Sue Martin and Mark Pearson discuss the commodity markets.
Pearson: This is the Friday, July 22, 2011 version of Market Plus. Thanks for joining us here at our Market to Market website. A lot of people are talking about this debt ceiling, it is in the news, I mean we are hearing about it really ad nauseum, Sue, and it should be fixed. I know it is political. There's some real ramifications out there. There is ramifications of capital not being formed because of the uncertainty over it and then there is the concern about a debt downgrade and not meeting our obligations on the debt and there is different ways they are telling us that that could be fixed. But you mentioned several times it is an overhang really in all the markets. We've really depended on the volatility of these markets, these big funds coming in and out at will, and you're telling us on the show tonight they're on the sidelines with all their cash.
Martin: Well they are and yet interest certainly isn't anything special to write home about. I think that there are many things that the Fed can still do to create this situation to turn around. First off I think that we could see the QE3 come out and that the QE3 would be money that would be spent with the government buying up real estate, helping the housing industry to get it going. I think that they could start and of course printing dollars is not a problem for them and I think that we will see them continue to print dollars, flood the dollar market to push the dollar lower in essence to create more interest in buying from the U.S. I think that they could start fining banks for not lending and get them up and going. Also I think that what they could do is, you know, I think that they pay banks a certain small percentage of excess funds that they leave with them and I think that they could start basically tapping that and creating fees for when they don't do certain things. They could - right now the amount of banks money that they have to have on reserve is ten percent that could be changed. I think the Fed has a lot of tricks up their sleeve. Some of them if they go back, if you listen to Bernanke he goes back and talks about the past and what was seen back in The Depression and what worked and what didn't and I think he is looking at different things and I think we are going to see quite a few, I look at the month of August as an extremely volatile month. September maybe too. I look at August, I have several cycles coming out in August. I call them cycle - and they are all tied to volatility and I think we have got a doozy of a month coming up. And maybe this is what it is tied to. In September, I think, at the time you get around the 26th of September we are going to see a major game change in our economy and the commodity markets in general. I hope it is all positive.
Pearson: All right. Let's talk about what could happen conceivable people become panicked about the currency. They want to own stuff. they want to own commodities. They want to own real assets. I mean could we see that translate into some movement again in the corn, bean, wheat, cattle and hog markets again as a safe haven?
Martin: What they might do is go into ETFs that do handle those commodities. My attitude is that people in agriculture are still very blessed of anybody, any sector in the U.S. Food is a major item. You ever get these economies around the world moving again and it is food and can we produce enough to take care of all these countries that are going to grow and in the meantime you don't have any more land. So land prices maybe they do kind of hang in for a little bit longer. I'm concerned because it does seem like they are getting extremely high but yet as we go through this one phase we could go through a hyperinflation phase maybe it is another year out. But we could see something like that happen and land prices escalate because God knows your dollar isn't worth anything anyway. In the meantime I look at China and their economy slowed a half a percent. What is - nine and a half percent growth for a country of 1.7 billion people is phenomenal. And you've got India coming right up behind China that is huge with good growth and looking at good crops, by the way. So I think when I look at everything that is going on another place you might see them continue to put money into is gold and silver. If you take silver through that fifty dollar target that double topped here on the - this year with the old hunt rally squeeze high back in the late 70s/early 80s. If you do that you're looking at a market that is just going to explode because you are now taking out a major benchmark resistance and it is just going to go huge. You can see gold go to two thousand. You could see silver get to a hundred. I would not underestimate anything in these markets when this all kicks in but we're going to have some extreme volatility, I think, in the month of August. It is going to be all over the map.
Pearson: Sue Martin always great to have you with us, some great insights, we appreciate it. That will wrap up Market Plus for this week. Thank you for joining us. We look forward to you joining us again next week and for all of us here on Market to Market, I'm Mark Pearson, have great week!