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Monthly Archives: February 2012

Presidents Day, NOT

Today is president’s day.  I often wonder why we observe such a pointless day.  I have always thought the point of being president was to lead the nation to a better life.  I fail to see how millions of people taking a day off is going to help in our ability to produce.  I especially do not get observing president’s day right now, when we are living during a period of one of the worst presidents in history.

I see posts of total lies on Facebook from time to time about how Obama has done all these great things for the country.  If those brainwashed college students only had a clue.  I know where they get their information and I know all their arguments before they even make them.  They are like little robots running the program that has been built into them.  I wonder why they never question their programmer.  They tell me they have an open mind and encourage me to have the same open mindedness.  I laugh at them, I am objective.

The number of people living in deep poverty has exploded during obama’s term.  Today 50 million Americans live below the poverty line.  The price of gas has risen 83% since he took office.  If you are the working poor how do you afford the gas to get to work and feed your children?  You don’t.  Every day over 1 million children in America go to bed hungry.  So many of my braindead liberal friends hail obamacare.  Hey guys, the stuff you are so pumped about doesn’t take affect until 2014.  See that is after the 2012 election.  That way you will not know how bad it really is and Obama will have a chance of getting reelected.  If is was in affect now, he would have no chance.  Until 2014 enjoy the frontloading of that bill (the new taxes, fines, and penalties)  Oh but he saved Detroit and the auto industry.  If that is so why is the average home value in Detroit only $6000 (only one third what it was a few years ago), and the city looks like Lebanon?  Obama is president at a time of the demise of manufacturing in America and yet he wanted to pass Cap and Trade.  This only shows he is incompetent.  Back to obamacare.  Do you remember how he refused to meet with his military advisors until he had a health care bill to sign?  In the mean time our troops were coming home in body bags.  The title is commander and chief.  Why does he not get that?  Why do those of you who support him not get this?  And for those of you who support the Wall Street reform, First I bet you don’t even know the name of the bill.  Number two you better  never have the hope or dream of owning your own business.  That bill will make it next to impossible for you to do it without government involvement.   Oh and I love this line, “We can’t leave raising children up to the parents”  And who could forget the world apology tour?  That is not a presidential thing to do.   Also don’t you dare own any guns, pay cash for anything, or have seven days of food in your home.  Under one of the more recent bills Obama signed this makes you a terrorist.  One last thing.  For those of you who think Obama got Bin Laden.  I doubt it.  First Bin Laden was sick and I doubt he survived.  Number two, isn’t it a bit funny that everyone who was involved in killing him is now also dead?

The only person who can take today off and increase his productivity is Obama.  The rest of you should not observe president’s day and go to work.  My wife has the day off and she is heading to the office this morning.  I’m proud of her.

We have had some great Presidents that deserve to be recognized.  You do not honor those men by electing someone like Obama who has dismantled so much of what they accomplished.  Next time around lets elect someone who will honor those great men.

I wish I could tell you where this photo came from, I do not know

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Posted by on February 20, 2012 in Uncategorized

 

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Supply and Demand 3 of 3

Now let’s think logically for a minute.  I live in reality so I see no need to worry about what the price MIGHT have been.  I can’t read cards, palms or stars so I just deal with what I have at the time

The only reason I can think of to have the demand conversation is to give ourselves an out for losing money, like in the example earlier.  We all know we like to have someone to blame for our short comings.  Bud Williams says in his years of experience (2 of my lifetimes) he has noticed that cattleman are willing and ready to accept a loss as long as they have an out to blame it on (that is not a quote it is a summarization)

You see there is another law that trumps the law of supply and demand.  It is the law of substitution.  If feeders were to get that high I would go buy range maggots  (sheep).  If the price of beef gets to high the consumer will take their ball and go play in the pork or poultry yard.

Now this is where “smart” people tell me, see if the consumer goes elsewhere the price for your product drops.  Maybe so.  Just remember earlier that I stated the market is currently trying to create its opposite.  So we ALREADY KNOW  this is coming.  Now I don’t sell BEEF.  I sell cattle and buy cattle. (notice the order I put that in.  Sell/Buy.  This is a clue. )Moving BEEF is a packer and retailer problem.  If you have any marketing skill you would still know how to make money when this happens.  Going back to the example of 08, that was my best year ever.  I doubled the size of my operation and that set me up for great years in 09 and 2010.  Knowledge and marketing skill, is how I did it.  None of this demand bull  was ever a thought in my head.

Here is a bit of trivia for you.  This whole concept of making charts and graphs, depicting the scam of supply/demand making cattlemen profitable was created by a commodity broker in Denver.  It really did wonders for his business.  At the time he was the only one doing it.  The boys over at cattlefax felt left out and took it to a whole new level.  How many of you have ever sat through one of their seminars and left totally confused?  That confused feeling wasn’t because you aren’t smart enough to get it.  No, it was because you were trying to make sense of something totally irrelevant.

