Farmer Diaries

So the IMF things the magic number will be 0.9%, Citibanks things 1.4%, and HSBC 1.5%.  Who is right?  really not important, what is important is that growth is substantially lower than the 3% that AMLO was hoping to achieve in 2019 and 2020.  But this almost irrelevant There are three issues here (1) Domestic generated growth, (2) foreign investor generated growth via investments and (3) US import driven growth.  AMLO has the ability to influence the first two; needless to say that over the past 12 months AMLO has made sure that foreign investors feel "unwelcomed", mainly because of his decision on "reforming" Mexico's energy sector -- the first is the shutting down of all new energy project.  Now for most builders a solar and wind farms the use of PPA -- where the government (via CFE) buys all the power is the easiest and cheapest; using a combination of export credit agency funding and private equity finding CFE has the ability to acquire energy.  It's...

I got a call, early early this morning from a friend in Tokyo.  Actually, it was last night, he's a kind of a specialist, in fact, he doesn't deal with clients, his client is his employer, he works in the equity derivatives risk management team for DB.  He got a notification of risk (figure out that a bank like DB would use such convoluted wording) basically he (and his whole team) were told that they were at risk of losing their job pending a complete review. Basically, its a kindness of sort, it means to prepare yourself, don't buy anything extravagant and work the network because you could be out.  His job is fascinating, basically, he manages the bank's derivatives exposure thereby reduce capital utilization.  It's a supremely important job since he's basically the reason the bank will make a profit of 12% instead of 6%.  Now he doesn't take any risk himself, he's not a trader he's a really really smart guy who's seen this business under al...

I've often written about the F35, Canada decided to purchase the aircraft to replace its fleet of aging CF-18 aircraft, and when I say aging, I mean really aging!  some aircraft are more than 20 years old. The logic of buying the F35, what was touted by GD as the most advanced stealth aircraft in the world made some sense when looking at the war theater in Eastern Europe, that had dominated the news for some years prior.  As usual, the military was buying equipment for the last engagement. The first and most important problem of the F35 was its cost, which was literally two orders of magnitude more than the CF18 that the Canadian armed forces had purchased int he 1970s and 1980s (and extensively refurbished in the 1990s).  the CF18 cost about 35 million apiece (in 1990's money) the F35 was nearer $500 million per aircraft. The second problem is that the aircraft is a single engine (fewer parts) aircraft, for Canada that has extensive land (Northwest Passage etc) whe...

Tarrif Man was at it again last week imposing massive tariffs on nearly $200 billion of Chinese imports...the end of the world as we know it.  For those paying attention, Trump has also imposed new tariffs on Mexican tomatoes to appease farmers in Florida who are feeling the sting of higher labor costs (thanks to ICE & its friends). The question is what does it mean; well first off its evident that, so far, the Chinese exporters have not absorbed the additional costs of tariffs -- that is usually how these things work, right now supply chains are being examined (on both sides) and decisions about future production are being made.  Nevertheless in an US$18 trillion economy -- even a few hundred billion is not that much!  So far some consumer (actually as farm products are an important staple for most household) are being affected by some rising costs (imported vegetables) and some lower costs (hog feed prices are the lowest they've even been having collapsed).  ...

Only 18 months ago, Boeing's reputation was good, sure it had screwed up its battle with Bombardier on the C-Series handing the project to Airbus that now has a full complement of aircraft from 100 seats all the way to 550 seats (ok ok the A380 is a financial quagmire).  Still, Boeing had the upper hand with the B777 and the B787 and the B737 was a dependable workhorse for short haul flights.  In the space of 18 months throughout 2017 and 2018, Boeing repurchased nearly $20 billion worth of shares.  The impact has been dramatic on December 31, 2016, Boeing's share price was near US$ 155.  On March 1, 2019, the price of Boeing peaked at US$ 450.00 per share!  In the space of 18 months, the share price of the airline had trebled!  Since then it has lost nearly $100 per share! The first "big" problem was the two accident that involved the B737MAX -- the savior aircraft for Boeing and its potential long term profit center.  Cheap to develop (all things...

On one side a government is blamed for poor economic growth, often without it being responsible.  On the other side it gains the benefit when the economy is growing; last month Canada create more than 100,000 new jobs -- youth unemployment is at its lowest in years!  See here for more. Bottom line 100,000 new jobs in Canada is like the US adding 900,000 jobs in a month -- its a lot!  Actually, its the largest number of new jobs, in one month, ever recorded since records began in the 1950 (yep only 70 years).  Again, showing how little central banks know (sorry Monique) these numbers came out just two weeks after the Bank of Canada got all "negative" on Canada's economic growth. Granted I've not looked at the type of jobs being created...still a few of these 100,000 jobs must be good!  After all the bad news suffered by the Trudeau administration, a large percentage which seems to be self-inflicted, the strong growth in the job market will play well for th...

