Milk Futures Set to Double if Farm Bill Does Not Pass
by ilene - December 11th, 2013 6:37 am
Courtesy of Mish.
Unless a farm bill passes by the end of the year, the crop subsidy program will revert to 1949 policies and the government would be required to stockpile milk until it reached $37.20 per hundred pounds. The current price is about $19.00.
Why our legislators would write ridiculous laws like this is totally beyond me, but they did.
The House wants to pass an extension to resolve the issues, but the Senate says no. So here we sit wondering if the price of milk is going to double.
Bloomberg reports Extension of Farm Subsidies Rebuffed by Senate Democrats
An extension of U.S. agriculture subsidies to late January was rebuffed yesterday by Senate Democrats, who said they won’t pass any House plan for temporary funding before Congress breaks for the holidays.
“We’re not going to do an extension,” Senate Agriculture Committee Chairwoman Debbie Stabenow, a Michigan Democrat, told reporters. “If the House leadership would just stay through next week, like the Senate is staying, we would actually be able to get” a new five-year farm-policy bill, she said.
If Congress doesn’t act before year’s end, U.S. dairy support programs will revert to a 1949 statute that when fully implemented would double the wholesale price of milk.
The Agriculture Department hasn’t said when it could implement the law, which could take months. Lawmakers are reluctant to head home for the holidays to headlines about milk prices of $7-per-gallon in the new year.
Cuts to food stamps, along with changes to crop insurance programs and other farm aid, have been stumbling blocks as lawmakers seek to resolve differences in Senate and House versions of a reauthorization of agricultural programs.
The main effect of an extension to the end of January would be to allay fears of milk prices rising after Jan. 1, when dairy is the first crop program set to revert to the 1949 policies form the underlying language of all subsequent farm bills.
Under the law, the government would be required to stockpile milk until it reached $37.20 per hundred pounds, nearly double the current price of dairy futures traded in Chicago.
Other commodities, including corn and wheat, would see their programs revert to archaic programs later in the year.
I rather doubt it comes to this but stranger things have happened.
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About That Illinois Pension “Fix”
by ilene - December 11th, 2013 12:30 am
Courtesy of Mish.
The highly touted Illinois plan to fix its pension system is largely hot air. I was waiting for details to prove just that and they came out today. Let’s flashback to the initial claim.
A headline from six days ago reads Illinois lawmakers approve fix for $100b pension crisis
The Illinois Legislature approved a historic plan Tuesday to eliminate the state’s $100 billion pension shortfall, a vote that proponents described as critical to repairing the state’s deeply troubled finances but that faces the immediate threat of a legal challenge from labor unions.
The measure approved Tuesday emerged last week following negotiations by a bipartisan pension conference committee and then meetings of Illinois’ legislative leaders. They say it will save the state $160 billion over 30 years and fully fund the systems by 2044.
It would push back the retirement age for workers ages 45 and younger, on a sliding scale. The annual 3 percent cost-of-living increases for retirees would be replaced with a system that only provides the increases on a portion of benefits, based on how many years a beneficiary was in their job. Some workers would have the option of freezing their pension and starting a 401(k)-style defined contribution plan.
Workers will contribute 1 percent less to their own retirement under the plan. Legislative leaders say they included that provision, as well as language that says the retirement systems may sue the state if it does not make its annual payments, in hopes of boosting the measure’s odds of surviving the unions’ anticipated court challenge.
Actuarially Unsound
Unions are opposed to the plan, as always, and will file lawsuits, as always. But the plan does not even work.
Via email, Jonathan Ingram, at the Illinois Policy Institute explains…
House Speaker Mike Madigan and proponents of the temporary pension “fix” enacted last week promised taxpayers that it would immediately reduce the state’s unfunded pension liability by about $20 billion. But despite these promises, the credit rating agencies have indicated that they would be waiting for actuarial analyses before making any decisions on how the new law will affect Illinois’ worst-in-the-nation credit rating.
They’re wise to wait. It turns out that somewhere between $6 billion and $8 billion of Madigan’s promised reduction is
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Can Good News be Good News?
by ilene - December 10th, 2013 4:03 pm
Can Good News be Good News?
Courtesy of Wade at Investing Caffeine
There has been a lot of hyper-taper sensitivity of late, ever since Fed Chairman Ben Bernanke broached the subject of reducing the monthly $85 billion bond buying stimulus program during the spring. With a better than expected ADP jobs report on Wednesday and a weekly jobless claims figure on Thursday, everyone (myself) included was nervously bracing for hot November jobs number on Friday. Why fret about potentially good economic numbers? Firstly, as a money manager my primary job is to fret, and secondarily, stronger than forecasted job additions in November would likely feed the fear monster with inflation and taper alarm, thus resulting in a triple digit Dow decline and a 20 basis point spike in 10-year Treasury rates. Right?
