The Economy

[Tom Bartosiewicz]

Who here is paying attention to the Economy?? Hopefully all of us!

We should be re-entering a bull market for commodities which means, assuming minimal government intervention, we should be see higher grain prices and higher fertilizer prices.

My forcast is we will have excessive government intervention to suppress their lies (for lack of a better word) regarding inflationary food prices. This will cause high volitility in the grain markets. Pretty big swings. I think Oil will soon exceed 100 per barrel - not because of demand but due to inflation (similar to what we saw in the late 70's). This will cause our fertilizer costs to go way up as well.

Eventually - our government will lose control of the market prices for food and we'll have some interesting years - hopefully making enough money for the years they over surpressed the market.

Whatever the case - I see the next 5-8 years as historical, hard, and sometimes profitable. Rely on your history, not what you see/hear on the news!!

[Clayton Mitchell]

U.S. curbs proposed for commodity energy traders

By Kevin G. Hall
[e-mail]
Published: Friday, Jan. 15, 2010 - 12:00 am
WASHINGTON – In a move aimed at limiting financial speculators' ability to drive up oil prices, the Commodity Futures Trading Commission on Thursday proposed restrictions on the number of energy contracts that any single investor can hold and new limits on the trading activities of Wall Street banks.

The commission staff proposal comes amid growing research that suggests that the record high oil and gasoline prices in 2008 were due in part to excessive financial speculation. Much of that speculation came from Wall Street powerhouses such as Goldman Sachs and Morgan Stanley.
"Today's meeting is an important step," commission Chairman Gary Gensler said.

Before 2001, there were limits on how much control any one investor could have in the energy markets, a term called position limits. The limits disappeared amid an era of deregulation, and by 2004 oil prices were climbing sharply as the global economy grew. Crude oil prices peaked at $147 a barrel in July 2008, then crashed along with the economy later that year, to $56 a barrel. Oil is trading at just under $80 a barrel this week.

The Commodity Futures Trading Commission seeks to establish a limit on how many contracts an investor could have across all regulated markets in which oil and natural gas are traded. This would broaden the limits that existed before 2001, since it would apply not only to contracts for future delivery of oil, but also to markets that involve the physical delivery of oil and natural gas.

That's important, because several Wall Street firms got involved not only in the speculative futures market but also in the physical markets, giving them tremendous potential for market manipulation. Morgan Stanley, as a player in the physical market, controls an estimated 15 percent of the home-heating oil supply in New England. Goldman Sachs owns shares of companies that own pipelines and refineries.

Gensler and fellow commissioners said they weren't trying to regulate prices, but rather, to restrict the possibility for heavy market concentration by big investors, which could lead to price manipulation.

Many analysts think the huge flow of Wall Street money into oil and other commodities in the last decade raised the price for a range of commodities, from barrels of oil to bushels of corn.

One leading proponent of this view is Michael Masters, a hedge fund manager who warned Congress repeatedly about the impact of excessive speculation in oil markets. He called Thursday's commission proposal "an interim step, but a very good first step."

"You don't have to conclusively prove that excessive speculation is an issue. That's not their job. It can be circumstantial or the belief that there's speculation," Masters said. "I feel strongly that we have had a significant bout of excessive speculation, and I'm glad to see the CFTC taking action that is reflective of that."

Commissioner Bart Chilton, a Democratic appointee, welcomed the limits but said that they "err on the high side," meaning that he'd prefer to see them lower. He added that "should the limits prove inadequate, the agency can, and I hope will, recalibrate" them.

[Tom Bartosiewicz]

Iknow the govt is trying to control all comodities - governments have done this before when faced w a great depression. Its good to watch the news. Its better to study history!

[Daric Preston]

The grain market took a big hit this week after yield data came in. (surprise,surprise) I hope your right about it though. I do see fertilizer creeping back up with oil, but now we are on our way to spring, fertilizer historically starts to climb. I agree with excessive govenment intervention as that is what has been going on for close to 2 years now. I can't see the government losing control over the market, though. They have proved they will do whatever it takes to control whatever they need to, I mean who would have ever thought of government healthcare? I don't know who's behind it, but everytime we get good grain prices like 2008, input costs follow suit taking away from farmers bottom line. (ie. fertilizer: potash was at 850 not too long ago, round up 65/gallon, NH3 1200+/ton) It was all insane.

