Economic Outlook

Here is an article which tells a greater story than imagined. Agricultural Futures for December are listing above the Tech Buy prices, at a time when the Wheat harvest was poor, but the Corn harvest is expected to set a Record yield. What does it mean? It is hard to define the exact context, and Secondary Price changes extremely hard to evaluate. I would seriously like to know the level of Ethanol plant purchases of Corn in tonnage for next year. I smell something coming, and it is beginning to stink already. The Consumers should brace themselves for a potential 20% rise in Food Costs year over year. Economists would discount this with numbers, though I would suggest Hedge Fund Market Calls could do the same for Food as they have done for Oil.

This article tells the woes of the Banking industry. The Second Quarter was the fifth straight Quarter where noncurrent (90 Days or more past due) loans increased, and not by a minor fraction; listed at $3.1 bn, a rise of 12.6%. Foreclosures are up 93% since a year previously. The major trouble may actually be that Banks and Thrifts have relatively little to do with the subprime mortgage market. The Thrifts have the highest level of noncurrent loans since 1993. It is clear that the Tax Cuts, especially the Mortgage tax credit, led the American Consumer into oversubscribed Debt. The Crime is that even Government-regulated, sound Banking did nothing to retard this Trend.

I felt I had to include this Post by Michael Shedlock even though he presents a picture bleaker than I could endorse at this time. I cannot see a Recession coming because of one basic Condition, this coming from the Manufacturing Sector–surprising isn’t it. I doubt that there could be any further reduction in this Sector, and that it will support Business Investment. The actual Quantity of Goods and Services out there are being produced. The current problems are basically created by oversubscribed Market activity, and the loss of financial reserves will impact only the Market plungers, leaving All of the economy except for Personal Households untouched; serious depletion of the Nuevo Rich may only adversely affect the luxury sector. lgl