The stock market broke to new lows today erasing yesterday’s gain. This helped to cast a very negative tone over the Ag complex today. Granted, I believe the market is oversold and I’m preparing to buy a bearish Supply/Demand report and test of old lows but upside potential really seems limited. Today we also saw the dollar moving higher along with gold. So what does it all mean for the grain and livestock markets?
- The bond market has been in a bull market since 1981 when interest rates hit their high and bonds their lows. The easy money policy plus with global demand especially stimulated by China have all contributed to last year’s price event. Was this a multiple year high? Are we structurally moving into along term pattern of tighter banking regulation and loaning policy? What will be the effect on agriculture if banks move from an asset loaning strategy to an income based loan? Will it have an effect on carrying charge spreads? If you’re a borrower of short term or long term money what’s the risk and how do you defend?
- What causes inflation? The books suggest it caused by grow in money supply plus active participation by consumers to buy (i.e. more money chasing fewer goods). One way to measure is velocity; we have experienced a drastic drop and in fact the biggest drop in over 48 years of data in the recent quarter. Without velocity, you don’t have inflation. How fast can velocity (consumer buying) come back? What impact will this have on commodity and subsequent land values? I will be talking about this in my upcoming seminar here in New Richmond, Indiana.
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