‘The Great Financial Writeoff’

[GDR]

Again, my apologies for touching-a-nerve, but markets are always right, not opinion . . . .

Markets are now in the process of telling investors the true health of financial markets. Central bankers have failed miserably, talking up inflation until recently and pretending economies are healthy enough for rate hikes. QE has been a failure fixing nothing while producing producing far more capital than available investments. This created the U.S. stock market bubble. Simply, a parking lot for money struggling to find a home.

It’s not my intent to stir the pot, it’s my intent to offer opinion ‘outside’ of the political and banking sector that is directly tied to the health of ag business. If this motive is an insult to Agvillers, then it is time to leave this forum.

Keep the comments coming, always welcome.


In this scenario won't the money keep flowing to the stock market and gold. I cant beleive the fund managers and the wealthy would settle for negative or even flat returns for more than short term. Would be pretty risky for funds to post consecutive losses, customers would be jumping ship even if the alternative isn't any better.

[bucket]

...."...but markets are always right..."


Can you explain those markets? Are they the markets where 27 billion of government money has been committed and more to come as the trade war goes on....

Or is it that steel market in Canada that gets its tariff money back in the form of a subsidy and they continue with higher steel prices????

Or is it that market where every so called capitalist gets a government cheque for creating a few jobs....

Or is it that market where again those so called capitalists need the government to implement a TFW program because the capitalist won't pay for labour....since it reduces shareholder dividends...capitalists are welfare bums....


Where is this market that is always right...sounds like the government is always involved in the market...

The one exception is western canadian primary production....we are such noble people ...we pat ourselves on the back for using equity against government's treasuries that are impacting our markets that are...." always right " That's a bullshit statement....



You have to also believe in Santa Clause , the tooth fairy , the easter bunny,,,and unicorns....

[Rareearth]

Yes Errol keep it coming.

Buffet seems to favor ownership through stock markets, and Pattison buys companies outright for control?

Every one has their preferences.

I like to invest in my lively hood, what I understand, work life balance etc., yet government and politics is the main risk. Is it worse with Ag than with other businesses or industry?

[AlbertaFarmer5]

The key takeaway here is that this is global, not isolated. Hyperinflation happens when it is one country who prints to pay off debts in foreign currency and the market then loses all faith in its currency and governance, quickly spiraling out of control. In that case there are alternatives, so no one holds or accepts the hyperinflating currency, instead trading it for another currency, or hard assets as fast possible before it is even more worthless.
When it is occurring to all major economies at once, there are no alternatives, just some are really bad, and others just terrible, making it quite sustainable for longer than anyone thinks possible.

In this case, everyone is offering negative rates, and many pension funds are mandated to hold government debt, plus other asset classes are deflating.

[sumdumguy]

It is easy to comment on monetary and macro policy as opinions are free and welcome but as Rareearth says, “where’s the solution”? Opinions of “sky is falling” are cheap and are perpetual - I had a father who spent his life preaching the “sky id falling” theory. Thank God he never lived what he preached - we would be working at Walmart today.

[macdon02]

Keep the comments coming, always welcome.


In this scenario won't the money keep flowing to the stock market and gold. I cant beleive the fund managers and the wealthy would settle for negative or even flat returns for more than short term. Would be pretty risky for funds to post consecutive losses, customers would be jumping ship even if the alternative isn't any better.

Yes capital will shift in my opinion from bonds to equities, what isn't regulated by govt. Regulation was put in place in 2008 that a certain % (up to 40~) as bonds were deemed "safe". They have no choice. SEE THE PROBLEM? That's whats unique today compared to previous. The sheer size of the bond market is overwhelming, if there was a mass exodus it would double triple quadruple commods currency and equities, i have no idea the exact impact but it's massive.
Then you need to look at the industries that place their entire holdings in bonds in short term and overnight, banking, insurance, etc. and the consequences of having them wiped out. In my opinion it isn't what the fed does that'll be the next trigger it'll be the ECB and Japan. The difference between now and previous is the cb's are out of bullets. Nobody knows how it'll unfold exactly. Look at the breakouts above long term resistance on a monthly level for clues. When govts can't borrow at any price the results are not pretty as contagion sets in like '08 equities and commods, it's almost automatic a 62% cut. This is only theory, however it won't resemble anything in our lifetime. Could be 1929 or 1800's when states last defaulted.