 

To think that an increase in demand will result in higher profitability is absurd.  To say that the law of supply and demand leads to increased profits, is a politically correct way to say “We now know how many incompetent fools can make a profit based on dumb luck”    All it takes to look like a marketing genius is a rising market.  Knowledge and marketing skill are what separates the profitable operators from the rest

 
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Posted by on February 8, 2012 in Uncategorized

 

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Supply and Demand 2 of 3 (unedited)

Remember this was written half a year ago, when you get to the part of cattle prices.  After this blog was posted last summer the author of the article I wrote this piece in response to made some flattering insults directed at me.  He even insulted my ability to be a father.  I was asked dozens of times what my response is.  I do not have one.  I am only interested in helping the cattle biz.  And if that means pointing out flaws in other people’s data I will do so.

 

Nobody can predict what the market will do, to try and do so is gambling.  That is my uncreative lead in for this next part.

Now I don’t read many, if any, of the cattle biz magazines that mysteriously find a path to my mailbox.  But occasionally I do read one.  The article that I read yesterday lead me to write this blog.  It  was an article on the affect demand has on cattle price.

This article used data from cattlefax.  It showed that the average fat steer price in 2008 was $.93 and that the average price for a 550# feeder steer was $1.14.  Now remember this was the average.  I found it quite interesting that they used 08 for this example since that is the year the market tanked in the fall right after we all experienced inflation.  Since that is the year they chose we will go with it.  Now the point trying to be made was if we had the same level of demand in 08 that we had in 04, (04 being higher I guess), the price of cattle would have been greatly affected.  Somehow  they “know” ,(I would say guessed), that the average price of a fat steer WOULD have been $104 and the average feeder steer price would have soared to a whopping $140.

This is about when I took my right hand and, THWAP,  Right upside my head.  How dumb!  Thousands of peeps read this article and didn’t even see the error.  I’ll line it out

08 AVG                                                                                 Guessed 08 price with 04 demand

1300# @ .93 = 1209                                          1300# @ 104 = 1352

550#  @ 1.14 = 627                                                           550#  @  140 = 770

750                     582                                                             750                     582

 

THWAP THWAP THWAP!!!! Come on man, if you’re going to make up numbers at least show me that somehow demand helped people lose LESS money.  I know some are asking how do I know it’s a loss.  Easy,  the Return On The Gain (ROTG)is lower than the Cost Of Gain (COG)  The COG in 08 was over a buck.  But since we are making up numbers lets just go with a buck for easier math.

$582/750#=.776 ROG     .776 – $1.00 COG = -$.224 loss per pound * 750# = -$168 head

Or if you are one of those that doesn’t understand marketing do it this way.

Buy feeder steer  at $627+$750 COG = $1377 total costs

Sell price of $1209 – $1377 expenses = $-168

So he made his point, maybe it has an effect on cattle price.  It didn’t affect profitability.  I am in business to make a profit so I would like to see USEFUL  information.  The out come on those made up  numbers is the same and in the real world that would most likely not happen.  It is easy to see the boys over at cattlefax used a coefficient to come up with those numbers.   One thing I have learned about the markets is there is one factor that always ruins any market analyst’s predictions.  The human element.  IF the fat cattle price got that high, who’s to say show lists wouldn’t bloom as everyone tried to go out the door at the same time?  This would have caused the market to come cruising back down.  In the mean time, the guy who has feeders would hold them back.  This is usually the case because a rancher will say “if the price of feeders is this high I will wait cause it will go higher”    If this were the case the feeder/fat  spread would widen.  Or this scenario could all go opposite, since I can not predict what people will do.  Either way, the prices that would have been paid for cattle would not have been what cattlefax predicts based off a coefficient.

Now what kind of relevance does a coefficient have in the cattle biz?  I remember a table from my high school physics class, that had a coefficient of deviation for velocity.  Our velocity is -$168 so on this table the coefficient is the number 19.  If you take 19 divided by 168 you get .11.  Multiply that by 100 (as a percentage) you get 11.  Ah ha that is the $11 that we presumably add to fats.  Now we then divide 1300# by the feeder  weight of 550# and you get 2.36.  We have to do this because the feeders are lighter so they have to go faster to have the same velocity as fats.  Take the $11 and multiply it by the 2.36 and you get 26.  The same dollar amount cattlecax claims feeders presumably would have been.  This has got to convince you that this demand forecasting is a total bogus pile.  In fact I bet Randy Blach’s ring tone is Dr. Dre’s “Keep Their Heads Ringin”  Ring a ding ding dong!

But the article didn’t stop there,  Oh no.  Some how the data shows that the lack of demand cost us a loss of $25 cwt on fats in 09 and so far in 2011 the difference is $6 cwt.  I guess they missed  the $11? And the $12? Markets we just had.  Any way he goes on to show in the feeder market the loss of demand cost us $308/hd.  So if we were to add the $308 onto what we are currently paying for feeder steers they would cost us $1133 or $206 cwt.  REALLY? (My advise is to stick to the 80/20 rule.  If 80% of your income is not a direct result from marketing cattle then you are not qualified to talk about markets.  I am a college drop out and it only took me a few minutes to figure out all the math on this page.  Kinda sad cause cattlefax has people whose only job is to run coefficients and confuse all of us.  The guy who wrote the article I am reponding to fell for it.)

