Friday, November 25, 2011

Farmland prices in the Midwest soar

So about a year ago I am standing at Arielle's Soccer game with a large American food producer who had been asked to be part of a think tank out of Washington to prove that there is a coming food shortage. Through work that we have completed in creating exchanges we are aware that 50% of food leaving the farm is already destined to spoil due to the huge inefficiencies in allocation (therefore no shortage). Part of the story that the producer gave me for the reason of  the coming food shortage was the change in tastes that Chinese are having as their economy grows, this all after a few week trip to the region. After having lived in Asia and done business in every country for nearly a decade I knew this was significantly overstated. As many of you that have read my book know, commodities are manipulated and this is no different. I mentioned to many of my colleagues that I bet we would see a run up in the price of agricultural land as the Banks that created the think tanks would have been buying agricultural land and concurrently would be lobbying  the government to provide subsidies to purchase farming land to avert a global shortage of food. Benoit sent this article with the comment that I am scary, I guess because I foresaw this. Aivars Lode

Farmland prices in the Midwest soar

November 16, 2011: 9:12 AM ET
Historic increases in farmland prices seen in parts of the Midwest.Historic increases in farmland prices seen in parts of the Midwest.
NEW YORK (CNNMoney) -- Agricultural land value is soaring in the Midwest, with parts of the region surging 25% from last year, according to two recent Federal Reserve surveys. The jump is the highest increase in three decades.
Record farmland prices are also being reported in the northern Plains.
Surveys released by the Kansas City and Chicago Federal Reserves Tuesday find that despite a struggling U.S. housing market, agricultural land in their districts is booming. And the run-up in prices may have yet to peak, they said.
"District farmland values surged to a record high in the third quarter," the Kansas City survey said. "Cropland values rose more than 25 percent over the past year, and ranchland values increased 14 percent."
In particular, Nebraska experienced exceptionally strong gains in the Kansas City District due to bumper crops -- especially productive seasons for certain crops -- reporting a roughly 40% rise in farmland prices from one year ago.
The surveys indicate that good credit conditions, successful harvests, and elevated levels of farming income helped to contribute to this large surge in an already strong agricultural property market.
According to the Chicago Fed, farmland values in its district had their largest increase since 1977, jumping 7% from the previous quarter.
Iowa farmland prices led the Chicago Fed's district, jumping 31% from last year's 3rd quarter.
However, not every state in the region had such historic success.
The southern Plains, Oklahoma in particular, saw more modest increases -- mainly due to devastating droughts, affecting yields from crops and livestock.  To top of page

Thursday, November 24, 2011

Dividend stocks get new respect

As predicted a couple of years ago on this blog.

