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| In the Scheme of Things, it is going to be difficult to address risk.
In the heat of these markets, I believe it important to step back for a moment.
Cash flow is essential. Immediate prices are good. Input prices are headed through the roof.
I believe it is a good practice to occasionally review weekly and monthly charts. Weeklies, I have found are more informative than daily charts.
There is a tendency among most humans, when prices are declining, to search for a bottom, just as there is a tendency to try to pick the top in periods of advancing prices.
The nationalization of Northern Rock I suspect is part of a Plan B considered at the most recent G-7 meeting. While this move is most likely going to kick off a rally in equities, it evidences the possible Plan B in the USA.
However, the recent Fed actions and the possible Plan B do not, and will not, address the structural difficulties in our economy.
Housing, we have discussed at length. In my view, a declining asset for some time which is spreading into commercial real estate.
Tightening credit standards in a time when consumer credit, in addition to the mortgage problem, are not oriented towards growth.
While credit spreads have discounted problems, I do not believe all of our potential problems have yet been identified.
While a glance at the dollar index chart suggests it may try to bottom in cyclical fashion, the chart also suggests the dollar remains in a strong downtrend.
Trial balloons are being floated relative to a tax cut yet this year.
The “what if’s”-
The current stimulus package is insufficient?
A tax cut is approved.
Tax revenues flatten.
The budget deficit increases sharply.
The Fed cuts more, equating to a negative Real Interest Rate.
A presidential election looms. My party has no viable candidate, an old coot who will do almost anything or say almost anything to be elected & a quasi-conservative whose chances seem dim.
The opposition party provides a choice of an economic theory-challenged female ready to support very expensive programs. She is not business friendly. More of the old school same old stuff. Her opposition, while inexperienced, has evidenced a brain and does evidence a successful gathering of grass roots support for change. In reality, neither will get very far in the Senate.
Which of these candidates would you find comfort in sitting down with you as an adviser to your business?
The private sector, as usual, will attempt to wade through these structural problems over the next few years, but in my opinion, it could get rough.
Therefore, I view patience, once again, as a good thing.
What if the dollar begins another downside leg?
What if gold, after a period of consolidation, again heads higher?
What if crude oil, the massive reserves held in the hands of non-friends to the USA, is squeezed higher?
As I mentioned yesterday, once this acreage report is known & it will be tentative at the mercy of spring weather, the real issue is 2009 & 2010. What will be the next battle for acreage? Whatever acres are pulled into crop this season will evidence about the maximum of productive acres.
The issue is, in my opinion, planning sales to serve cash flow needs for the next 6 months, I would be cautious about further down the road.
While our dollar is the reserve currency of the world, I fear it is losing some credibility.
There is a lot of blame to be spread around, including an increasing political ineptness & I find it difficult to believe, while we are applying a lot of band aids in the short run, and we may well stimulate this economy to again overheat, but the structural problems are huge and I think it is going to be difficult to avoid a hemorrhage at some point in the next few years.
Caution and patience may be a good thing. Mine is a very high risk view, but we are in a very high risk environment. It is a tough call. We face very volatile markets.
The ownership of food & assets which produce food, might be better ownership vs the US dollar.
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In the Scheme of Things.
