Hey guys, everything moving ahead perfectly isn’t it.. no one should be too surprised by any of the price action we can see before us, imo.. I’ll do a technical and macro comment on another post but firstly price controls/free markets..
I’m not sure who else is trading the softs here but anyone close to these markets must have little (NO) faith in the USDA claims. In fact i find it almost comical they way they try and play follow the leader with agri prices. Its a complete joke for anyone involved. The USDA should be embarrassed by their various releases, imo. US Ministry of Agriculture propaganda, for sure.
http://theswash.com/2011/06/30/party-over-for-corn-market-bulls-after-usda-acres-stocks-surprise/
In truth the USDA’s various price control tactics are simply part of systematic and repeated attempts to control all sorts of prices in our markets. This must be the conclusion for anyone involved at the sharp end. You cannot trade these markets day in day out and not be shocked at the level of massaging on a week by week basis of all sorts of prices from interest rates to agri prices to energy prices to direction of investment flows from housing to green matters.
In summary, the band, within prices are free to move, is becoming thinner and thinner as time moves forward.
Why is this happening?
There is a wealth of data and writings as to how economies get themselves into these positions. Even our own recent history, in the 70s, provides a wealth of evidence with everything from price to capital controls being applied as money supply grew. Very simply if you operate an economy on extreme ratios of savings/capital to debt the system becomes extremely susceptible to shock. On ratios of savings to debt in the DM markets, here and now, we are the 70s on steroids.
Free markets contain plenty of shocks unfortunately. Therefore to sustain an economy at the extremes of savings to debt prices must be controlled. Its as simple as this. Nothing complicated here. We have been these roads so many times through history again and again and again and again. From the Roman coin clipping to ‘copper nose’ Henry. In our age of immediate gratification, so few seem ‘bothered’ to investigate to understand these things. All it takes is a quick google search. All the information you need is at your finger tips.
We are where we are.. There is no turning back now. So, to sustain the system, as it is, prices must be controlled to some degree. This control creates all sorts of side effects or unintended consequences. These consequences demand more control and so it goes on. Of course the real problem with this approach is that the system becomes less and less efficient as time marches on as layer and layer of control are applied. This is why stocks generally do badly in these non liberal markets/ inflationary periods. It is also why it is important to maintain a portion of your assets in pms no matter how accomplished a trader you are.
Having said this stocks are a far better place to weather the centrally planned system than cash or bonds for obvious reasons. Fortunately half of the world has the western ratio in reverse. ie high savings and low debt. So this area will demand less planning and inevitably more freedom of capital will be allowed.
So it is that, short term, prices must not drive your allocation too sternly. Given the above we must allocate more capital to areas of the world where a positive ratio of savings to debt can be seen. There are plenty of states where this occurs. These markets will be free and operate far more efficiently that planned markets where capital will be attacked and even seized remorselessly.
Some readers here must suggest this is waffle. They might turn away at this point to watch the next market watch video. The immediacy and availability of ‘fast food’ information encourages a lack of patience and thought on these things. I ask you to switch off from these for 30 minutes at least.. consider the big picture here.. ignore the short term for a moment.. Think big not small. Look at your assets and how and where they are allocated. Consider the next ten years and start to position for what is about the occur.
In my humble opinion we are entering a decade where we will see a sustained wealth transference from developed markets to emerging markets. The trend is firmly in place and in fact the greatest transference is simply beginning. The geopolitical implications of this capital transference are very serious and very likely to provoke some sort of future armed conflict within this decade, imo.
Rich
(5 votes, average: 5.00 out of 5)
Loading...