Aivars Lode

November 21, 2011: 5:00 AM ET T. Rowe Price's Tom Huber says the category makes more sense than ever and explains what he's buying.
Interview by Amy Feldman, contributor
FORTUNE -- Tom Huber started managing the T. Rowe Price Dividend Growth fund (PRDGX) right around the time the tech bubble burst in 2000 and has seen plenty of market tumult since then. Through it all, the 45-year-old Wisconsin native has stuck with the slow and steady strategy of betting on companies with strong balance sheets and rising dividends. When stocks were soaring, that might have seemed boring. But with the markets seesawing wildly, its appeal is clear. The $2 billion fund has consistently beaten the market over the past decade, with a 4.1% annualized return, vs. the S&P 500's (SPX) 3.2%. Huber makes the case for dividend stocks -- including struggling bank shares -- and discusses what he has been buying. Edited excerpts:
With the current market volatility, dividend-paying stocks look attractive to skittish investors. Is now the time for a dividend strategy?
The idea of getting some level of return, regardless of the direction of the stock price, is at the top of investors' minds right now because of the environment. There's a lot of skittishness, as you called it, or nervousness. And with the low level of interest rates, it's very difficult for investors to find competitive yields without taking undue risks. I think dividend growth is an investable strategy over market cycles, but there are periods when it's going to do better than the market, and now is probably one of them.
Companies have been stockpiling cash since the financial crisis. What has been the impact on dividends?
We've seen a nice recovery since the big recession, when financial services pretty much eliminated their dividends, and other more cyclical companies took a hit as well. The payout ratio for the S&P 500 is now hovering at 30%, which is historically low. The historical rate is closer to 50%. There is capacity for dividend growth.
Financials make up 13% of your portfolio, even in a tough year for them. Why?
Financials are historically very good dividend payers and very good growth stocks. I owned a lot of financials going into the crisis. We took our hits, certainly, but we avoided the biggest disasters. I had minimal Citi (C) shares, no AIG (AIG), and never owned Bear or Lehman. At this point, we've consolidated into names like U.S. Bancorp (USB), Wells Fargo (WFC), and J.P. Morgan Chase (JPM). USB and Wells, in particular, are predominantly U.S. banks, and they're very well-capitalized, well-managed companies. Both have reinitiated dividends. Banks are all suffering right now, but we want to be in those stocks that are going to act rationally in a difficult environment and come out strongly on the other side.
Pfizer is your largest holding, and was the fund's top performer earlier in the year. But with top-selling Lipitor coming off patent, it doesn't seem like a growth play. What's your thinking?
This wasn't such a growth idea, but one where we thought there was a lot of value, an attractive yield, and a tremendous amount of free cash flow over the next several years. The company went through a management change, and the new management has been a breath of fresh air in terms of allocation of capital to shareholders. We've seen a healthy level of buybacks, dividends, and dividend growth. Pfizer (PFE) is facing big patent issues, but that's no secret. It has a pipeline with a few new drugs going through the FDA that should help offset some of the loss. I think it's a safe investment, and one where we see fair value of $24 to $25 [compared with a recent $20]. On top of a 4% yield, that's a nice return.
What have you been buying recently?
One that's moved into the top five is PepsiCo (PEP). We have a valuation bias, so when we notice a company of Pepsi's quality that seems to be struggling, we'll do the work. It has underperformed relative to its peers, in part because of losing some market share domestically to Coca-Cola. I think it is now making the right decisions to increase marketing and ad spend. If you look out a few years and assume a reasonable multiple, you can make 15% to 20% without taking on undue risk. Another one in the consumer area is Kohl's (KSS), the department store chain. It just this year initiated its first dividend, and the yield is under 2%. It was your classic rapid-growth darling stock that matured. It had grown the store base 15% to 20% a year, year in and year out. Eventually the market can't support that level of growth. Kohl's is a very well-managed company and figured it out very quickly. It will now grow square footage only 2% to 3% a year. It won't be investing in stores that wouldn't pay off for us as shareholders. For us, in an economy that's hardly growing, 5% to 6% topline growth is not bad.
You've made a big bet on industrials. What do you like there?
United Technologies (UTX) [which makes everything from air conditioners to elevators to helicopters] is well positioned in the industrial world and is a good way to play global GDP growth. It does about 20% of its business in emerging markets. That's important now, and it's only going to become more important. We think it could earn close to $6.80 in 2013. It trades around 11 times that number, and it could get a higher multiple in an environment where people feel better about the global economy.
This article is from the December 12, 2011 issue of Fortune.

Green Energy Is Awash in Red Ink

The “green industry” with its faux “green jobs,” pushed by United Nations globalists have scared billions of people that global warming is real, and it is the result of human activity, is a multi-trillion dollar profitable hoax

