The seriousness of the U.S. DEBT CIRCUS cannot be overstated but evidently not from a market perspective. U.S. Treasuries have continued to be well bid as many investors still run to the TREASURY market in times of uncertainty. Besides the “rush” to safety in the BONDS, the FED has so badly perverted the market’s pricing mechanism that it is very difficult to determine the genuine impact of the Washington default countdown. European sovereign debt has been trashed during the last 20 months as there was no real central bank support to the market as the EFSF was a late comer to the scene and was provided with meager provisions.
The FED on the other hand has purchased $2 TRILLION worth of assets making it much harder to discover value. Many of the world’s foremost investors have lost a great deal of money. Thankfully it has been only DOLLARS trying to short the U.S. Treasury market. Are the losses indicative of poor analysis or rather a factor of running into an immovable object?
But in a world where MONEY is still able to roam the globe in a fairly unfettered fashion, other investment opportunities are provided. The havens, GOLD and SWISS FRANC, have rallied in synchronicity as they have appreciated almost 14% since January. Commodities, for the most part, have gained in price, except for those commodities being down because of increased supply–grains and cotton. Many BOND sales people argue that the haven allure for the DEBT is still relevant but as the long as the FED is the largest player, along with the captive investors such as PENSION FUNDS and INSURANCE GROUPS, the board is too complicated. For nimble investors, it is far easier to access alternative markets in search of return. It is time to be freed from FED BONDAGE.
The venerable Jeremy Grantham of GMO has a new quarterly piece out about the importance of the agricultural sector as an investment. Grantham is not touting GRAIN FUTURES but rather the concept of farm land, water, fertilizer and the technology of versus new farming techniques as the path for financial gain over the next decade. Readers of NOTES FROM UNDERGROUND know that this has been a favorite theme going back 20 months. When BHP tried to acquire Canadian-based POTASH, NFG applauded when the deal was squashed by the CANADIANS as they didn’t want a foreign entity controlling such a strategic asset. Early this year, the merger between URALKALI and SILVINIT resulted in the Russian fertilizer firm controlling 45% of the world’s potash reserves.
Recently, Belarus President, Lukashenko, was courting Chinese investors to buy a 25% stake in the national fertilizer company, BELARUSKALI, keeping it out of URALIKI‘s control. The Chinese are scouring the globe for fertilizer and potassium, signifying the importance that agriculture will have in a world with increased wealth. The Belarusians are looking to have some independence from Russia while at the same time trying to raise some much-needed funds. Uralkali, though, has not exited the process and is still seeking to buy the available assets of BELARUSKALI to gain further control of global potash production. Just a reminder to pay attention to the fertilizer stocks as the Chinese and other emerging nations are searching to enhance their agricultural output. THROW IN THE CHEAP DOLLAR AND GLOBAL AG STOCKS WILL BE THE TARGET OF THE WORLD’S SOVEREIGN WEALTH FUNDS.
A quick hitter on the OIL MARKET: It has been a while since NFG discussed oil as it has been range bound after the IEA attempt to force the market lower by releasing 60 MILLION BARRELS from global strategic reserves. For all the short trades out there you should be aware that Japan has ramped up its imports of sweet crude. Post-FUKUSHIMA, two-thirds of Japan’s nuclear reactors are shut down and operating at 37% capacity. In a BLOOMBERG article from July 22, Christian Schmollinger reported that the added demand from Japan has put a premium to Indonesian crude. It is uncertain as to when Japan’s nuclear production will return to normal so the market will continued to be buoyed by this new source of demand. Sometimes a very strong YEN has its benefits as the financial impact of higher oil prices is offset. [IN JULY 1983 it cost 7760 YEN to buy a BARREL OF OIL, WHILE TODAY A BARREL OF OIL COSTS----7753 YEN.] Read that again carefully.
Tags: Belaruskali, BHP, bonds, Canadians, dollars, EFSF, Fed, Fed bondage, Gold, grain futures, IEA, Japan, Jeremy Grantham, NFG, oil markets, pension funds, Potash, Silvinit, Swiss Franc, Treasury, U.S. debt circus, Uralkali, Yen