Keep in mind that if the S & P does bottom on X date at 550 that half the sectors will bottom before X date and half will bottom after (to deny this means you are suggesting that all sectors will bottom on the same day). My bet is energy will bottom on the front side of X date. But for now, I would not be a hero.
The thing that keeps me up at night is the Pension System. Talk about a Ponzi Scheme - nothing could better describe the U.S. Pension System This has all the makings of a surreal political crisis.
I hate to be negative. I have been negative for so long, and I hate it. But ignoring the data in favor of optimism for optimism's sake is just plain silly. Besides, I don't work for CNBC.
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I am "down on the farm" in Tennessee at the moment. I spent the afternoon being depressed by the guys down at the local farmer's cooperative. People here in rural Tennessee are broke, and their food assistance program dollars are not enough to get by. So gardens, backyard chicken flocks, rabbits, and dairy goats are breaking out everywhere in Wilson County Tennessee. People are buying seeds, gardening equipment and the equipment shop at the co-op is backed up 3 weeks with folks bringing in their garden tillers and other equipment they have not used in years, according to my friend there.
As I was listening to this I was reminded of Dmitri Orlov's "Reinventing Collapse". That guy is a bloody genius, although I doubt he is the kind of genius we were hopping for. It seems that Orlov was essentially correct, that the collapse would occur one individual at a time. It seems that for a great many individuals here in rural Tennessee, the collapse is here.
Tomorrow I will be going to a local farmer's "flea market". This (if you are from New York or L.A. or Miami) you gotta see. The biggest seller is/are "layer" hens - chickens already old enough to be laying eggs. A good layer will give their owner 5 eggs per week, and after 3 years the hen can be consumed as a "stew chicken" (too old to be anything but soups and stews).
Besides chickens you will find pigs, goats, sheep, emus (yes! emus!), llamas, alpacas, etc... it seems everything except cattle. The locals buy these and slaughter them at home or have them slaughtered. Chest freezers are very popular here. If I can, I will take some pictures.
Good Luck,
Mentatt at yahoo dot com
11 comments:
Coffin freezers are popular because they are practical. It takes me a couple of days to defrost mine when I need/decide to. On the flip side if the power goes out for a day or two it’s no problem. N.b. it stays frozen for the same amount of time as it takes to defrost because when the power is out I leave the door shut, except for a few seconds to retrieve something, and do not blow a fan in it.
Conversely the handier upright freezer dumps all the cold air on the floor every time you open it.
Dan:
Excellent point about the upright freezer dumping the cold air on the floor!
I have a huge "coffin" freezer, as you call it, as we raise animals on the farm that go into that freezer.
I was impressed that people here are responding in a practical way... gardening, fruit trees, and back yard chickens, indeed! Somehow I doubt poor folks in major cities are taking matters into their own hands like that... but that must happen, too.
Posted to Kunstler's blog last week ...
Dear Jim:
You stated in your blog today that you were anticipating financing problems for the 2009 crop year. That couldn’t be further from the truth. If there is one exception to the high risk borrowing, it would be agriculture. Having learned some difficult lessons in the 80’s, farmers by and large are in great financial condition in comparison to Wall Street and Main Street. The reason: Most farmers have little debt leverage. Ground that has been selling for astronomical levels over the past 5 years has mostly been purchased by farmers – FOR CASH! There will be no difficulty in obtaining financing for the 2009 crop. The banks would like for nothing more than to get their grimy hands on some prime farmland as collateral for operating loans.
I am a relatively small farmer with about 1,200 acres of row crops including corn, wheat, soybeans, milo and sunflowers in SE Illinois. My biggest fear isn’t financing for 2009 crops. My biggest fear is the continuing collapse in commodity prices. Current price levels for grains won’t come close to breakeven. My biggest fear is that once I plant my crop, prices will continue to plummet and I’ll be left stranded with huge input costs for fuel, machinery, labor, land, fertilizer seed, etc. Our input costs have not dropped in synch with commodity prices.
The other possibility I see is a systemic collapse of the banking system which would leave us with the counterparty risk of not having a viable end user to purchase what we grow. At the moment, my best strategy would be to leave my land idle and preserve my capital instead of throwing it on the crap table. It will require approximately $ 375,000.00 for me to plant my crops this year. We are about 45 days from normal planting date. It’s getting pretty scary at the moment.
I’m afraid as farmers we’ll be diving headlong into the abyss. . .
Dave Burt
Burt Farms
Bureacrat:
I saw that; as usual, most outsiders misunderstand farm economics - me included. There is a good reason for all of the Ag colleges out there...
I was pointing out that the federal food assistance program, a big part of rural income in the south, is insufficient. I was thrilled to hear that the response was large gardens, requests for assistance from the local Agriculture Extension office, and small livestock - rather than gas station hold ups.
