Farmer Diaries

Several weeks ago, during a heated discussion on oil prices a good friend told me:  "You believe that oil prices are going down, put your money where you mouth is" The bet was for oil to hit $30 before it would hit $50.  That bet -- was a sucker bet.  The marginal market is unknowable.  That's simply the truth is that one serious global event and oil prices can jump back to $80.  What is more interesting is where will oil be in 24 or 48 months.  Will it remain as cheap as today. There are a number of factors at play: Producers the world over have gotten use to the $80/100 bbl economic windfall; enabling them to buy off their citizen -- from Caracas to  Ryad the plan has been "buy off the natives" US producers of expensive shall gas and oil have used "expensive" debt to fund their development.  Sunk costs are sunk!  Right now they are pumping as much as they can so that they can meet interest payments.  But soon even variable...

So Canada's Truth and Reconciliation Commission has finally closed its books and the Canadian government has decided to apply all 72 recommendations.  Fine as it stands, the Residential Schools were traumatic. The issue today is where does Canada go from here?  What is to be done about the Aboriginal problem, because its an C$ 8 billion per annum cost.  What are the solutions? First, some hard truths, if you are an Amerindian in Canada you have two choices; live a coddled and largely pointless life on a "reservation" pay no taxes and receive benefits.  Education, despite being expensive, is widely seen as completely useless.  Children leave school with little useful knowledge or socially (outside the reservation) useful skills.  If you are smart -- you get out as fast as you can. My experience, at McGil University years ago, where I met a single AmerIndian was telling, smarter than most, engaged and had little time for his tribe.  He was out i...

Oil are now lower than at any time since 2009!  That's going to cause serious trouble in America's oil patch (not that things are going to be that great for Saudi or Venezuela for that matter.  The shift from a few to many (lower oil prices benefit many while high prices benefit the few, is a massive transfer of wealth. The Saudi royals have been "buying off" their country men with the windfall of expensive energy.  Now they have to liquidate their holdings...that could hurt stock prices.  In america, nearly 50% of all junk bonds (High Yield bonds) are issued by oil & gas companies drilling expensive shall gas and oil.  So far they've been buying time with massive increase in flows, but that cannot keep up. Interesting times

Every day another nut-job professes his desire to "kill" Syrian refugee "in Paris" as if that's where they were... The most amazing thing, of course, is that America has seen these kind of commentaries before, many many times in the past -- at the turn of the century it was the Irish and before them the Jews.  Although historically America has welcomed the poor --that have served it so well, today the behavior of most Americans remains appalling.  Obama is proposing bringing 10,000 refugees to America, that compares to nearly 25,000 before Christmas in Canada, and tens of thousands in Europe.  Recent polls show that 72% of Republicans believe that the values of Islam are at odds with American values, for the Democrats the number is 48%.  There are many similarity between the Christian and Islamic faiths; neither are totally comfortable with secular governments, but Christians made (mostly) their peace with the separation of Church and State.  As for the place o...

Now that's a great headline.  This morning the latest poll, just 12 weeks ahead of the first primary races in New Hampshire and Iowa (its getting serious now) show that The Donald (TM) is now leading the field with 35% support of primary voters -- in Iowa Carson is still #2, but with the bad press -- he ran as an "honest guy" who turns out has lied about his entire life... is really toast. Things are unchanged in the Dems field, HC is still well ahead of Sanders.   The Donald continues "outrageous statements" is a non-stop spin machine.  He now suggest that the US and its friends should "Kill the families of terrorists".  Now I don't condone terrorism in any way shape or form, but history has shown that "Freedom fighter" and "Terrorists" can easily be confused -- depending on your side of the argument.  If you are a surviving member of a Yemeni wedding party that was bombed "in error" by a predator drone -- y...

So despite all the BS news over the past few months, if you had bought the S&P500 or the DJ industrial you would have assumed that 2015 was a very quiet year for investors -- the S&P started at 2020 and today is trading around 2100, a 3.9% increase and if you add your dividend (a whole 1.9%) you are looking at total revenues of 5.8% -- before tax not too shabby and certainly better than what a bank deposit will give you.  In a nut shell 2015 has been a good year for investors, at least better than for depositors. So what about 2016?  One of my very favorite commentators is Bob Janjuah -- an old colleague with tons of street smarts.  He's the voice of reason and a very good macro commentator.  He was long the whole year and told his clients to stay the course -- if not increase position when the market soften. He's now gone full bear told his investors to liquidate their positions in September on the often heard rumor that the feds were going to raise...

