Year: 2012

COW, Claymore Global Agriculture ETF

Hamilton

COW jan 28 2012

Mid last year we had a look at COW and the US MOO (not shown) Etf’’s. Both have performed roughly as expected except, perhaps, that they did not go down as far as they could have in the first wave of C. In this case the “logical” level would have been about $16, the level of the b wave in the larger B rebound. Wave 2 may still go a little higher, but not much so if, for some reason, you still own this ETF, it is now a very good time to get out.

Speaking of cows, Canada still believes in a “supply management” system for dairy cows, eggs, chickens etc. These systems, despite a lot of hype to justify them, are all essentially kartels where production levels are controlled by a central (government) agency and competition is kept out by very high tariffs.  Central Banks operate along precisely the same lines. The authorities invariable believed in the ability of markets to self-police and find their equilibrium on their own when it came to dismantling  Glass-Steagall, the 5 pillars and just about every other regulation. Not so when it comes to setting interest rates or milking cows! The distortions this creates are immense. In Ontario the consumer pays about twice as much for milk or cheese as in the US or Europe. Consumption has consequently gone down steadily. What is even more interesting is what it does to asset prices.  A typical farm in Ontario is about 100 acres (25 hectares) in size, but usually additional land is rented to get to some sustainable level of efficiency. The price about $750,000 to 1 mln. if growing crops is the farm’s business. But if it is an operational dairy farm with 100 head of milk cows, the price goes up to nearly $4 mln, or $30,000 a head on top of that! Bernanke &Co. seem to be oblivious to the unintended consequences and continue to justify their actions by the preposterous notion that interest exist only for the purpose of providing central bankers with a toy.

DJIA , Dow Jones update.

Hamilton

From stockcharts the high reading on the Dow, on the 2nd of May 2011 was 12876, intraday. The recent high on Jan.  26, 2012 was 12841, intraday. Ergo we did not make a new high (yet?) and the count still stands, that is this is the top of a wave 2 of 3. 3 of 3 is about to start. Apart from the price itself, the structure definitely supports this view. So does, of course, the fact that only the Dow has managed to retrace, for practical purposes, 100% of the preceding drop. No other index comes even close. One has to be careful not to embrace conspiracy theories  too readily, but the simple fact that the Fed would announce the extra year of ultra low rates and think out loud about QE3 exactly at such a critical point, in the absence of any fundamental reasons, makes you wonder.

DJI, Dow Jones

Hamilton

INDU jan25 2012

The Dow Jones is the most watched index, it is also the most manipulated. It is now threatening to make a new high as it is only a hundred points away from the may highs of last year. Much of this thanks to the Fed. that announced an additional year to late 2014 of these very low rates and expressed a more open mindset towards other stimulative measures to help growth. The Dow is now close to its all time high of 14000+ in late 2007. No other index has accomplished this miracle. Is the Fed targeting the stock market and creating the next bubble? It is hard to judge what all this means, but it is certainly good to remember that the Dow, now more than a hundred years old, contains only one single stock General Electric from the early days and that one is trading at 1/3 of its high.