Farmer Diaries

It is Christmas day, and of for the past few days I have not written very much. Frankly, the Canadian scene has been quiet -- aside from inflation data that showed that inflation is not under control in Canada, in reality inflation is steady at 2.5%, while transport costs (read fuel prices) are rising much faster. GDP growth for October was flat (after many months of strong growth).  The reality that is GDP growth seems to indicate that Canada strong Q3 growth will be match by adequate Q4 growth, but nothing to write home about. It makes the numbers for the whole year closer to a level of 2.0% than the 2.5% that had generally been hoped for. It is hard to say what will happen in 2012, since the BoC's hands are tied by global economic conditions.  The tea leaves for Canada are impossible to read, the events emerging in China, Europe and America will determine what happens to the Canadian economy. Europe's story for 2012 seems to be largely written, and the news is not ver...

Just notice the counter on my post hit the 502 number --- cool

Some will have followed the Congressional hearing on John Corzin, the ex-head of MF Global, a middle size American investment bank, and broker that seems to have lost or misplaced around USD 1.2 billion of segregated client money. The picture that is emerging is that MF was using clients' money to improve its return by borrowing -- and pledging these funds to acquire government owned security .  Never mind tthe conflict that emerges from borrowing clients money without compensation, the reality is that MF was basically borrowing this cash so that MF could "gamble" in the sovereign bond market .  Usually because the risk of losses in sovereign bonds is very limited the lender (MF Global) can re-lend this moeney several times -- creating leverage.  It seems (and not all the information is in yet) that MF re-lent these funds many many times over -- but when the European bond market moved (by two or three percentage point) the collateral (Provided by MF's clients) was es...

One of my hero's, a man ow wit died last night.  All those who followed the last year of his life new that he was "fighting the fight of his life", although to hear Hitchen, it was not so much a fight than it was a contemplation since he had little energy from the chemotherapy. As a life long atheist he bugged America's known nothing right, and delighted many with his erudition, I've got several of his book on my Kindle reader for the holidays. A fascinating man

First, the really crazy story ; It was reported this morning that the German government is forcing its citizen into prostitution.  Hard to believe but according to the report a German women has been threatened with losing her unemployment benefits unless she accept a job in a brothel: "providing sexual favours".   You see prostitution is legal in germany -- it can only occur in certain area, like the Reeperbahn in Hamburg (as an example).  Now, the American puritanical right has been warning for years that légalisation of prostituions would lead to women being forced by their government into prostituions.  Turns out they may be right (I still think this is crazy). However, there are a few things that don't add up in this story.  Say for example that you are a guy and are offered a very dangerous job, would the government have the right to terminate your unemployment benefits if you refused that job???  Still strange! ...

On new years eve 2000 I was celebrating the "new" millenium with my family in southern France -- we would watch the new year celebrations on the hour every hour as each time zone celebrate the new year (BTW I am fully aware that the new millenium only starts at the end of 2000 -- so don't point it out).  French television was effusive when the French capital did its "show" with the Tour Eiffel being the spectacular center piece of the new year celebration (it was such a hit that the lights that were installed for that event are still there today).  An hour later it was London's turn; the Brits really pulled out all the stops and the fireworks were spectacular.  The French commentator was so pissed-off that he started bad mouthing the British economy and social framework (at 1:30 am!). Well we had a repeat last night.  It appears that the head of Banque de France (Christian Noyer) was being interviewed in a region...

According to the FT (December 14) the German government is working on a plan to rescue Germany's second largest commercial bank.  Commerzbank could be the first European institution (after Dexia) to fail. I wish this was a joke ( here ), but the reality of Europe's over leveraged banks, and the fact that the $30 trillion Eurobond market has been closed for months, means that all these attempts to keep the boat afloat are now facing increasingly strong storm currents... As Zero Hedge said this afternoon:  "the German government has begun preparations for a possible state bail-out of Commerzbank." The plan would be activated if CBK is unable to figure out a way to fill a €5.3 billion shortfall in the next 30 days, which in reality will likely turn out to be far greater when all of the bank's dirty laundry is exposed for all too see. And with German banks by far the most sensitive to any perceived "tipping points", since it is the German state ...