Actually, I'm far from being the only naysayers about the health of European banks, in German banks in particular.  The reason German banks are in trouble is that the two biggest cannot count on their domestic operations -- because DB and Commerzbank only account for 15% of the domestic depositor base (compare that to Canada's nine largest banks that account for 95% of all deposits).  Moreover, European governments decided to shield their banks from reform requirements after 2009, even their 2009 intervention was different than in North America -- in the US the Treasury took shares as collateral for their "investments" in Europe they got bonds -- limiting control and upside potential. The reality is that DB/Commerzbank merger dies (rightly) a few weeks ago because taking two bad banks and making them into one bigger bad bank is not a good idea -- for politicians!  So the American Conservative Blog wrote about the European banks here , and it's interesting to s...

Over the weekend a study came out here which showed that the price of dryers (washers too by the way) had risen by an average of US$ 90.00 per machine. Following the imposition of tariffs (and aluminum too) on washing machines, some manufacturing was relocated to the US.  It is estimated that nearly 2,000 jobs were created.  As an individual that is suddenly working at manufacturing washing machines in the US, for them it's a good thing -- they have a job.  For everyone else (who is buying a washing machine) its a bad thing. The number came out and what was surprising is that after years of falling prices for washer&dryers the price suddenly shot up.  In fact, and that's the interesting part, not only did the price of foreign washing machine rise, so did the price of domestic ones.   The total cost of the tariffs has been estimated at US$ 1.5 billion -- the Treasury department got about US$ 78 million and the rest was for the benefits of the new wo...

Well, that's Monday morning for you, and it's not even April 1... So this morning Trump suggested that Boeing rebrand their aircraft, as a way of winning back the flying public.  There are a few problems here, first and foremost 99% of the flying public could not tell the difference between a Boeing 737 and an Airbus 320, secondly, the "public" for Boeing are the airlines.  Now there are between 5,000 and 5,500 airlines in the world, but in reality "real" airlines there are only 700-800 operating in the world. I would be very surprised that these "customer" could not see through a rebranding effort, when in fact the B737 is Boeing's workhorse aircraft and has for the past 40 years.   The problem is not the brand, in fact, the B737 is very respected.  The problem is this aircraft and its apparent instability that has bee managed by software -- without, it seems, informing/training the crew on how it works, what it does and how to shut it dow...

A few weeks ago President Trump was all excited by the idea that the entire legislation would be found illegal -- funny how Trump loves activist judges when it favor's his desired outcome, and that the entire law would, in fact, be unconstitutional.  This, of course, is the result of the GOP Congress stripping out a specific aspect of the Obamacare legislation. Imagine his disappointment when the GOP refused to carry the water for the President -- and indicated that they had no plan, no timetable, no ideal or even analysis of what the future of healthcare should look like.  For Trump the objective was (a) remove Obamacare -- and destroy Obama's legacy, (b) get someone to do something about healthcare that was "cheap and great".  That's the sum total of the White House's contribution to the debate. What is clear is that after the massive tax cut that took place in 2018 -- and yes the reality of lower reimbursements is partly the result of less retention at ...

The Mueller report was given to the Justice Department on Friday, and aside from those in trouble right now -- and going to jail there is little new "bad news" for Trump.   It turns out that there appears to be insufficient evidence of collusion between Trump and the Russians.  It doesn't mean that the Russians didn't try to influence the American vote towards Trump, just that Trump didn't seek this support he just got it...because as far as the Russians were concerned he was the better candidate (for them). So why was Trump so pro Putin in virtually any environment?  That too came out during the Mueller investigation; commerce seems to be at the source of his support for Putin.  It seems that for personal reason Trump views his relationship with Putin as very important, Trump confused the interest of America with the interest of Trump.  Not entirely surprising from such a narcists, but this doesn't equate to TREASON!!! Some were saying (like the G...

IN the discussions about what happened on the Ethiopian Air disaster one thing must be pointed out -- Ethiopian Air is probably Africa's best carrier and well regarded by the entire industry.  Its management is professional and it's aircraft maintenance second to none.  I suspect that it is this fact that has led to the decision by many carriers to ground the 737Max until they figure out what went wrong As for the cause of the accident, a few days still will be required to get an idea as to whether the accident was related to the Lion Air accident