I hardly ever watch network TV, I don't think I've watched a political gabfest in more than 3, maybe even 5 years.  Its just that pundits the world over have an opinion, it will not change, and its why the are on TV, they're a sure thing for the bookers -- the "hooker" of the TV world -- you get what you pay for! Anyway, at a loss, in an Ottawa hotel I saw this debate on the confluence of recent Canadian elections, the Liberals' (left of centre) victory and the impact of the Paris terrorist attacks.  Present were a conservative pundit, a token "good looking" muslim women and  a radio host -- my guess is that no smart liberal wanted to be on that show.  BTW I do realize that's probably the beginning of a joke:  So a conservative, a Muslim and a radio guy walk into a bar...   Back to my story: the conservative pundit (hereafter know by her initial TK) who I vaguely know is asked a leading question:   If the Canadian elections were held the...

This morning GS in a E&P report said that the current glut in oil could easily drive prices to $20.00/bbl. Nine times out of ten whatever GS says doesn't happen!  Take gold, it's rather amazing, although GS has a 2012 US$ 850 target (when it was trading at $1,300), today it's trading at US$1077.00/oz -- so not a very good prediction (it did make the cover of the WSJ). So why is GS so often wrong?   The short answer is that GS, like all brokers, is looking at generating "buzz" for their ideas.  The real issues are the following: There is a glut of oil with virtually all storage options full Lots of investors played the yield curve assuming that oil prices would rise -- it didn't New production in the US "non-conventional" is dropping fast -- drilling rig count is down 60% Other stuff that's worrying:  overall demand for trade is off, freight rates (ships) is down 70% in a month (that cannot be good) So the signs are not good f...

Friday night the world has changed, again. The multiple attacks in Paris are a stark reminders of what happened in 2001, where several aircraft were directed at various American targets (World Trade Centre, Pentagone and White House).  These attacks are somewhat similar, except they targette the France's youth.  The region of Paris where the attacks occurred are known as the primary "fun spot" of Paris.   It was horrible! In  Liars Poker , Michael Lewis talked about how his boss would use real (horrible) world events to theorize on how they would impact the world. economy in general and markets in particular. Therefore one question I got asked this weekend was what will be the economic impact of the attacks on the world economy; we have a strange confluence -- whereas last week everyone was "anti-Putin" this week, no so much.  My first guess is that conflict with Russia is now off the table;  The enemy of my enemy is my friends (or something a...

First off, Gold's been off its feed for some months now.  Its not clear what's going on, but in USD gold is off nearly $200 since spring -- where it had been trading around $1,200/$1,250 for nearly 3 years.  Normally, I would blame the strong dollar, but its been more or less unchanged for two years, so that's not it.  My instinct tells me that something else is a foot!  My best guess is inflation expectation are going down the tube.  Not only are primary ressources suffering (e.g. oil prices, steel etc) but the central bank's pumping action seem to achieve little. This morning a very prominent hedge fund declared that "the floor on oil prices had been reached" within 20 minutes of this pronouncement oil price dropped nearly 8%... goes to show "nobody knows nothing".  But a massive failed auction of used heavy equipment in Australia, CEO of Maersk declaring that trade was far worse than the market assumed all point to further economic slow down....

Earlier this summer I was having a conversation with my father, the topic was self driving cars.  I though that within a few years self driving cars would begin as a solution to gridlock and the complete absence of parking spaces in large cities.  My estimate that "in the next 10 years" experiments would start.  My dad was far more pessimistic, he thought that the Americans would never be able to get around the liability issues (then again 30,000 people die from guns and that doesn't appear to be a problem, but I digress).   Imagine our surprise when Tesla unveiled its latest software update which allows limited automatic driving on motorway.  Furthermore two guys drove across the country with a Tesla; 99% of motorway driving was automatic driving.  It gets better, last week I learned that machine learning was involved!   That every time an American (because the software is so far only available in the US) takes his tesla on the road and activate ...

Honestly, I find myself hard pressed to get exited about any of the recent political developments.  Everyone agrees that the Greece tragedy is over, well maybe not over, but swept under the carpet, shovelled forward -- use any analogy, but there the reality of Greece's tragedy is there for all to see, the country has more debt today than it did 6 months ago, the economy is still not recovering.  We shall see -- I am still confident that I will eventually win my bet (that Greece will be forced out). On the American side things are unchanged, Canada had election and the conservative government was defeated by the left of center Liberals.  Mostly untested, but already some positive actions have occurred -- such as cancelling the F35 -- a ridiculous acquisition by the previous government of a poorly suited aircraft for Canada's usual border defence mission at a cost that is simply unacceptable, nearly $200 million per aircraft! The American long long winded electoral proc...