Farmer Diaries

Well rumors are that Saudi Arabia has suggested that every producer cut production by 5% -- again this is a rumor and nothing may come of it during OPEC's next meet & greet.  Again agreements can be made and they can be broken. On top of everything Iran is back in the oil game, for real, and things there are getting interesting. Gartman -- a loathsome analyst said that we will not see oil at $40 "in his lifetime"  -- well that could be long as it could be short, but again aside from some free publicity I don't see how Gartman can make that call.  18 months ago oil was at $110.  Who would have called oil at $30 then? Europe keeps on being fun, as is Japan with "no negative interest rates ever" -- at least until this morning.  Banks in Europe keep outperforming (NOT) the sad truth is that Europe is in a slump and the first to be affected are financial institutions.  Looking at charts none of Europe's major bank have reclaimed their market cap of 20...

What a strange few weeks it has been.  Oil prices fell all the way down to $28, just to rebound a few days later to $32 -- as of 10 minutes ago they are just north of $30.  The stock market is in crisis -- we seem to be having a major correction, although its not entirely clear that its a major correction (it could just be a garden variety version -- after all the US economy is NOT in recession).  Some segment of the economy are in trouble, this morning all the talks were that another shale oil producer was about to "give up the gost".  Granted in America we are not talking about liquidation we are talking Chapter 11 with a write off of debt and equity -- new owners will keep on pumping.  The world is awash with oil, Chine diesel consumption is growing slowly, Saudi Arabia's bet that they can get the world to stop producing --- seems to be hurting them most.  The impact of a transfer of wealth from the producer to the consumer is the great unknown as for e...

If I knew I would be a rich man!  One thing for sure is that there's still lots of long position out there. Every Tom, Dick and Harry saw the "easy trade" of going long oil because the forward curve was steep -- a cannot lose trade, that is losing lots of money for a lot of people. Where will it end?  A very good question, demand is simply not rising -- Europe, which is a net importer of all energy things should be rejoicing, but in fact things are getting serious there.  Greece remains a basket case -- and the yields have recently started rising again.  The European banking sector seems to be facing a very difficult times and the word on Italian banks is "Get Out Now".  It never made sense that Italian debt was priced inside that of the US. Europe is in a difficult place, deflation (especially imported from China) is a problem, the Southern countries problems that were swept under the rug are coming back to the foreground and Germany's mind is else...

" The Dallas Fed met with the banks a week ago and effectively suspended mark-to-market on energy debts and as a result no impairments are being written down. Furthermore, as we reported earlier this week, the Fed indicated 'under the table' that banks were to work with the energy companies on delivering without a markdown on worry that a backstop, or bail-in, was needed after reviewing loan losses which would exceed the current tier 1 capital tranches ." Zero Hedge, January 18,2015 That's more like it!  There is no doubt that the US bank's exposure to the drilling sector was large. Ideally, for the banks was to issue bonds (Junk, but they like to call them High Yield...) that was the feed for the US energy sector over the past 5 years.  Almost any project was fundable, because extraction costs were around $50/$60 and prices were around $80/$90.  As of 9:00 am today oil prices (WTI) are trading around $29.95, so that producers are maximising output so as ...

Historically, the BDI has been one of the best measure of global trade growth or contraction.  Its an index with few problem because if the number of ships increases then the index may fall despite trade growing -- which is what happened in in the early 00. The BDI is a measure of bulk shipping -- we are talking steel, minerals and other bulky items that are not moved by containers.  The BDI peaked at 10,000 in 2007 but also fell to near 600 in 2008 -- a function of the economic crisis -- Now for many economists, like myself it was a useful tool to ascertain economic health of economies, such as that of Canada, which are primarily dependent on the export or raw material. In the 2008 crisis it lost a bit of its usefulness, for not only was there a economic crisis but there was also a known schedule vessel replacement cycle.   The bulk carriers have an expected lifespan of about 20 years, and the replacement cycle in 2008 coincided with the economic crisis -- making ...

This morning Telsa's newest software iteration was released to all users (in the US for now) that now provides a Summons Feature (SF for short).  What is SF, well you press your key fob and the car will find you.  it will drive out of the garage, it may fill itself with electricity independently, but the car will drive to where you are.  Imagine arriving at the airport and "summoning" your car to the curb... I though this feature was years away, in fact it was weeks away. The important thing here is that the car can move without a driver and passengers -- the taxi of the future if you will, the ultimate "shared economy".  My guess is that in very large cities -- New York, London, Mexico this will become the norm.  You are part of a club, when you need a car you summon one to pick you up...voila! The news out of CES (Consumer Electronics Show) could not be better for Tesla -- because absolutely every car manufacturer is building an electric car out there...

When I became a banker, in 1984, the financial world was well organized.  In the City of London there were clear rules as to who did what, fixed commission the easy life; then Tatcher's government decided to tip over the apple cart and implemented the Big Bang of financial reforms.  Big American brokers set up shop in the City covering the globe with their knowhow.   In no time the old City was swept away -- the Americans with their speed and capital took over and impose their rules -- granted the American learned their share of new stuff, foreign currency were a no mans land, I was privileged to "assist" as a very very junior banker, as the first European interest rate swap was written (we didn't think we were doing something that would change the world).  It was just a contract.  The Americans could be amazingly obtruse; one back office guys in New York, decided that Sterling could not be worth more than the US dollar -- and for months booked F/X trades u...

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...