 
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Posted by on February 7, 2012 in Uncategorized

 

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Supply and Demand 1of 3(unedited)

This series was origionaly posted on Cattle Call in early summer 2011.  It is very important cattle producers grasp this.  NCBA edited some stuff out of the origional I submitted to them.  Part 1 is more of an intro, part 2 is where the good stuff is

 

Supply and demand is a natural law.  It rules socialist and capitalist economies and is as natural as gravity.  The law states that scarcity is the driving force of nature.  The scarcer a commodity is the more we value it, and the more abundant it is the less we value it.

The law of supply says that as prices rise suppliers will produce more of it

The law of demand says that as the prices rise the consumer will demand less of it.

What this means is high prices are always working to produce lower prices.  Conversely, low prices increase demand while at the same time discouraging increased production.  Today’s price level is always working to create the opposite.  The easy conclusion to draw here is to buy low and sell high.  (like anybody can time the market like that)  To make a profit you must learn to move in the opposite direction of the current market situation.

An example of this would be the feeder market.  A couple months ago, peeps could not buy enough six to nine weight cattle.  They HAD to have them because the “smart” people were talking about how small the cow herd is and how tight supply will be.  Then bang, we find out placements are way high right now because of the cattle that left the drought regions of the U.S.  These guys bought up as many cattle they could at inflated prices because they were told supply would be tight and they thought the price of fats would go higher.  Betting on the come is gambling.  Now these guys are scurrying around wondering about what they should do.  I bet they are the same guys that shorted the cattle market last fall and got hit with huge margin calls. (that is the type of bet I make) So the example of going against the current situation, is I was the guy selling the six and seven weight cattle.  Knowledge and marketing skill is what makes me profitable.

 

So what can you learn from all this?  Supply should not be confused with availability.  The word supply is commonly used to mean the long term amount.  So we can have the second largest supply of placements in history, (which was reported by the “smart” people but a look back into history will show a number of years of higher placements) but that does no good to us if they are all five weights.  Available supply is the amount that is readily obtainable.  The confusion surrounding supply is what can lead to “pipeline shortages”, and people are often tricked into long term decisions based on short term price rises.  This is why cattle on feed reports are totally meaningless.  People with the proper marketing skills know this.

In a long production cycle such as the cattle biz we have a confusing act to deal with called “lag”.  An example of lag, is in order to produce more beef we must first produce less by withholding heifers from harvest.  Or to produce less beef we must first produce more by sending cows to harvest.  As I stated earlier we are always creating our opposite.

The price that currently exists for any commodity will not be the price that will exist tomorrow.  So any profit that is obtained through increased production will be temporary, if it is achieved through an increase in underlying fixed costs.  The result is the inevitable cost-price squeeze.

 
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Posted by on February 6, 2012 in Uncategorized

 

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Opportunities

I hear all the time that there just aren’t many opportunities out there.  I understand times are tougher than they used to be, and our political leaders have done a bang up job killing the American Dream.  Here’s the thing.  If you get all negative, or begin to doubt yourself, or blame others for not getting your break you are going to miss a lot of opportunities.

Most people miss opportunities for many reasons.  One is they come dressed in overalls and look like work.  Or they appear smaller when they are coming at you than when they pass you by.  Mostly I think it is because our radar screens are not on all the time.

Let me share a small and silly opportunity I jumped on a couple weeks ago.  I went to the tobacco outlet store to get some cigars.  When the clerk gave me my change I looked at the coins he handed me.  I have kinda gotten into coins lately and have done some research on them.  I had in my hand numerous coins from the 1930’s and early 40’s.  I knew due to the war they changed a lot of the alloys and minting during that time period.  I also knew that uncirculated coins had sold for millions on auction due to the different type of coating a particular coin may have had.

I did the most bizarre thing.  I turned to the clerk and asked to buy all the loose change in his drawer.  It took a little convincing and he gave in.  There was a little over $14 in his drawer in coins so I gave him $15 and split.

Here was my thought process.  I had several coins in my hand that were around the era that there could be some valuable coins.  I also noticed in the past that this place doesn’t exactly attract the best people, to put it politely.  So I figured I had good odds some loser stole his grandmother’s old coins to buy a pack of smokes.  He probably used all coins to buy several packs to.  I bet I was close to being right because there were more older coins in that drawer.

I was out a few cents to buy the coins in that drawer.  Thing is some of those coins were very old.  Their collectors value may be worth fifty dollars.  I was able to do this with a little knowledge, situational awareness, and the means to act.

This was a silly deal.  Thing is small victories like this tend to lead to others.  This is how momentum is built, leading to bigger things.  And bigger things have come my way since.  When you get things right in your head and act on things that come your way the universe has a funny way of sending more good things to you.

Just remember the sign on the door of opportunity says “push”.   And there are plenty of doors to push on

 
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Posted by on February 3, 2012 in Uncategorized

 

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