Green Energy Is Awash in Red Ink

- Dr. Ileana Johnson Paugh  Thursday, November 24, 2011

American people are beginning to notice that the “green energy” is not so green after all, it is awash in red ink. 
“Green jobs” were being promised all over Europe when Spanish voters swept into power the Socialist party in 2004. More entitlements and withdrawal from the war in the Middle East were the icing on the cake. The Socialists presided initially over a period of sustained economic growth.  Today Spain has 5 million unemployed, a huge public debt, and the “indignados” (the indignants) who are a small and disruptive minoritarios.
Mariano Rajoy, the leader of the conservative Popular Party won the prime minister post in a landslide victory last Sunday.  The voters spoke loud and clear against the Socialists’ lavish spending and mismanagement of the Spanish economy.
Interestingly, Europeans keep voting for right of center parties, but the spending spree and the “green economy” march on. According to Daniel Hannan, “only three per cent of European Union nationals have leftist governments (Austria, Denmark, Cyprus and Slovenia). Yet spending continues to rise (except on defense), bureaucracies continue to grow, powers continue to shift from national capitals to Brussels.” No matter how Europeans vote, as long as Brussels dictates the laws and Germany runs the economic policy, the “green” oligarchy rules.
On the home front, the bankrupt solar panel manufacturer Solyndra’s employees are now qualifying for trade adjustment assistance.  After blowing $528 million dollars in taxpayer support, Solyndra’s 1,100 laid off workers will receive $13,000 each in federal aid packages, including job retraining and income assistance.
Since President Obama extolled the virtues of clean solar energy, why is it that Solyndra could not make a profit in such a hot market?  Was this just crony capitalism or a photo opportunity for the White House to waste more taxpayer money? 
Trade adjustment assistance was intended to ease the burden on the victims of free trade, to provide special unemployment benefits, loans, retraining programs, and other aid to workers and firms that were harmed by foreign competition after they’ve been in business for a while. 
Solyndra was hardly in business long enough to prove that it could not compete against the Chinese who were making solar panels quite cheaply. The information was already available that the Chinese were making solar panels for $1 or less each. Now the taxpayers have to cough up another $14.3 million in federal aid as a direct result of the bankruptcy. If the workers were “highly skilled” as the Department of Energy documents show, why do they need retraining?
President Obama gave Solyndra $535 million in loan guarantees in 2009 as part of his program for “green jobs” and sang its praises at the Freemont, Ca plant.  The company burned cash so quickly, that the Department of Energy had to restructure the original defaulted loan in order to help Solyndra survive. During renegotiations of the loan, private investors were placed ahead in line to receive the first $75 million recovered in the event of liquidation, clearly in violation of DOE loan rules.
Energy Secretary Steven Chu and the DOE have approved in September a $737 million loan guarantee to Tonopah Solar Energy for a 110-megawatt solar tower on federal land near Tonopah, Nevada, and a $337 million guarantee for Mesquite Solar 1 to develop a 150-megawatt solar plant near Phoenix, both under the same program as Solyndra.
If Americans have spoken loud and clear that they want drilling for oil here in order to ease the dependence on the Middle East importation, why are we still pursuing expensive solar and wind energy that cannot even begin to replace the energy currently produced by fossil fuels that our huge economy needs? Why are we not building nuclear power plants? Why did President Obama stop the Keystone XL pipeline from Canada that would have delivered crude all the way to Texas? Why does he want to bankrupt the coal industry?
The similarity to the European Union situation is eerie. No matter what the majority of American voters want and no matter how they cast their ballots, the ruling power elite ignore them.
Another sector of Obama’s “green economy” is in financial trouble, the renewable electricity grid. Among “smart grid” companies that have received taxpayer loans is Beacon Power that manufactures flywheel energy storage technology.
Beacon received $43 million loan guarantees from the same stimulus-funded program that financed Solyndra. Beacon filed for bankruptcy in October 2011 and announced in November 2011 that it will likely liquidate its assets instead of restructuring, meaning that the government may not recoup the $43 million through bankruptcy proceedings.
Ener1 received more than $120 million in federal grants. It was delisted last week by NASDAQ for failure to comply with SEC filing requirements after suffering heavy losses and firing its top executives. Other “green energy sectors” may follow.
The Smart Meter lawsuit in California will put in jeopardy the manufacturers of such meters if the judge rules that all litigants must have their Smart Meters replaced with traditional meters. This administration has already spent hundreds of millions of dollars for the deployment of Smart Meters across the country and especially in California.
A class action lawsuit in California has brought the following issues in front of the Administrative Judge Amy C. Yip-Kikugawa, who ordered PG&E, SCE, SDG&E, and Southern California Gas Company to explain Smart Meter transmission details.
  • misleading representation
  • public exposure to pulsing RF radiation
  • UL misrepresentation
  • failure to disclose smart meter defects
  • misrepresentation concerning FCC guidelines
  • unlawful use of customer property
  • excessive conduction
  • excessive RF radiation
  • failure to investigate customer complaints
  • Americans with Disabilities Act Violation
  • customer discrimination
The “green industry” with its faux “green jobs,” pushed by United Nations globalists who have scared and convinced billions of people that global warming is real, and it is the result of human activity, is a multi-trillion dollar profitable hoax. This hoax will extort huge fees in carbon emission taxes, flushing taxes, carbon footprint taxes, water footprint taxes, and other yet unnamed “green” taxes across the globe.
Billions of dollars are being spent to retrofit homes, cars, plants, entire industries, products, roads, medications and hospital care, food, agricultural methods, education, travel, water access, and land access, in the name of saving the “green” planet. Every facet of human life and every human being will be better controlled by a handful of omnipotent and omniscient oligarchs.

