The Road Ahead for Markets

by Michael Seek Fox Group at the Board of Trade

Pictures are worth a thousand words, however, we’ll go ahead and add the ‘words’ for this current issue of Livestock Plus magazine. The Fat Cattle market has shown amazing resiliency the last half year and while the Feeder Cattle market here on the Board in Chicago has been more elastic the sale barns have not flinched. The US Dollar has been on its back for a long time and while the inflation metrics the Federal Reserve uses have shown a decent shift down the reality is that the Fed is no where near where they want to be on inflation nor where they want the Fed’s balance sheet of MBS [Mortgage-Backed Securities and US Treasury Securities] to be. This back drop will be a grinding process on many markets as the inevitable interest rate escalation rattles the mortgage industry and takes 30-year mortgage rates from 10 to 12 to 15 to 18%. Again, do remember that mortgage rates were as high as 18% in 1981 and those days were mild in inflation and domestic debt on a government and corporate basis.

Most livestock folks would reasonably expect an upcoming Corn market sell off to fuel Feeder Cattle to the moon, but we do not think so since beef demand has to contract at some point while the stock market continues its long term bear market that will continue to bleed 401k plans that in turn should keep the price of beef from reflecting a ‘shortage’ of Cattle on the dirt. Why? Because they say it can’t.

Many bull markets turn on a dime and in a longer term manner when just about everyone is saying ‘it’s different this time’.

Bottom line? The 14 years of easy money facilitated by the Federal Reserve is over and when money is no longer easy then you have to assume that 30 to 40 year rallies in bonds and stocks are ‘goose cooked’, meaning the low hanging fruit is off the tree on a 50 year run on real estate, using 1973 back in the oil embargo days as the beginning of the long term real estate market that has rewarded folks who acquired homes in the early 70’s but that was then and this now.

The stagflation that is present will likely transition into a depression within 24 months when Fed monetary policy proves unable to achieve substantially lower rates of inflation that leave United States economic growth at a level that allows strong personal benefit or reasonable earnings per share.

If you you see 161 on Feb Fat Cattle or 192 cwt on March Feeder Cattle by the time you receive this current issue of Livestock Plus Inc magazine you’ll know to take inventory on the dirt and quickly so that you can forward contract and attempt to lock-in attractive gains per head on your cattle on the dirt. Do not assume that the next sharp drop on Corn will push the Cattle Board up without looking back. Eventually just about all major commodity markets will bleed like a stuck hog. Domestic and Global debt must be paid at some point and if it cannot be repaid then the system will have to ‘reset’. How is the entire system ‘reset’? We are not sure. Time will tell. Until then you need to have hedge accounts in place to hedge asset classes’ that your gut and objective and outside financial sources confirm. l ot 7 - 20530081 l ot 13 - 20499709 l ot 69 - 20499613

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VISIT

 Custom drawer layout

 Standard or custom colors

 Wheels and locks

 Stainless steel top

 Drawer divider and mats

 Upper cabinets / peg board much more

Take a few minutes right now and simply contact Michelle White at 312.756.0931 here at our Fox Group office at the Chicago Board of Trade Monday through Friday 9am to 430pm CST and share your email address with her and she will help you receive on a complimentary basis for two full months by email the sundry market advisories sent by us. You can also email Michelle White at mwhite@tradewithfox.com and give her your email address to accomplish same. And remember, hedging livestock and grain needs and fuel needs with Exchange positions still has risk of loss and is not suitable for all livestock producers and investors who desire to hedge their operational needs. Also know that educational teleconferences with your team and bankers can be done late afternoon or in person here in Chicago on Saturday’s. n