[Tom Bartosiewicz]

Daric - you are correct! However what is different now is the amount of money the US treasury and the Fed have pumped into the economy to "save" us. Which really means to save the governments rich and powerful friends (the bankers in most cases).

However - what this means is there now is almost 2X as many dollars "chasing" the same number of goods and services - also known as inflation. So prices now MUST come up. This has occurred many times in history - even back to Roman Times despite governments attempt at controls. In fact in Rome, the emperor decreed a ceiling on prices. If you violated the ceiling max, you were put to death - but guess what? Prices kept climbing as Rome continued to debase their currency (print more money).

Now in the US today, these numbers are ballpark numbers, but from 1930 to 2007 the government (and Federal Rerserve) were able to put about 950 billion dollars into circulation around the world (77 years). Between 2007 and 2009 they took that number to 1.7 Trillion - over twice as much in only two years!!. So they have now effectively debased the dollar. This is why you are seeing countrys and states go bankrupt. Its in the news everywhere! As our dollar loses value, their currency does too as the dollar is the "reserve currency" for the world.

In Rome, hyperinflation took over and I believe there is a likelihood the same will happen to the US. Its happend before in the US - with the continental and all around the world many many times. Just go to Wikipedia and search hyperinflation and see what it describes and see if you see that happening here and now (for starters).

So you may find fertilizer 10x higher in 3 years than you paid in 08 and grain 20x higher or 100x higher or hell 1000x higher than normal. Our government can only control this as it starts to unfold, once it goes its uncontrollable.

The surest sign that its failing is the Federal Reserve, world banks, and our governments manipulation of the price of gold like the world has never seen. As gold goes up, currencies are failing and they cannot lose their currency! So their is a war going on between banks, governments and gold. They don't see however, that gold has NEVER once lost this war - it wins 100 % of the time - currencies have never won. There is always a war - economists say that every so often, gold must "account" for all the currency in circulation. It did this in 1980 where it rose to 850 dollars an once - finally "backing" all dollars in existence. The inflation adjusted value of those 850 dollars (per ounce) to todays dollars is 6000 dollars - so many believe gold is expensive at 1150/oz now - well not compared to 1980 - it still has allot of room to grow!

So its gonna be interesting - but I believe farmers must begin to ban together as I fear the years where volitility could be so high that fertilizer costs are 5x grain prices so you go broke if you try to plant - So I'm happy to see this forum. It could also play out that for the first time in history, farmers are driving BMW's, etc and Wall Street is out on the street!

[Clayton Mitchell]

Here's a bullish view of the future of agricultural commodities.... http://www.cnbc.com/id/34874608

Food Shortages Coming, Buy Commodities: Jim Rogers
Published: Friday, 15 Jan 2010 | 4:48 AM ET Text Size

The financial crisis is likely to lead to food shortages in a few years because the agriculture sector is in dire need of funds, legendary investor Jim Rogers told CNBC Friday.

Buying distressed commodities is a better way to make money than investing in stocks, according to Rogers.

"The fundamentals (for agriculture) have gotten better," he said. "The inventories are now at the lowest they've been in decades, not in years."

"Sometimes in the next few years we're going to have very serious shortages of food everywhere in the world and prices are going to go through the roof."

Cotton and coffee are good buys because they are very distressed, while sugar, despite the fact that it has gone up a lot, is still down 70 percent from its all-time high, according to Rogers.

"I don't think that the problems of the world are behind us yet," he said.

Investors shouldn't bother with stocks because commodities are likely to win in both the optimistic and the pessimistic scenario, Rogers said.

If the economy rebounds, commodities prices will rise because of increased demand, while if the economy continues to be weak, central banks will keep printing money and commodities will be used as a hedge against inflation, he explained.

Rogers is holding on to oil and he is also holding on to gold, saying they are too expensive to buy but not worth selling.

"If you want to buy precious metals I'd rather buy silver and palladium, just because they're cheaper," he said.

[Tom Bartosiewicz]

Rogers is an idiot - Yes commodities are going bullish and will but according to those quotes he cannot distinquish between price and value. Gold is still vastly undervalued if you understand the history of that metal. Further, if you understand the future of the metal - you would buy gold.