My head says be true to your beliefs and analysis, my heart says the world will muddle through! Each path has a very different outcome for Canada, and only in a few times in history have the pressures of change been more powerful.  In one corner we have China, the engine of growth for Canada with its insatiable demand for raw materials -- the core of Canada's strength.  In the other corner we have China the  65 million empty apartment massively over-invested economy battling inflation and a weakening economy.   Data out of China is famously unreliable, certain data points used to be useful (energy consumption) but over the past decade China's government has made this data less reliable.  Economists have used coal consumption (the primary source of China's energy) as a barometer, but even these datapoints have become contaminated.  Its a little like the USSR of old, not only was the Kremlin lying to the world, it was lying to itself;...

IN late 2010 I made the following predictions: 2011 growth would be around 3% 10y T-Bond would price around 2.95/3.30 (because of inflation) 30y T-Bond would price below 4% but remain above 3.3% Inflation would be higher than BoC wants but Carney & friends have few options Oil would remain around $100/bbl CAD/USD would trade in the 97/101 range. How did I do? Turns out not so well on the important stuff, the 10y and the 30y fell dramatically during the year, in fact as an investor the 30y has been a spectacular investment if you consider that yields have dropped from nearly 4% in January 2011 to 2.57%, nearly 1% below my lowest target price.  The same is true for the 10y that fell from 3% in January to 1.75% this morning. Growth:  the numbers are not all in, but while the first half was a disaster the second half of the year saw an explosion in GDP growth that could take Canada GDP growth rate within spitting distance of my 3% target.  Better ...

Being out of the loop for a few days allowed me to take some distance from Friday morning euphoria regarding Europe's most recent summit.  Looking at the cold reality of what has been agreed, a fiscal pact seems to have been struck by Europe's 17 (maybe 24 soon).  This falls well short of what is needed to repair the problems, but is a first and significant step in the right direction. Most amazingly, reading the data available shows there are numerous ways for a country to derogate from the targets and stil escape from financial penalties.  Amusingly enough these penalties are not spelled out anywhere -- but the derogations are!   Fundamentally, the initial problem persists; the only proposed solution is a deeply "protestant" one "those who overspent have to cut expenditure" -- there is no element of debt forgiveness.  An unrealistic (but locally for Merkel, politically expedient solution) position that assumes t...

As one famous ultra-right wing economic commentator once said: "Canada makes things that if you drop them on your feet, hurt".  Canada makes steel (or at least Iron ore), we make copper we make gold and plenty of soft commodities.  Not only do we "make" these things we export the great majority -- which enables many Canadians to flee Canada's harsh winters. Canada's banking system is made to measure to serve these industries, we know that demand is a boom/bust scenario -- unending change from feast to famine driven not by Canada's doing but others exuberance or at times soberness.  Canada's financial institutions are deemed some of the safest in the world because they know that today's feast can quickly change into famine. The past quarter of century (and the last decade specifically) have belonged to the emerging nations and as far as Canadian exports, China in particular.  The Chinese story has been one of massive investments -- accounting...

I finally got my walking papers from my employer -- after waiting and hoping for more than six months, my (now former) employer finally came to its sense and made me an offer I could not refuse, I happily walked the plank, and I am now officially unemployed -- Yeah bitches! Not entirely sure they were expecting my reaction, they are nice people, but I they keep on saying no to my deals!  What`s a guy to do? My silence over the past two days was due first to the above mentioned:  "Your services are no longer required" episode, but also due to the fact that I had "minor" surgery yesterday morning -- the most painful part was when they removed the surgical tap that held the surgical cloth up (to keep the area clean).  No worries dear reader I was not emasculated -- no the "operation" was near my eyes -- I now look like a punch drunk boxer. I`ve been out of it for 24 hours -- but the news this morning is far from glorious.  Don`t kid yourself, the...