I see that yesterday I refered to Lehman Bros as “Lehmann” Bros. Two “N”s rather than one.
It could simply be a sloppy error. Or it could be a product of the deep tides moving in the core of my psyche, pushing me to think of a truly two-“N”ed person: David Reimann.
I choose to believe the latter.
For it is indeed a propitious time to be thinking of David, a wise market analyst, with whom I spoke a little less than a year ago about the structure of the commodity markets post Lehman-sparked world market crash. Â David’s a bright guy – for years a floor trader at the Winnipeg Commodity Exchange and now an economic analyst and vice president of Informa Economics. There are a couple of differences between David of two-Ns and Lehman Bros of one-N: 1) David is based in Winnipeg while Lehman is in New York; 2) David does sound analysis and is still in business . . .
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I called him up and we talked about one of my favourite subjects in the world: the structure of commodity markets and what kind of an era we’re living through. Some readers will remember I did a series about a year ago looking at various analysts’ views on the theory of the long term commodity bull market, whether we had entered an era of inflation or deflation, and what that would mean for long term crop prices. I was interested in the question of whether we were living through a period more like the 1970s or 1930s. The difference for farmers would be enormous, because in an inflationary and stagnant period like the 1970s crop prices rose dramatically, attained a new plateau level and offered many rallies, while in the 1930s crop prices collapsed and stayed weak for a decade. This was all post-Lehman, but followed my interest of a few years in the long term commodity bull market theory. I didn’t leave much room for a third possibility, which was that this could be a short term economic blip of badness, that historical precedents don’t have any relevance, and that everything’s just based on raw supply and demand stats and every year’s a blank slate.
I still don’t give any credence to that third possibility – regardless of the green-shootsists who have now become believers in a new equity bull market – and still think the first two situations are more likely: a stagnant economy with peppy commodity prices; a depressed economy with weak commodity prices. I hope it’s the ’70s all over again. I fear it’s the 1930s once more.
David’s views on the nature of the 1970s market were fascinating because he’d analyzed them quite closely, was able to relate them to what the real experience of farmers was with them, and was able to pull out some basic conclusions of that period for farmers. To briefly recap, the 1970s brought farmers a permanently new, higher plateau of prices, which for a number of years meant something (until the rest of the components ate them away). Market action was volatile, offering many pricing opportunities. And even though there were repeated peaks, each rally was a bit weaker and there was general settling down of the blended average, meaning farmers couldn’t count on rallies to reach new peaks after the amazing 1973 rally.
This meant farmers needed to be careful marketers and not glibly assume prices were always going higher, but be willing to sell into rising markets that seemed fated to go up forever.
David and I talked about the nature of the commodity market in the last 12 months and there wasn’t anything to disprove the thesis that this might be like the 1970s all over again. There was an incredible rise. There was an incredible fall. There was another, weaker rise. There has been a subsequent fall. The market has been anything but flat, dull, directionless. It doesn’t seem like most of the 1983-2005 era in crop prices.
So we’ll see where it goes from here. Economically and financially, I’m awaiting a correction, which perhaps will become a rout. Soon the depression possibility will either become a reality, or be chucked onto the scrapheap of history. (That’s where Leon Trotsky thought he’d chucked capitalism and where that buffoon Michael Moore thinks he’s throwing it now with his latest amusing fictition.)
So we’ll find out if the 1970s lives again. It’s hard to step outside our present age and look down on it from above – perhaps it’s impossible – but I think it’s worth trying because the implications are great.
