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Right on the trend
Wiped out by the volatility
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How quick can you UNLEARN?
US is the “best” market
Per capita income and wealth
Strong markets and institutions
No one is perfect
However, US is not the market maker
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Forecasts? What are they worth?
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We will gift wrap it for them
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The two that really drive the
markets
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Why do “we” have $80/barrel oil?
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An invisible sun
Cost of capital
US: allocated (mostly) by market returns
China: allocated (mostly) by connections
You don’t need to ship something to distort the
market
Import substitution
Technology transfers
Currency exchange trends have big cycles
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Economic volatility will be
rising. What does that mean
to your strategy?
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Define “economic volatility”
The difference between the
actual and the average.
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Daily distribution of price change
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It’s not your imagination
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How it entered your world
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It’s now easier to be wrong than ever
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What’s driving volatility
Globalization and integration
Speculators
Electronic trading
Portfolio models
Biofuels policy
Love it or hate it – that’s your business
Major input and now a major output
Sheer randomness
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You
don’t
solve
a
system
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Planning can’t be about predicting
Drunken monkeys throwing darts
Risk management
Own
Rent
Compensated risk
Theirs
Ours
So what does it mean to ME?
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How does the US economy grow?
Long-term GDP growth is 2.4%
Output grows with inputs and productivity
Larger labor pool 0.4%
More capital invested 0.7%
Productivity gains 1.3%
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If you don’t have productivity …
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So
what
have
we
been
distor6ng
lately?
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We’re all Keynesian now …
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We’re on sale – really marked down to move
25. Wells Fargo Ag Industries - 25
Free money forever – Is that good guess?
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A quick show of hands.
Who thinks they know what
they’re doing?
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(Un?)intended Consequence
Agriculture
Land
Values
Energy
Input
cost
Output
value
Expected
Profit
Cost of
food
30%
100%
Global economic
growth
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Can the tail wag the dog?
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So where does it leave me?
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Increasing volatility has consequences
Margin management v. “guessing”
Risk management is never free
Deleveraging has a financial cost
You need to
“own” your program
not “rent”
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The “perfect” kills the “good”
Hitting a “hole in one” is always luck
Scratch golf = skill + practice
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When the environment
changes, it’s the adaptable
that thrive not the well
adapted.