Farmer Diaries

Over the weekend, Draghi spoke at the Jackson Hole economic symposium. He addressed the  absolute disaster  that unemployment in the Eurozone has been, but also made the case that the ECB has been somewhat limited in its ability to address the economic situation in the bloc because of austerity measures taken by European governments.  Ok so first off, Draghi has no control over fiscal policy (he can have a word, but nothing else) .  Moreover, when European government put the breaks to spending (largely at the urging if the ECB -- with an objective to cut deficits) the impact was, surprise, surprise, economic contraction. Amazingly, the ECB is now saying "it's not us, we didn't tell Portugal, Spain, and their friends to cut spending". Guess what then, European countries put pressure on their economy to stem the flow of capital out -- so that the pain would be mitigated, the ECB was surprise of this outcome --  "Sovereign pressures also interrupted the homoge...

Twice last week I got that question, don't know why!  I keep on telling all my friends that I must be the world's worst stock picker -- if I choose it, it will go down.  Anyway, the markets have decided that the news is suddenly bad, don't know what is different suddenly (not wars, not economics).  It used to be that in thin summer trading "trolls" could play their games but with the advent of high frequency trading this is no longer realistic -- for those who don't know HFT accounts for 40-50% of all trading activities on most North American markets. So since computers don't take holidays summer doldrums cannot be it, maybe the markets have over-reached over the past few months.  I always commented that the markets were rich over the past few months -- corporate profitability has never been higher (NEVER) as a percentage of GDP, earnings multiple while not insane are "rich" insofar as there's not much increase in multiple (again the logic ...

Google analytics is cool, a bit of "porn" if you will, and I've notice that of late (I've not written anything in two months) Russia has been the biggest source of readers for my blog!  Now I should not get a big head about this, we are talking at most 50/60 readers a day, hardly a large population, still its funny to think what makes me attractive to them -- maybe my "non-American" voice (really Canadians think they are not Americans... we are a little delusional some times). Anyway, an amusing situation -- BTW the second largest reader base are Americans followed by Australia -- Canada is 6th. Back to work now!

Over the past few days new records have been set; Spain saw rates on its new 5y debt at 2.5%, the lowest ever -- and that's a country that has had a debt market for 500 years!  Italy saw its debt rate fall to a new low, the same day that the Italian government admitted that it owed more than $100 billion in late payments to its creditors (local suppliers).  What's going on, for a start there are no risks in Europe, the ECB has decided that it will buy all paper not absorbed by the market, making peripheral (higher yield) Europe a sure thing for institutional investors, this is particularly true for the short dated instrument (interests could still go up -- and destroy bond values).  But deflation is a greater risk (especially since European countries are locked-in with a single currency) its almost an objective of current policies. The above graph is very positive for Europe (not good, but positive) insofar as the total debt volume is down, mainly because core Europe ...

Numbers as published are always subject to revision.  The initial Q1 U.S. GDP number has been revised as more information was made available.  Today, the US government revealed that Q1/2014 GDP growth was revised downward from -0.7% to -2.0%.  Apparently healthcare costs that were assumed to grow by 9.9%, and account for about 15% of overall GDP actually fell by 6% instead.  This is a truly terrible number, one of the worse (top 10) since the end of WW2.  If that provides some perspective! It's going to make the 3.5% target set by Wall Street difficult to achieve!   In other news the boys on Wall Street are suffering, low volatility and a scarcity of new deals in the 2nd half of the year means that banks are thinking of trimming traders numbers and even IB guys are looking around in fear (let's not exaggerate) nevertheless it is we'll know that the bonus pools are shrinking, and that the banks are mindful of their overheads! The usual exit strategy into pri...

So Ms Lagarde was in Montreal yesterday for the "Montreal Conference" a watered down version of Davos that aspires to do... something.  Anyway, the lunch speaker was Christine Lagarde the current head of the IMF (Washington based) and all around cheerleader for capitalism! The highlights was that the global economy is back on its feet, yep we're looking at 3.5% growth in America and "something positive in Europe"  China should be around 7% -- less than before but still respectable, shifting towards consumption... Ok so there are a few things wrong here, Q1/2014 GDP growth in America was -0.7%, so to make the 3.5% target Q2/3 and 4 are going to have to be gangbusters.  Still, Europe is going to get something positive because the ECB is so brave -- they have entered into the land of negative interest rates.  If you accept a deposit from the ECB, you pay them interest.  There's no way that this can go wrong, and deflation is not just around the corner.  As...