Please go to GATA.org and do a little reading there - there you will find that GATA is sueing the Federal Reserve Bank for manipulating the price of gold. Why would they do this?? As gold goes up, the dollar goes down. If gold goes up enough, a bubble will form as the world decides that the dollar is worth nothing and exchanges dollars for gold. This the Fed (and all the world central banks) cannot risk!!

The Fed only cares about their currency, not you! As they take a massive short position against gold, they will artificially depress (and or surpress) the price for a period of time. One way they can do this is by issuin IOU's for gold - sometimes taking the form of ETF's and other paper assetts backed by the metal. What happens is they still many times more paper then can actually be backed by the metal and to sell the paper backed gold, they are not required to carry a reserve of gold - nope not one single oz!!

What can happen is the free market decides it no longer trust all this "paper backed gold" (at some point in the future) and begin to cash in their paper for the metal - but its not there and the gold rush begins - its like a bank run but no where to run to - the "price" explodes until the metal determines its new "value".

This will kill your currency as almost overnight inflation will destroy the middle class.

See the attached file which simply asks some very important questions.

[Tom Bartosiewicz]

Also - while the fed manipulates gold - the US Government is manipulating grain prices by removing the free markets ability to speculate. This too will backfire once shortages occur and also - watch gold - if it exceeds 4000 USD per oz, the entire market will destabilize - and I agree we could see allot of barter occur and grain will be very volitile.

I think its a good time to be a farmer! Though perhaps stressful

[Daric Preston]

Scary stuff, I believe it's all possible. I also believe our country might get to the point of the barter system again when are money is worth nothing. My question is what happens when us farmers input costs are more than it's worth to plant? What do we do then? Do we not plant and starve? Does big government bail us out, so to speak? I don't know. I do believe that all the money that is being pumped into the economy is bogus money we don't have and is contributing to inflation. What happens when China cashes in our ticket? Did we put up collateral to them like land, natural resources, etc.??

[Adam Gaska]

You go back to fertilizing the old fashioned way, manure. You might get a lower yield but better then no yield. It'd be a good position to be in if you had a mixed operation- i.e. row crops and livestock.

As to the China question, the short answer is yes we put up collateral. If we default, they have grounds to make a case to the WTO and World Bank that we should open up natural resources and land to foreign ownership. There won't be questions anymore like should we drill ANWR, the Gulf, the Pacific Coast but what company will get the bid- and it probably won't be American.

[Tom Bartosiewicz]

Actually we did not and do not collateralize our currency (debt). It is backed only by the "good faith and credit of the american people". I am reading a book right now called "When Giants Fall". It historically reminds the reader of the fall of the roman empire and soviet union and compares those to whats happening now fiscally and otherwise in the US.

China has its own problems right now - but their only leverage is to trade out their dollars for another currency or to succesfully lobby (with other countries) to have the dollar removed as the base currency for the world. If that happens, the dollar will crash and become worthless. That is their leverage. They can crush our economy on their own if they simply decide to trade all their dollars for euro's (for example). The value of the dollar will be zero.

But don't forget - we are their largest consumer. If we are not buying the crap they made, they're economy will crash too - so it makes little sense for them to crash our economy. The sad part is that they could. And what concessions is our country willing to make to appease their inevitable depression if we do not resume buying their crap again - and soon!???

Good work Bill Clinton!!!! Great policy!!! Dill-Weed!!!

[Tom Bartosiewicz]

When planting costs exceed expected revenue - we must ban together and NOT PLANT our fields. Leave them fallow - this will only occur due to excessive government intervention in surpressing grain and food prices due to their own pitiful fiscal policies. History tells us, they (governments) will tax and penalize farmers - all the way back to Roman Times. But the world markets will prevail - so long as we stick together.

I am hoping the economy goes off like a bomb lit by a fuse - it will eliminate the governments ability to react and intervene. It will force a showing of their true colors (no longer a democracy) and the world will see, and our countrymen will see, from the poorest of the poor to the wealthy, what they have created and what we as people have let them create and will have CHANGE.

A few definitions I have learned recently:

Armageddon: Means "A lifting of the Veil" (not the end of the world)
Crisis: Means "Change screaming to occur".