Your comments about oil are particularly interesting in that the price of oil is, of course, controlled by a cartel. This is pretty close to what you think about cattle, if I'm reading you right.
And yet there is a cycle, too, in oil, despite the cartel. That cycle is based on supply and demand which would seem to be controllable by the cartel but, in fact, is beyond the control of the producers. It is beyond their control because it is based on world-wide economic strength and demand which is not easily discerned or controlled.
In my old industry we used to have a saying "The market will out" that meant that in any situation, the forces of supply and demand will eventually overcome other forces. I think it is unlikely that we will see oil at $11 a barrel again, at least short term. And we may not see the other highs and lows that you outlined in the short term. Note that I have never said that we will see feeders go to .40 a pound, either.
But not seeing those lows does not negate the idea of the cyclical nature of commodities. I think we could see oil pull back to, say, $40 to $50 a barrel (it's rash for me to make a prediction on oil since I know little about where we are in the oil cycle). That sort of pullback would be a roughly 40% decline from where we are now. But in an economic slowdown, that could easily, easily, occur.
Your point about buying when prices are low and selling when prices are high is interesting but, generally, directly opposite to what most people do. In fact, most people only feel comfortable doing what most other people are doing and that is buying when things look good, prospects are fine and prices are high. And they sell when things look tough and prices are low. The opposite, of course, to what they should be doing. The keys to making money in anything, I think, is to seperate your emotions from your decision-making, remember that the market doesn't care if you make money or not and, finally, realizing that making a decision based on what you want to happen is a poor way of proceeding.
So where are we now? What I see is a market that has been bouyed by getting over the BSE crisis, with the U.S. border open, with real high bred cow prices and high prices for our calves and with the U.S. cow herd in an optimistic, expansion mode. So, a good time to buy, right, with only good things ahead in the future? For me, it looks like a good time to sell, or at least cut back. I'll wait for the time that people hate calves, can hardly give their breds away to buy back some heifer calves.
kpb
And yet there is a cycle, too, in oil, despite the cartel. That cycle is based on supply and demand which would seem to be controllable by the cartel but, in fact, is beyond the control of the producers. It is beyond their control because it is based on world-wide economic strength and demand which is not easily discerned or controlled.
In my old industry we used to have a saying "The market will out" that meant that in any situation, the forces of supply and demand will eventually overcome other forces. I think it is unlikely that we will see oil at $11 a barrel again, at least short term. And we may not see the other highs and lows that you outlined in the short term. Note that I have never said that we will see feeders go to .40 a pound, either.
But not seeing those lows does not negate the idea of the cyclical nature of commodities. I think we could see oil pull back to, say, $40 to $50 a barrel (it's rash for me to make a prediction on oil since I know little about where we are in the oil cycle). That sort of pullback would be a roughly 40% decline from where we are now. But in an economic slowdown, that could easily, easily, occur.
Your point about buying when prices are low and selling when prices are high is interesting but, generally, directly opposite to what most people do. In fact, most people only feel comfortable doing what most other people are doing and that is buying when things look good, prospects are fine and prices are high. And they sell when things look tough and prices are low. The opposite, of course, to what they should be doing. The keys to making money in anything, I think, is to seperate your emotions from your decision-making, remember that the market doesn't care if you make money or not and, finally, realizing that making a decision based on what you want to happen is a poor way of proceeding.
So where are we now? What I see is a market that has been bouyed by getting over the BSE crisis, with the U.S. border open, with real high bred cow prices and high prices for our calves and with the U.S. cow herd in an optimistic, expansion mode. So, a good time to buy, right, with only good things ahead in the future? For me, it looks like a good time to sell, or at least cut back. I'll wait for the time that people hate calves, can hardly give their breds away to buy back some heifer calves.
kpb
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