Sometimes I love the ticker! Shares of AAPL in the pre-market are trading around $92 a share... sure the stock has lost 85% of its value overnight, there was big news today -- AAPL stock split 7:1.  So really nothing to see here.  All the automated news will show that AAPL is the biggest looser today -- some will correct the news to reflect the split.  Others will not. My bet is that a few investors will call their broker in panic!  The stock is down, the stock is down sell it all! It reminds me, a million years ago, my then firm had created a structured product for Nortel shares.  It was a strange instrument created in the early 00s (before Nortel went bust).  So in 2005 I get a call from this angry investor, because her structured note was not going up, and all her friends at bought Nortel at $8 and it "was going to $18" -- according to her friends. I had to point out that she had bough the instrument when Nortel was at $85, we had offered to buy ...

Watching Greece over the past few months has been an education, and education in the rise of fascism! Turns out that the Greek population in general is not enamoured with its politicians and their current method of "saving the country"  The new favourite pastime for the middle class (well educated at that) is to support Golden Dawn a avowed  fascist  party that is "blaming the Jews" for all that has befallen the country. Granted financiers have a lot to answer for, but they're not the ones who spent like drunken sailors -- yes bankers were enablers, but... at any rate in local election Golden Dawn which is just short of being thugs (actually not that short) and who have committed some rather appalling actions (and enjoy a bit of Nazi salut) got almost 10% of the vote. It's really not that surprising; considering the state of the economy, the unemployment and destruction of the middle class that a far right party would take hold of the popular imagination...

Yesterday's tragedy in Moncton (where 3 police officers will gunned down) just brings closer the whole firearm mess that is a constant headline grabber.  In the US the number of "daily" incidents is so large to make it almost farcical.  The number of American who manage to shoot themselves (or their family or friends) is simply depressing. Interestingly enough gun ownership is in free fall in America.  Despite all the rhetoric and the crazies in Texas with their "Open Carry" demonstration gun ownership has dropped from around 40% in 1980 to around 25% today.  granted those who own guns tend to own many many guns! Look at these two morons!  I mean you've got shorty on the right who's clearly got some "size" issue -- will anyone ever tell that guy that his assault weapon is some form of penis replacement therapy (well maybe not to his face), and as for the fat bastard on the left, you know he's wanted to be a soldier all his life but al...

This morning the local French newspaper (called La Presse) released a new poll for 18-24 year old party affiliation/interest.  The result is both stunning and obvious; from the 500 young people who were asked, 34% would vote for the Liberal party, 23% each for the CAQ and QS and 16% for the PQ. What was obvious at my time in high school and college that the "cool and Hip" crowd supported the Parti Quebecois -- the party pushing for the independence of Quebec (maybe) is no longer true.  The Party Quebecois is GrandPa's party -- its no longer cool, and the people who run it are the same who were running it in the late 70s and early 80s! The reality is that young Quebecers don't really see their future here -- 60% say that would like to work and live elsewhere!  Canada, the US doesn't matter -- they are considering a future (or at least dreaming of) that doesn't include Quebec and its "aspiration" to become a country. For the PQ that is about to sit...

American Q1/2014 GDP growth that was to be 3% (when discussed in late 2013) was finalized last week....drum roll; its -0.7% (I presume that the media will blame the weather).  Why is the economy underachieving what everyone believes to be the right way to go? There are several reasons:  First off, median income continues to fall, America's middle class is seeing real wage contraction and has done so since the mid 1980s.  There is no doubt that the contraction in high paying blue collar jobs is a culprit, personally I blame the financial services that accounted for less than 5% of GDP in 1980 and today accounts for nearly 10%.  This "value added" has to be paid for. Looking at machinery from cars to telephone via white goods (washer etc) one inescapable truth is that the craftsman is a dying breed.  Two years ago my range oven "died" it was $900 to replace the electronics or $1,200 for a new range oven.  Guess what I did -- I bought a new oven.  Wor...

Last week StatsCan announced that jobs were down 29,000 in Canada for the month of April!  That's not good news with Quebec and the Atlantic province suffering the most.  In  fact, Quebec accounts for 110% of all job losses in Canada -- the province actually lost 32,000 jobs -- but the rest of Canada made up the difference. This is not good, and in fact, will probably probably cause the Loonie to drop some more over the next few days (which it did). Sometime not only is the Nominator in the equation an issue, sometime its the denominator that has an impact.  As an example, Europe has seen no real changes to its economic fundamentals, France's government budget deficit is going to be huge, again!  Greece has seen no reduction in its overall debt burden, in fact it continues to worsen.  Italy that has a new government (and seem to want to tackle some hard issues), the market has given an unusual sign of confidence with historical low borrowing rates, but th...