Dr. Ileana Johnson Paugh
Most recent columns

  “Dr. Ileana Johnson Paugh is a freelance writer (Canada Free Press, Modern Conservative, Romanian Conservative), author, radio commentator, and speaker. Her book, “Echoes of Communism, is available at Amazon in paperback and Kindle. Short essays describe health care, education, poverty, religion, social engineering, and confiscation of property. Visit her website,
Dr. Johnson can be reached at:

Wednesday, November 23, 2011

The Bet That Blew Up Wall Street

An older video however very worthwhile revisiting and watching. Fascinating how the rules were changed after lobbying by the large investment bankers and the profound effect that it had!
Aivars Lode 
January 11, 2010 5:20 PM

The Bet That Blew Up Wall Street


Watch the Segment »

Wall Street sign in the downtown financial district of New York, USA (iStockphoto)
(CBS)  This story was first published on Oct. 26, 2008. It was updated on Aug. 27, 2009.

Anyone with more than a casual interest in why their 401(k) has tanked over the past year knows that it's because of the global credit crisis. It was triggered by the collapse of the housing market in the United States and magnified worldwide by the sale of complicated investments that Warren Buffett once labeled financial weapons of mass destruction.

They are called credit derivatives or credit default swaps.

As correspondent Steve Kroft first reported last fall, they are essentially side bets on the performance of the U.S. mortgage markets and some of the biggest financial institutions in the world - a form of legalized gambling that allows you to wager on financial outcomes without ever having to actually buy the stocks and bonds and mortgages.

It would have been illegal during most of the 20th century under the gaming laws, but in 2000, Congress gave Wall Street an exemption and it has turned out to be a very bad idea.

While Congress and the rest of the country scratched their heads trying to figure out how we got into this mess, 60 Minutes decided to go to Frank Partnoy, a law professor at the University of San Diego, who has written a couple of books on the subject.

Ask to explain what a derivative is, Partnoy says, "A derivative is a financial instrument whose value is based on something else. It's basically a side bet."

Think of it for a moment as a football game. Every week, the New York Giants take the field with hopes of getting back to the Super Bowl. If they do, they will get more money and glory for the team and its owners. They have a direct investment in the game. But the people in the stands may also have a financial stake in the ouctome, in the form of a bet with a friend or a bookie.

"We could call that a derivative. It's a side bet. We don't own the teams. But we have a bet based on the outcome. And a lot of derivatives are bets based on the outcome of games of a sort. Not football games, but games in the markets," Partnoy explains.

Partnoy says the bet was whether interest rates were going to go up or down. "And the new bet that arose over the last several years is a bet based on whether people will default on their mortgages."

And that was the bet that blew up Wall Street. The TNT was the collapse of the housing market and the failure of complicated mortgage securities that the big investment houses created and sold around the world.

But the rocket fuel was the trillions of dollars in side bets on those mortgage securities, called "credit default swaps." They were essentially private insurance contracts that paid off if the investment went bad, but you didn't have to actually own the investment to collect on the insurance.

When 60 Minutes last spoke with Eric Dinallo, he was insurance superintendent for the state of New York. He says credit default swaps were totally unregulated and the big banks and investment houses that sold them didn't have to set aside any money to cover potential losses and pay off their bets.

"As the market began to seize up and as the market for the underlying obligations began to perform poorly, everybody wanted to get paid, had a right to get paid on those credit default swaps. And there was no 'there' there. There was no money behind the commitments. And people came up short. And so that's to a large extent what happened to Bear Sterns, Lehman Brothers, and the holding company of AIG," he explains.

In other words, three of the nation's largest financial institutions had made more bad bets than they could afford to pay off. Bear Stearns was sold to J.P. Morgan for pennies on the dollar, Lehman Brothers was allowed to go belly up, and AIG, considered too big to let fail, is on life support thanks to a $180 billion investment by U.S. taxpayers.

"It's legalized gambling. It was illegal gambling. And we made it legal gambling…with absolutely no regulatory controls. Zero, as far as I can tell," Dinallo says.

"I mean it sounds a little like a bookie operation," Kroft comments.

"Yes, and it used to be illegal. It was very illegal 100 years ago," Dinallo says.