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| I don’t own a motorcycle, gamble in Las Vegas (anymore), or other regional establishments, but after a lifetime of stress related activities I sometimes find something of interest in which I depart from my tried and tested rules. Old crop wheat.
Call it what you will. My long time NYC trader friend, as I messaged him into the close yesterday, telling him I thought March wheat had reached a level of ownership and was adding to my little position, messaged in return “you are insane.” He, of course, is the fellow who messaged me 8 or 9 days ago indicating the petroleum market ‘had legs and better get aboard’ & after a sharp break, in which he rode large positions in both crude and natural gas into a huge loss for a couple of days, is now riding high with record oil prices yesterday and overnight. At the time, I told him ‘you are a genius.’ Of course, he is several years younger. Over the years, I have determined there is a fine line between genius and insanity (also a certain disconnect between old fogies & senior citizen wanna bee’s—him) we now have $1 bet on whether he will have to arrange transportation for me to get to the car wash to begin my new career as the possible result of my old crop wheat trades.
I believe people of “the soil,” raised in climates of 4 seasons handle stress better than most and frequently possess more patience. However, some of us have those Scandinavian genes touched with ancient Viking influence and admittedly can be a bit eccentric; my grandfather who, along with his brother, were stowaways to the USA from Norway at ages 10 & 12 & they often told me when adolescents they climbed the occasional windmill to relax and feel more at home. One ended owning a big spread in the Red River Valley, the other in Minnesota; my friend of nearly 35 years is Chinese. I am hoping to win the $1.
As I watch the markets this early morning, we have $92 crude oil, the dollar is at a new low & I continue to observe the ‘talking heads and experts’ assure the world the housing dilemma will not hurt the economy.
I hold a different view, and have held this view for quite some time. I am a bit familiar with homebuilding. When medium quality homes constructed for $100 per square foot, or less, are sold to folks unable to afford it, at $150 to $200 per square foot…a re-adjustment is forthcoming. One other fact keeps gnawing at me. When the market is saturated with houses, many of which are sold to non-credit worthy buyers, does not our future demand base dwindle? Most importantly, throughout recent history the consumer has relied upon a home increasing in value every year. Provides a comfort level. What will be the average consumer reaction to a home losing value over the next 3 to 5 years? May sober them into spending a bit less affecting consumer purchasing patterns. What we have, as the experts stand on one foot, glance at each other, then move to the other foot…is once again is most likely going to force the Fed to reduce interest rates & we may well have a tax payer bailout hiding in the shadows. Going to have to print some money, plus our inept (does not matter which political party) foreign policy is going to require some money printing…so who in their right mind wants to own a dollar?
Those of us who survive by our wits (includes agricultural producers) watch the political players, few who have intellectual means to address those problems, face some real dilemmas. How do you plan 5 years down the road when you have no assurance of any meaningful benchmarks for costs? You have to market your product carefully, taking advantage of strong speculative bubbles but you are most certainly forced to speculate on some of the production because of all this uncertainty.
As I mentioned yesterday, when some countries are putting price controls in place & others are subsidizing their domestic food prices & we are reacting to the Middle East chess game amidst players not having to be responsive to voters, our group faces challenges. Continue to be careful, I still believe we may yet see a third and final leg up in some of these world markets. But, that is purely speculation. If history is our guide, when these issues are again on the back burner, prices again may crash around our heads.
Overnight, the Chinese soybean futures settled at new highs: May08 $583 MT US equiv. & May08 corn at $220 MT US equiv. in response partly to a heavy & unexpected snow fall in the productive crop regions and yesterday’s Chicago markets. Palm Oil settled at new highs in Singapore.
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The Big Casino