Well, the triple digit Dow move indeed came to fruition…but in the wrong direction. Rather than cratering, the Dow exploded higher by +200 points above 16,000 once again. Any worry of a potential bond market thrashing fizzled out to a flattish whimper in the 10-year Treasury yield (to approximately 2.86%). You certainly should not extrapolate one data point or one day of trading as a guaranteed indicator of future price directions. But, in the coming weeks and months, if the economic recovery gains steam I will be paying attention to how the market reacts to an inevitable Fed tapering and likely rise in interest rates.
The Expectations Game
Interpreting the correlation between the tone of news and stock direction is a challenging endeavor for most (see Circular Conversations & Tweet), but stock prices going up on bad news has not a been a new phenomenon. Many will argue the economy has been limp and the news flow extremely weak since stock prices bottomed in early 2009 (i.e., Europe, Iran, Syria, deficits, debt downgrade, unemployment, government shutdown, sequestration, taxes, etc.), yet actual stock prices have chugged higher, nearly tripling in value. There is one word that reconciles the counterintuitive link between ugly news and handsome gains…EXPECTATIONS. When expectations in 2009 were rapidly shifting towards a Great Depression and/or Armageddon scenario, it didn’t take much to move stock prices higher. In fact, sluggish growth coupled with historically low interest rates were enough to catapult equity indices upwards – even after factoring in a…
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Stanley Black & Decker: Powering Its Way Toward Fair Value
by ilene - December 10th, 2013 3:23 pm
Courtesy of www.fastgraphs.com.
Stanley Black & Decker (SWK) is a machine tools company built on namesakes of – you guessed it – three individuals with the last names: Stanley, Black and Decker. Frederick Stanley started a hardware manufacturing company in 1843. Duncan Black and Alonzo Decker started a similar shop in 1910, becoming known for the world’s first patent for a portable power tool. In 2010 the two companies merged to form what is today Stanley Black & Decker.
With this long history comes a wide assortment of brands, products and solutions. The construction and do-it-yourself segment – which generates roughly 50% of revenues – makes the typical hand-held tools like hammers, tape measures and flashlights along with the more exciting power tool brands of DeWalt, Porter-Cable and Black & Decker. The industrial segment – making up roughly a quarter or sales – is probably best known for its brand MAC tools, but it also operates in the fastening system and infrastructure solution segments as well. Finally, it might surprise some that the remaining 25% of Stanley Black & Decker’s business is derived from security – ranging from locks and hinges on your front door to automatic doors in a bank, airport or storefront.
Assuredly Stanley Black & Decker covers an array of tools – but interestingly even if you want a new or improved product, you can submit an idea to the company’s website.
Beyond the history and product collection, potential investors might also be interested in how the company has been rewarding shareholders. To this point, Stanley Black & Decker has a storied track record of dispensing dividend payouts – having not only paid but also increased its dividend for 46 consecutive years (ranking it 25th on the increase streak list). Over the last decade these increases have come in at a rate of just over 6%. Further, the company has a substantial portion of its authorized 20 million share repurchase program at its disposal. It seems being the leader in tools and storage has its benefits.
Yet that’s not to suggest that Stanley Black & Decker is without risks. For instance, in a recent presentation management lowered their expected earnings guidance. This was likely due to many concerns such as stalling margins in the security segment, lower than expected demand in emerging markets and general economic spending worries. It’s always…
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French Industrial Output Drops Unexpectedly; France Finance Minister in Complete Denial; Expect the Unexpected
by ilene - December 10th, 2013 2:39 pm
Courtesy of Mish.
I am in a near-constant state of amusement regarding what economists and analysts expect vs. what happens. A perfect example came up today.
MarketWatch reports French Industrial Output Drops Unexpectedly.
French industrial output dropped unexpectedly in October for the second month in a row, data from national statistics bureau Insee showed Tuesday, providing a further indication of a weak start to the final quarter of 2013 in the euro zone.
Industrial production in the currency bloc’s second largest economy fell 0.3% in October from September, when it also fell 0.3%, Insee said. Analysts polled by Dow Jones Newswires had expected a 0.2% rise in October.
The October decline confirms a steady shrinking of output in industry. Over the three months through October, industrial production was 0.6% below the previous three months, Insee said.
The disappointment comes after separate data showed Monday that German industrial production dropped 1.2% in October from the previous month.
Why Was This Unexpected?
This decline should have been completely expected. I can give you three reasons.
