Unfortunately record drought conditions are causing some small issues. Not that it shows up in inflation figures or will in the future... but if inflation were real (in theory) we'd have to worry about things like this
- Fonterra Cooperative Group Ltd., the world's biggest exporter of dairy products, said drought cut New Zealand's milk production and may restrict new export orders.
- Record dry weather in much of the country means season-to date output is falling below last year, Chairman Henry van der Heyden said in a statement e-mailed to Bloomberg News. The Auckland-based company had budgeted on a 3 percent rise in production to about 14.8 billion liters.
- World dairy prices reached a record in November after doubling in two years as drought cut production in Australia and rising land and feed prices increased costs in Europe and the U.S. Fonterra is New Zealand's biggest export earner, with dairy accounting for about a fifth of the nation's overseas sales.
- ``Lower production at a time of strong international demand and elevated soft commodity prices risks raising the price of agricultural commodities further,'' TD Securities strategists Stephen Koukoulas and Joshua Williamson said in a Feb. 5 report.
- Fonterra accounts for about 40 percent of the international trade in butter, cheese and milk powders
- ``The weather is key,'' Fonterra's van der Heyden said. ``Everyday without rain is hurting farmers.'' On a daily basis, output in Waikato is down 27 percent, van der Heyden said. Bay of Plenty production is down 21 percent and in Taranaki by 9 percent, he said.
- Customers are being advised that new export orders may not be accepted, he said.
What's that? Yes that's the new working theory - since the whole world revolves around the US (don't worry about those 2.5 Billion in China and India), when the 300M Americans and their economy slows down all the world's inflation problems will go away. Yes it's true. Just like in the 1970s ... what's that? That didn't work out so well in the 1970s stagflation? Nevermind that - it will work out this time, we promise. I heard it on CNBC so it must be true. So once the US economy slows down, inflation goes away! POOF! So we can cut rates to zero in that environment!
What's that? The bond market disagrees with that theory? And that's why 10/30 year bond rates are stubbornly staying up? Never mind those bond guys - what do they know. Listen to CNBC and the equity guys. They say inflation disappears once the US economy slows, so therefore it must be true.
What's that? The US economy will be booming in 6 months due to Fed cuts and housing "re-boom"? That's why housing, financials, and retailers are flying up.
So how could inflation go down in 6 months (due to slowing economy), yet at the exact same time the US economy will be booming (in 6 months)? Therefore making for a total nonsense, circular arguement?
Well just stop asking those tough questions and just keep buying financials, retailers, and homebuilders! It makes the analysis that much more easier. After all that's what the PLAYBOOK says to do. So just do it! (and buy some powdered milk while you're at it)
So again, let's review. 300M on this earth (USA) will offset the other 5 Billion people. So when those 300M people slow down... inflation will stop. So the US can cut Fed rates to zero and it won't harm a thing. But with that said, don't worry about the US slowdown either. Because it will be over in 6 months. But that coming boom in 6 months in the US economy, also won't cause inflation. Because inflation was defeated by the slowdown we are going through now.
Got it? Good. Now go buy stocks.
And after reading this hair brained CNBC pundit idea I just convinced myself to buy back some of that Ultrashort Russell 2000 (TWM) exposure I sold off this morning. If *THIS* is the type of thinking causing the boom in these stocks - well it's all a big hoax.