This is farm country. But most of the farms here have been put out of business in the 1980's by the big industrial farms. That is changing - somewhat slowly - but changing. I noticed last year that the local slaughter house was inundated with folks that either raised or bought their own meat animals. 2 families splitting a meat steer, keeping a dozen laying hens and a milk goat save significant money over buying their meat at the local WalMart. Not just on food prices, but in not needing to get in the car, drive 15 miles round trip (this is rural country), paying for the gas and wear and tear on the car...
Raising a calf to slaughter and finished on grass (this is healthier AND cheaper, but the meat is different no matter what the organic folks tell you, although once you get used to it it is fine. Chicken raised on grass (and bugs) actually tastes MUCH better) cost us about $100 in milk replacer and maybe $20 in grain to get it started until it could graze on its own. $95 for the slaughter house fee and 400 pounds of meat... sounds like a little over $.50 per pound. Maybe I should throw in $40 in gas... getting the calf, driving to the slaughter house and back twice....
Still, very much worth it if you have the land and equipment (cattle trailer). If I had to amortize the trailer (which we use for our horses) I guess it would not work, but then again we could always slaughter at home.
If the industrial farm does not survive for WHATEVER reason people in the West are going to be stunned by the cost of their food.
http://www.marketskeptics.com/2009/01/hyperinflation-will-begin-in-china-and.html#comments
Greg you should read this...pay particular attention to the lightsaber duels between Misha nd others in the comments. Mish as usual was an arrogant prick..but the arguments are very interesting.
Yeah, Mish has this annoying tendency to be right, at least since early 2007. :)
As the MS and I (and every other trader in the world) both know, being right for so long means that a piano is about to fall on your head.
I know the Feeling Bureaucrat.
What Mish has been doing is aying we are going to have deflation since 2004 perhaps before that. By all un-massaged statistics everything is much much higher in prices since then. He uses statistics for convenience.
From 2004 when home prices went up not a damn word about them and when they start going down he took out owners equivalent rent from CPI and added Case Schiller home prices into it to show deflation.
Like I said he is an arrogant prick
Hehe, it is my humble opinion that he is using the right historical and theoretical models to make economic predictions. When a "science" such as economics acknowledges that it itself isn't even a science, but an art -- when PhDs like Bernanke and those before him screwup so hugely practicing their expertise -- we have to look for other prediction models and then stay patient. You two are entitled to your "every hour is a new belief" way of looking at trading. But I've always had a thing for that very small sliver of the population that just gets it right almost every time. Such people are very rare. Elton John may not appeal to everyone, nor Madonna, but you cannot deny they make music that lasts and is enduring, if not hugely popular. If it takes a small group of people like Mish to claim that Austrian economics and financial history is the best way to predict what is going to happen every time A and B and C happens, I'm afraid I, as an investor, have to judge how right they are and how much money I can make on those theories and past predictions. I think you both believe that optimism is necessary to successfully invest. But I am more comfortable with finding lately what doesn't work, and capitalizing on that, as I am now. :)
As Greg so often says, markets zig and zag. People that stick to one story until it comes true haven't predicted anything. Mish seems more than a bit that way to me. However, he seems to earnestly try to compare apples to apples in his historical analysis. The statisticians in our government seem to very much engage in obfuscation to hide the huge inflation that has gone on in housing and the general economy since the 70's. On this Mish is absolutely right.
This whole mess seems to have evolved from the inflation of the 60's and early 70's. This caused a housing boom, where everyone was trying to get in before prices increased. I was just out of college, and everyone 5 years older than I was trying to buy a house. The limiting factor was the monthly payment. The BIG IDEA was to get in now and pay later in cheaper dollars. Interest was at 16%. That's also the time when leverage in the home loan market started to increase in earnest. 20% down became a thing of the past.
For the last 30 plus years, we've been encouraged to pay the max our present income can stand. As interest rates lowed to 4%, the leverage on that part of a home purchase increased 4 fold. The 20% down "reserve requirement" went to ZERO.
I think that Paul Volker and the Reagan administration tried to stop it. Their attempt killed the savings and loans and caused the stock market mini crash in '87. No one has had the guts to try since. From that time on, the whole idea has been to feed the beast and make sure it didn't get hungry until someone else's watch.
I don't accept the notion that Greenspan and the rest of the folks at the Fed and treasury and Congress, for that matter, didn't know where this would end up. Same for the bankers. That's why the mortgage market got so crazy while no one said a word.
When interest approached zero and the downpayment was zero, the only way to feed the beast was to loan to those who couldn't pay at all. Don't think for a minute that the hotshots at the Fed weren't telling the bankers that they would be made whole when the bubble burst. Well burst it did, and now the bankers and bond holders are being bailed. Big surprise. Too rotten to fail.
They were all just hoping against hope it would be someone else's problem. Now, bad bank debt is rapidly being turned into federal debt. It will be financed with our tax dollars. See, it is someone else's problem. It's ours.
Sorry for the ramblin' rant. Just couldn't stop myself.
And Greg, I feel for the workers in the financial industry, too. Very few anywhere have escaped damage.
Regards,
Coal Guy
(Sci, the prices that matter are all way down: houses, cars and energy specifically) :)
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