- On December 2, the Markit France Manufacturing PMI final data showed “France PMI sinks to five month low as output and new orders fall at sharper rates“.
- On December 4, the Markit France Services PMI final data showed “French service sector slips back into contraction in November“.
- On December 4, the Markit Eurozone Composite PMI final data showed “Eurozone growth slows further as France and Italy suffer renewed contractions“.
If you are looking for a 4th bonus reason, please pencil in “Francois Hollande” and all the socialist ministers in his government.
From the third Markit link above …
Sector Output Growth ( Nov. )
Germany 55.4 29-month high
Ireland 55.4 5-month low …
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Timing Is (Not) Everything
by ilene - December 10th, 2013 1:31 pm
Courtesy of Howard Kunstler of Kunstler.com
“Federal Reserve officials are closer to winding down their controversial $85 billion-a-month bond-purchase program, possibly as early as December, in the wake of Friday’s encouraging jobs report.”
That from the much-deservedly maligned John Hilsenrath, widely regarded to be the Federal Reserve’s ventrioloquist dummy over at the Wall Street Journal, as in, from God’s mouth to the jittery multitudes. Of course the jobs number was just another highly seasoned and over-leavened cupcake from the Bureau of Labor Statistic’s magic hedonic oven, so you can be sure that the predicate of that statement is… how to put it delicately… the latest arrant lie with hypothetical icing on top.
Everybody knows that the Federal Reserve’s money-pumping operations have become a replacement for what used to be an economy. Therefore, no more money pumping = no more so-called economy. It’s that simple. But it doesn’t mean that the Federal Reserve won’t make a gesture and I wouldn’t be surprised if they try it during the season that Santa Claus hovers over the national consciousness — or what little of that remains when you subtract the methedrine, the Kanye downloads, the fear of an $11,000 bill for an emergency room visit requiring three stitches, and all the other epic distractions of our time.
The next meeting of the Fed’s Open Market Committee (FOMC), where such things as taper-or-not are considered, is Dec. 17. The Fed has to make some kind of gesture to retain any credibility, so I suspect they’ll go for a symbolic shaving of five or ten billion a month off the current official bond-buying operation number of $85 billion a month (or $1.2 trillion a year). If they don’t do it, no one will ever believe them again. I call it the “head-fake” taper, because it is essentially a false move.
The catch is that the Fed has more than one back door for vacuuming up all sorts of other miscellaneous financial trash paper securitized by promises already broken, moldy sheet-rock housing, college loans defaulted on, car payments that stopped arriving eighteen months ago, credit cards maxed to oblivion, sovereign foreign economies visibly whirling down the drain, and untold casino bet derivative hedges. Loose talk has it that the Fed is buying up way more dodgy debt than the official number of $85 billion a…
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American “Servants” Make Less Now Than They Did in 1910
by ilene - December 10th, 2013 12:50 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
While much has been said about the benefits of Bernanke's wealth effect to the asset-owning "10%", just as much has been said about the ever deteriorating plight of the remaining debt-owning 90%, who are forced to resort to labor to provide for their families, and more specifically how their living condition has deteriorated over not only the past five years, since the start of the Fed's great experiment, but over the past several decades as well. However, in the case of America's "servant" class, Al Jazeera finds that their plight is now worse than it has been at any time over the past century, going back all the way to 1910!
According to Al Jazeera, "at least one class of American workers is having a much harder time today than a decade ago, than during the Great Depression and than a century ago: servants. The reason for this, surprisingly enough, is outsourcing. Let me explain. Prosperous American families have adopted the same approach to wages for servants as big successful companies, hiring freelance outside contractors for all sorts of functions from child care and handyman chores to gardening and cleaning work to reduce costs. Instead of the live-in servants, who were common in the prosperous households of America before World War II, better off families now outsource the family cook, maid and nanny. It is part of a global problem in developed countries that is getting more attention worldwide than in the U.S."
The reality is that the modern servant is also known as the minimum-wage burger flipper, whose recent weeks have been spent in valiant, if very much futile, strikes in an attempt to increase the minimum wage their are paid. Futile, because recall that in its first "national hiring day" McDonalds hired 62,000 workers…. and turned down 938,000! Such is the sad reality of the unskilled modern day worker at the bottom the labor pyramid.
Unfortunately, we anticipate many more strikes in the future of America's disenfranchised poorest, especially once they realize that their conditions are worse even than compared to live in servants from the turn of the century.
Al Jazeera crunches the numbers:
Consider the family cook. Many family
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Close Inspection of Alleged “Draconian” Cuts in Food Stamp Program; Mish SNAP Proposal
by ilene - December 10th, 2013 12:23 pm
Courtesy of Mish.
