (predicting a recession for Q4 or Q1/12) and very little data was out.  Suddenly, market goes crazy; the result 60 minutes later -- as the market closes for the day, the S&) is up 2.25% -- a 4% shift in less than one hour. First, there is very little volume right now, there is no conviction, so while the market is soft its not moving really very quickly -- although the market is off 8% from its September high and 17% off its 2011 high (so really not that hot).  Over the past few days the market psychology has been one of Bear Market -- so the technicals took the market for a ride, and exploded the shorts -- bottom line the pros to the market to the woodshed  and started the quarter with a nice little profitable day!

Ok, most guys (women usually don't care about this one little bit) remember that in all the star trek episodes someone was speaking to their computer to get things done.  You know "Computer where is Scotty!", well today in Palo Alto, Apple unveiled  Siri -- its new app on the Iphone4S (no Iphone 5) where one guy asked to its phone:  Will I need my raincoat today, and the phone answer "it certainly looks like it will rain today", or please wake me up at 6 am tomorrow -- and the phone sets up a wake up call. Now having tried to used  Naturally Speaking by Dragon (it really really sucked).  It reminds me, an older colleague with poor eyesight (or just getting older) found out that you could speak to your Blackberry to get it to dial a phone number.  Set up was simple, but endless hilarity ensued, I think I almost pissed my pants I was laughing so hard, when he could not even call his number, it would not recognize anyone at all.

Still a little too early to be sure, but 2011 is looking like a good year for Canadian farming.  The weather has been clement with lots of rain in the early season and a dry end to the summer.  We are not talking 2008/09 levels of production for wheat, soybean, canola and Barley, but still very acceptable. Although Canada is not (by far) the largest producer of these grains, it is one of the world's largest exporter of grains.  BTW, how many people know that the world's single largest exporter if rice is the good old US of A. Anyway, a bit of interesting Canadian news. As an aside, everyone on Eastern North America noticed this year that lobster were cheap.  At first, you think its your imagination, but it turns out that 2011 summer has been a "bumper crop" for lobsters.  Somehow the North American lobster fisherman have been very successful, and the average size of the lobsters has also risen. No one knows what's the reason...

Readers know that I live in Quebec -- land of socialized medicine, and that I hold relatively "right wing" market economic views.  Quebec (like all Canadian provinces) runs its own health care system, Quebec is one of the poorer states in the country, our size makes up for the average income -- we stand behind Ontario, British Columbia and Alberta, but just ahead of the Maritimes.  Yet our residents require the best health care system in the world -- but of course since private providers are prohibited by law from operating in the province (one of the most restrictive systems) it makes sense that if you prohibit the provision of private healthcare, that the government takes over this duty. One problem has been the emergency room crowding, it is easy to wait 12 hours -- don't arrive at the emergency on a Saturday afternoon!!! However, emergencies have been expanded dramatically over the past 15 years, there has been a change in the way residents and...

Until this morning I had not been aware that Amazon.ca now sells more than just books (its mainstay until a few months ago).  What happened is that Amazon finally opened a warehouse in Canada (several actually) that cater to Canadians. One of the oft lamented problems between Canada and the U.S. is that goods tend to be more expensive in Canada than in the U.S., and for no good reason.  There are essentially no barriers to trade between the two countries (Except for shoes... go figure) and so Canadians have long been insulted that cars would sell for 25% or even 30% more in Canada than in the U.S. -- that has now changed (thanks to the gray market) because Canadian dealers were losing too much trade -- the posted price (on the internet) is still higher in Canada but when you head to the showroom prices are nearly identical. Now the great equalizer has arrived -- Amazon:  which sells everything from cookware to stepladders on its website-- guaranteed delivery...

From Reuters this morning: JPMorgan Chase & Co and Bank of America Corp were hit with new lawsuits by investors seeking to recover losses on $4.5 billion of soured mortgage debt, expanding the litigation targeting the two largest U.S. banks. Sealink Funding Ltd said between 2005 and 2007 it bought nearly $2.4 billion of residential mortgage-backed securities (RMBS) from JPMorgan and $1.6 billion from Bank of America in reliance on offering materials that were misleading about the quality of the underwriting and underlying loans.   According to court papers, Sealink is an Irish entity that oversees RMBS purchased by special purchase vehicles once sponsored by SachsenLB. Another plaintiff,  Landesbank Baden-Wurttemberg , raised similar claims in a separate lawsuit against JPMorgan over $500 million of RMBS that it said it bought. The plaintiffs seek compensatory and punitive damages. Newsflash:  Everyone was thinking of American hedge funds taking the baseba...

Used to be that if you looked at the S&P 500 futures market you had a good idea of the market's psychology. No more, yesterday market was "all green" and opened up 1%, by 15:00 it was down 1% but closed up .81%. this kind of volatility is due to very small trading volumes, and market participants looking for direction by pushing the price around.  For investors it is a dangerous time, because the moves can be sudden.  Old trader joke, the market takes the stairs going up, and the elevator going down...  The market is driven by forward earning estimates (determined by 25 year old recently MBA graduates), who are told by the companies they cover: "What to expect".  Bottom line the actual performance and these indicators bear little correlation.  in 2008 analyst were predicting earnings of $75 per share -- the actual number was zero (we also got the S&P500 at a close low of 666 -- how fitting). American Companies have h...

July would seem to see Canada's economy recovering from its dismal second quarter.  On an annualized basis, there is still hope that the 2.1% target by the BoC can be reached, although the rest of the year will have to generate the same kind of growth that was produced in July. manufacturing grew by 1.4% which is excellent since it reverse the previous three months of poor performance.  Every sector bar retail and construction advanced, and with continued rising national income savings are also going up (despite the poor -- or maybe because of the poor yields).  Oil and Gas continues to be a drag on the overall GDP numbers, but this is entirely due to price decline (as opposed to decline in volume due to the fires earlier this summer). Overall, the number was positive for Canada.  However, externalities remain the #1 problem for the country.  America seems to be, at least not in a recession, at the very least operating at stall speed...

So, Industrial production price input (IPPI) was up a bit in August +0.5% (Huge yawn really), guess what all the increase in prices is due to cost of motor vehicle (big whoop!), whereas raw material costs were flat (and will be falling for September -- you can bet on that). Some of the 2011 census data is starting to emerge, the big stuff:  Canada's population is 34,403,800 up 1% over the past year, aging is a bit of a problem since fertility rate is below 2.1% (population replacement rate). Average age is 39.9 years (up 0.2 years) and 16% of Canada's population is below the age of 15. Bonus:  Last week, a report came out that the Americans were thinking of building a "wall" between Canada and the U.S.  initially I thought it was a joke (a bit like the Onion), turns out no so much (Globe and Mail today).  Apparently, the Americans have decided that it would be a very good way of keeping terrorists and illegal immigrants out...

Canada's housing market continues to defy gravity.  A cursory look at the rest of the planet of those countries that have seen a strong housing market after the 2007 crisis -- China and Australia, are both now facing rapidly slowing market. Yet, for the 4th month running Canadian house prices are up, this time by 1.3% (July) , in June  it was 1.7%.  Canadian house prices are now 12% above the 2008 peak (Source: national Bank of Canada & Teranet National Bank House Price Index) What is driving these prices, well mortgage rates have restarted their downward trend of the past 30 years.  We forget that in October 1981 Canadian mortgage rate peaked at 22%, falling almost without interruption (87, and 95 stick out as rises 10% to 14% and 6% to 10%).  Today mortgage rates in Canada are around 5% for the 5 year term (Canada doesn't have the U.S. system of 30 year fixed mortgage), and less than 3% for the 1 year mortgage term. ...