Now That the Election Is Behind Us...
Nov 07, 2012
Obama remains President! As I mentioned the past several weeks, it looked like very few changes in American politics would come from this election. Bottom-line, Obama keeps the White House, Democrats keep control of the Senate and Republicans keep control of the House. Essentially all the major principals in Washington keep their jobs – Obama, Boehner, and Reid. We do now have record number of women serving in the US Senate (congrats). Do you realize the last time a Republican was elected President of the US without a Nixon or Bush on the ticket was Hoover back in 1929...WOW!!! Lets just hope the markets care more about "clarity" rather than the actual players involved in the game. Just as some "uncertainties" regarding the US elections are put behind us, more uncertainties regarding the US Fiscal Cliff, Greece, Spain, the Chinese economy, the US Debt Ceiling, Iran and Bernanke's possible replacement all lie ahead.
Just food for thought, if Bernanke chooses not to serve beyond his current term which ends in January 2014, the Obama victory means someone more like Janet Yellen, who Obama nominated to succeed Donald Kohn as vice-chairman of the Federal Reserve System back in 2010, could be the favored replacement. Keep in mind most considered Yellen just as dovish as Bernanke, if not more.
What will US businesses decided to do with their cash. As we have come to learn, many analyst believe US corporations now have over $1.7 trillion in cash on their balance sheets waiting to be spent. The problem is many of these businesses are deeply concerned about the US "fiscal cliff", the increasing rate of US debt and the possible US budget crisis. An Obama victory, without some type resolution by January 1st, could mean automatic spending cuts and big tax increases that could push the US quickly back into recession. Meaning US businesses could now be very concerned that consumer spending may quickly dry up. Therefore US businesses may simply choose to sit on their cash rather than expanding their operations, not wanting to get caught up in the setbacks that could occur.
As we all have come to learn in life no solutions are perfect, but in my opinion no challenges are insurmountable, especially for the United States of America...still the most powerful nation on earth. I remain incredibly bullish on America, lets just hope somehow we can get this train back on the right track!!!
As for today, traders will be adjusting to US election results and trying to determine just exactly what it means moving forward. You have to believe longer-term the election provides us with bullish tailwinds in the commodity markets on thoughts of a US dollar that will remain fairly weak over the next four-years. However there is some concern about "money-flow" as large US trades now face more regulations and increasing taxes. In the Ag's more specifically, we now have continued talk of corn and soy production estimates being reduced in Argentina despite South American weather forecasts improving. There seems to be some debate moving forward about Chinese soy demand in light of falling crush margins, along with thoughts of the US soy crop getting larger this Friday. US wheat is now all of a sudden the cheapest in the world, and US corn is slowing starting to look like it will gain some export interest as we turn the calendar into 2013. From my perspective there are still simply too many balls in the air for any clear direction to be taken. With this in mind I suspect we stay range bound, with wheat seeing the least downside (at least for the interim). Spec's should remain conservatively bullish, while producers should be using any type of rally to get caught up on 2013 (new crop) sales. Wheat producers should be looking hard at a few more new crop sales in DEC13 up above $9.00.
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