Inquiring minds are digging into the alleged “Draconian Cuts” in Food Stamps as championed by the Daily Koz. Of course the Daily Koz is not alone in whining about “draconian” cuts.
Note: The food stamp program is now called “SNAP” Supplemental Nutrition Assistance Program.
“The Unthinkable”
On December 5, Greg Kaufmann, writer for The Nation wondered Why Is a Senate Democrat Agreeing to Another $8 Billion in Food Stamp Cuts?
On the same day that President Obama eloquently described his vision of an economy defined by economic mobility and opportunity for all, Senate Agriculture Committee Chairwoman Debbie Stabenow was busy cutting a deal with House Agriculture Committee Chairman Frank Lucas to slice another $8 to $9 billion from food stamps (SNAP), according to a source close to the negotiations.
“That was the first time in history that a Democratic-controlled Senate had even proposed cutting the SNAP program,” said Joel Berg, executive director of the New York City Coalition Against Hunger. “The willingness of some Senate Democrats to double new cuts to the program…is unthinkable.”
Mother Jones Say “Kill the Farm Bill Entirely”
Bitching and moaning would not be complete without Mother Jones getting in on the act. On November 12, Mother Jones proposed House Dems Can Block GOP Food Stamp Cuts—by Killing the Farm Bill
The food stamps program—which helps feed 1 in 7 Americans—is in peril. Republicans in the House have proposed a farm bill—the five-year bill that funds agriculture and nutrition programs—that would slash food stamps by $40 billion. But by taking advantage of House Republicans’ desire to cut food stamps as much as possible, Democrats might be able to prevent cuts from happening at all.
To pull it off, Democrats would have to derail the farm bill entirely, which would maintain food stamp funding at current levels.
Where’s the Beef?
On December 10, The Tennessean more evenly covers the issue in its report TN House Republicans back $40 billion in food stamp cuts.
The future of food stamps — the Supplemental Nutrition Assistance Program — remains the largest sticking point in House-Senate negotiations to finalize a new farm bill before the end of the year.
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Investing in the Gold Market 2014
by ilene - December 10th, 2013 11:49 am
Courtesy of www.econmatters.com.
By EconMatters
2013 in Review
It was not a good year in 2013 for Gold Investors by any measure, whether it was central banks, John Paulsen or commodities funds with large Gold positions 2013 was a year they anticipated would have turned out differently; considering the large amount of currency debasement and money printing carried out on a world-wide scale by most countries in one form or another…Read the full article FREE on Seeking Alpha
Note: Above is an abstract of a premium article we wrote exclusively for Seeking Alpha. Repost or repulish only with the permission from Seeking Alpha.
Please click here to read more articles at EconMatters.
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In mid-November, Warren Buffett met with 20 MBA students from eight universities.
by ilene - December 10th, 2013 11:38 am
In mid-November, Warren Buffett met with 20 MBA students from eight universities
Courtesy of JOE WEISENTHAL, Business Insider
On his blog, University of Maryland business school professor David Kass has published notes from that meeting.
One student asked Buffett about his investment in Goldman Sachs that he made during the pit of the financial crisis.
In answering the question, Buffett vividly set the scene of the crisis, describing an economy that was truly teetering on the brink. And in setting that scene Buffett heaped gigantic praise on George W. Bush, which we've highlighted in red:
Money market funds held a lot of Lehman paper. It happened overnight, 30+ million Americans who believed money markets were safe, and then Lehman fails. This caused a major money market fund to “break the buck” and lose value. It became a great silent electronic run on money markets. There was $3 1/2 trillion in money market funds and $175 billion of funds flowed out in the first three days after Lehman failed. All money market funds held commercial paper. Companies like GE had a lot of commercial paper. After this, American industry literally stopped. George Bush said, “If money doesn’t loosen up, this sucker will go down” – I believe this was the greatest economic statement of all time. This is why he backed up Paulson and Bernanke. Companies were counting on the commercial paper market. In September 2008, we came right to the abyss. If Paulson and Bernanke had not intervened, in two more days it would have been all over. BRK always has $20 billion or more in cash. It sounds crazy, never need anything like it, but some day in the next 100 years when the world stops again, we will be ready. There will be some incident, it could be tomorrow. At that time, you need cash. Cash at that time is like oxygen.
We can only surmise exactly why Buffett found Bush's words so powerful, but it's the combination of understanding that the answer to the crisis was looser money and the understanding of the stakes — that it could have all totally collapsed.
And incidentally, the insight embedded in Bush's statement isn't limited to times of crisis. Loosening the…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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