Sharing economy comes to farming

After the credit-rush, people everywhere are adjusting to the reality of less free cash flow.  Some 90% of  North American households are today servicing about twice as much debt on the same level of income as they earned 25 years ago.

Figuring out how to accomplish more with less is a necessity and a growing passion, every day in every way.  Smart businesses are tapping into this trend with services to share everything from homes, vacation properties, boats, cars and bikes.

Oil and metals are not the only commodities that have been falling in price since 2011.  Grains, coffee, soy, sugar, cotton and more:  you grow it, it’s been falling, as the US dollar rebounds. Now the sharing movement is spreading through farming too.

See: The sharing economy comes to the farm. Makes perfect sense for farmers. Not so good for new equipment sales and the companies that finance it…oh well time to focus on how to rebuild the balance sheet of households and small business, rather than just finance co’s and international conglomerates…

Three months out of the year, the 5,500 members of the Heartland Co-op push their sprayers and fertilizing machines to maximum capacity in hopes of getting the most out of a million acres of central Iowa farmland planted mostly with corn and soy. The rest of the time, the machinery typically sits in barns, idle until the next season, like most of the $248 billion of equipment owned by farmers across the country.

FarmLink, based in Kansas City, Mo., seeks to turn that equation around. Run by Ron LeMay, who headed Sprint’s wireless division until 2003, the company has created a platform to help farmers rent out their unused equipment to growers who may be hundreds of miles away to take advantage of the differences in peak harvest seasons.

Farming co-ops and equipment dealers can already sign up online, and FarmLink may add a mobile app later this year. “It’s Airbnb for agriculture,” says Jeff Dema, FarmLink’s president for grower services. “Farmers are examining their bottom lines and wondering if the $500,000 in their shed might be put to better use.”

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Central banks are the master of financial disaster

Another big swing day in global markets as HFT traders go wild and the media hangs on every syllable of central bank speak.

The global sell off to date has been vicious and abrupt and as usual, has knocked most participants off balance. It is entirely typical that we could see a bounce back of some duration; but cash remains scarce and bets heavily levered.  The secular bear is not dead yet.

A decline of just 10% in US stocks was enough to make Fed members start talking about rate hike delays again this week. As if a .25 rate move either way matters a wit in supporting anything meaningful at this point. Chinese stocks that have crashed 50% since June, managed to rally a bit in the last hour of trading as the People’s Bank stepped in to try and calm nerves before a public parade. Lest we the lose the plot here, central banks are the problem, not the solution. They have created a monster of over-valuation, capital mis-allocation and moral hazard worldwide. Fortunately not everyone has lost their mind.

Jim Grant, founder at Grant’s Interest Rate Observer, speaks with Olivia Sterns about the role played by the Federal Reserve in recent market turmoil.  Here is a direct video link.

Capital Dynamics Chief Executive Officer Tan Teng Boo discusses the China stock rout and why he’s predicting another global financial crisis. Here is a direct video link.

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Commodity countries: boom to bust

As the China miracle continues to mean-revert what many in the world had misconceived as insatiable demand, sober insights on the commodities/credit boom now busting in Australia offers similar warnings for Canada and other commodity centric nations.  See:  First the Miners, now the banks, and then comes property? 

For those who still want to believe that the latest commodity super cycle is not yet dead but only pining, we offer the following chart of the resource focused Canadian Venture Exchange, below since 2000. It is well past time to admit facts.

CNDX ventures below 2009 lows
Having fallen steadily since global growth began weakening again in late 2010, the index has now retraced the entire gains of the China story from 2001 through 2008–and then some. At 528 today, shares in this index have lost a collective 84% from the euphoric peak in 2007.  Those who were ‘buying the dips’ throughout have been ground to dust.

It’s also important to note, that historically secular booms in commodities are followed by secular busts of 10 to 20 years as the industry consolidates to a fraction of its former self, rightsizing previously frothy household spending, finance and property sectors along for the ride.

As we consider these implications for the broader Canadian stock market (TSX shown below since 2005) , it is key to comprehend that the 15% decline to date, has still mostly been about losses in metals, minerals and mining, with the accompanying rightsizing of the finance and property sector in Canada, all yet to come.  This is why a potential retest of the 2009 lows (green band) and possibly lower, must remain on the radar.

TSX Aug 26 2015

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Danielle on The Financial Survival Network

Danielle was a guest today with Kerry Lutz on The Financial Survival Network talking about recent trends in the world economy and markets.  You can listen to an audio clip of the segment here.

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TED: creative problem-solving with ‘frugal innovation’

Acknowledging and accepting constraints on time, growth and resources is essential inspiration for wise solutions. Doing more with much less is the goal.  The destructive “all you can eat” mentality that assumes endless resources, is an idea whose time is gone.  Thank goodness for that…

Navi Radjou has spent years studying “jugaad,” also known as frugal innovation. Pioneered by entrepreneurs in emerging markets who figured out how to get spectacular value from limited resources, the practice has now caught on globally. Peppering his talk with a wealth of examples of human ingenuity at work, Radjou also shares three principles for how we can all do more with less.  Here is a direct video link.

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Financials “defensive”?

Late in every market cycle, financial gurus who are mandated to stay fully invested in equities at all times start talking about dividend paying stocks being ‘defensive” picks in ‘corrections’. If only that were true.

This chart of the Canadian financial Index (XFN) is just one poignant example.  From a high just under $33 last November when all the usual suspects were saying their usual “we love the banks in here”, the financial index dumped 36% to trade at $21 a share this morning, before quickly rebounding back to the $28.00 range this afternoon (still down 14% from last November).  Lest some think this an irrelevant blip, sudden crashes in heinously over-valued, highly levered markets tend to be foreshadowing of more lasting mean-reversion moves to come.  Dividends will be insufficient salve for such deep capital wounds, as years of expected income are outweighed by principal losses.
XFN Aug 24 2015
Today while trusting clients go about their daily lives, few will have noticed the warning shot marked out this morning by many of the most trusted ‘blue chip’ shares. It will not be until prices start closing at fresh lows on monthly statements that most will be aware of the damage done to their savings.

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