[Rareearth]

Expect lower interest rates with bond market problems?


German 30-Year Bond Yields Goes Sub-Zero for First Time: Germany’s bond market is widely perceived as being one of the world’s safest as investors are lured in by the liquidity and credit quality offered. Now, the Euro area’s biggest economy joined Denmark and Switzerland in the region in offering negative returns to investors, taking the total stock of investment-grade debt yielding less than 0% to $14 trillion globally. I should mention, funds looking to extract a positive return from European sovereign assets have been forced further out the yield curve or into riskier debt markets such as Italy. I suspect this will most likely raise the probabilities of the next U.S. rate cut coming in September

[macdon02]

There's a stampede for the lowest currency happening, China started talking of a 6.9 peg and market immediately went over 7. New Zealand has now cut 50bps and its currency dropped 1%, India cut 35bps, the Aud has dropped. Gold was over 1500 briefly tonight and USD is hanging right in there on top end of resistance. Either gold or USD is making a false move, i have my suspicions but will wait for confirmation. This is gonna get interesting

[malleefarmer]

Was discussed on rural radio today at lunch time.

Hmmm gold and agland both safe havens not sure about the second.

Another commnet on same session was ag is first to go into recession/depression but always always first out.

Just a opinion who knows but like errols posts better to have some knowledge on possible scenarios

[TOM4CWB]

There's a stampede for the lowest currency happening, China started talking of a 6.9 peg and market immediately went over 7. New Zealand has now cut 50bps and its currency dropped 1%, India cut 35bps, the Aud has dropped. Gold was over 1500 briefly tonight and USD is hanging right in there on top end of resistance. Either gold or USD is making a false move, i have my suspicions but will wait for confirmation. This is gonna get interesting

China has built an economy and Nation on their Chinese currency... bought US debt with US currency... obtained by sales of products bought...

As long as there is production and trade... currency will be used for the exchange of these goods and services... the US $ is King so far...

How does land here... in western Canada... over double in 5 years... when reported inflation is less than 2 percent...

Yet wheat and Canola dropped in price.

Farm equipment doubles... but what is it actually worth???

China devalues its currency...

What is something worth...? What the buyer will pay the seller for the product....in a currency payment that is trustworthy to be useful to the seller. Commodity Marketing no less... hence the need for futures and options...

Trust... in the integrity of the currency...

[bucket]

China has built an economy and Nation on their Chinese currency... bought US debt with US currency... obtained by sales of products bought...

As long as there is production and trade... currency will be used for the exchange of these goods and services... the US $ is King so far...

How does land here... in western Canada... over double in 5 years... when reported inflation is less than 2 percent...

Yet wheat and Canola dropped in price.

Farm equipment doubles... but what is it actually worth???

China devalues its currency...

What is something worth...? What the buyer will pay the seller for the product....in a currency payment that is trustworthy to be useful to the seller. Commodity Marketing no less... hence the need for futures and options...

Trust... in the integrity of the currency...

Tom

I highlighted that one part ...you could also say " ..what the buyer is forced to pay from the seller for the product.." Because how does a combine become worth 750000 dollars...protected territories etc...

And then it goes back to the value of grain and land in relation to everything coming onto the farm...there is a disconnect....

[macdon02]

Looks like the IMF wants to make "Deep interest rate cuts". Checkout the part on paper currency not having a par value to electronic. Here's the link to the pdf.

https://www.imf.org/en/Publications/WP/Issues/2019/04/29/Enabling-Deep-Negative-Rates-A-Guide-46598

Are we ready for -10% or -15%? Save all your life and it looks like govt will take it to prevent recession. There might be no leaving the farm in the future if cash savings are going to be seized. This leaves a lot of questions moving forward because they are running on the same hypotheticals that was supposed to produce the opposite reaction of today. There's a lot of things we been told over the last 90 years that are going to turn into lies. Promises are going to be broken. Eliminating the concept of savings and positive interest rates will simply destroy govt programs as they rely not only on taxes but interest compounding like it did before 08. This is gonna be a bloody mess.