Out of an abundance of caution

By: T F Stern
T F Stern’s Rantings

Last week Enfamil pulled all their products off the shelves coast to coast out of an abundance of caution after four babies died from Cronobacter bacteria; it MUST have been in the baby formula and the news media ran with the story. The FDA later made the statement, “the bacteria that are found naturally in the environment and in plants such as wheat and rice.”

“The FDA tested factory sealed containers of powdered infant formula and nursery water with the same lot numbers as the opened containers collected from Missouri and no Cronobacter bacteria were found.”

No harm, better to be safe than sorry and besides, Enfamil has made a fortune selling products to the pubic. It’s their duty to absorb such losses.

The latest victim in the “let’s scare the public half to death” and pull all their products out of grocery stores is lettuce. California pulled all Arizona Lettuce off the shelves because a field NEXT to a place that grows lettuce, tested positive for salmonella.

“None of the lettuce in the markets has tested positive for salmonella but the grower alerted retailers of the test results and sought a withdrawal of the product “out of an abundance of caution.”’

I think this all has something to do with Islamic terrorist networks trying to recruit illegal Mexican labor and George Soros’ desire to be World Emperor. If you’ve noticed, all these products require either paper or plastic bags to transport home; could be a Green Movement uprising, never can be too sure about folks who watch Whale Wars on television.

“Out of an abundance of caution,” if translated into terms we all understand means, “Our society has become so litigious that if we don’t do something drastic to show the world we did everything humanly possible, then we’ll be seen as heartless greedy capitalists who don’t care what happens, so we’d rather go bankrupt and throw perfectly good inventory down the toilet and minimize our losses if and when this ever goes to court.”

There may be a sinister plot to destroy American consumer goods one crisis after another until we all start eating Soylent Green, the daily nourishment bar made from our “dearly departed.” Is the purpose of collapsing the free market so we can usher in some form of state issued product like Soylent Green to take the place of dangerous privately produced or manufactured goods? Never let it be said the government hasn’t shown an abundance of caution; it’s taken years to destroy our free market system one brick at a time.

This article has been cross-posted to The Moral Liberal, a publication whose banner reads, “Defending The Judeo-Christian Ethic, Limited Government & The American Constitution.”



Hat Tip: BB

I’m out of pocket for a few days, but K.D. over at Market-Ticker.org ran THIS PIECE on Wednesday, and I just wanted to chime in and expand the concept at bit. First, I absolutely, totally, completely and 105% confirm that the futures markets are withering and dying on the vine AS WE SPEAK. I’m hearing for every single one of my contacts, both floor guys (in both Chicago and NY) and introducing brokers (as I used to be) all over the country, that business is totally evaporating. And we’re not talking the normal Christmas season slowdown. No. We’re talking people explicitly stating that they are done trading and hedging with futures, both speculators and hedgers. It’s over. No mas. See you later, Alligator. Buh-bye.
This was going on to some extent before the MF Global rape/theft. The markets had grown thinner and thinner, ironically on more net volume, but the volume increases were due to the veritable fungal infection of the market that is the high frequency algorithm trading systems. Furthermore, any short hedger with a brain in their head over the last 18 months has known that short hedging in an inflationary environment is and would be needless suicide. Why IN THE WORLD would you SHORT an inflating market? If Mrs. Reggie Love is printing money a trillion at a pop, and I think Mrs. Love’s debasement will be at $8.5 TRILLION in a few weeks after the debt ceiling is raised yet again, isn’t it obvious that currency debasement is happening and that physical commodity prices are going to necessarily inflate? At this point, anyone who actually believes any statistics that come out of the federal government or the Federal Reserve (there’s no inflation!) has got to be mentally disabled. Literally. Mentally disabled.

But I want address another issue that I don’t think many people are aware of yet. I taught one of my Level 2 Cornerstone Cattle Marketing schools a couple of weeks ago and we talked at length about cascading counterparty risk. Not only are producers not using the futures themselves, but they are also VERY keenly aware of the fact that if they enter into a private treaty forward delivery contract with a grain elevator or a feedlot, that they would STILL be exposed to the futures market, and to the risk of a futures market collapse, or even just another wealth confiscation. Yes, even though the producer was not engaged in the futures markets himself, if his counterparty turned around and laid off the risk on their private treaty forward contract using the futures, if their private counterparty were to be caught up in either a single-firm collapse OR a total system collapse, it is highly probable that the effects of that would cascade back to them. For example, if a rancher forward sells his calf crop to a feedlot and locks in his price with the feedlot on a purely private basis, if the feedlot then turned around and SOLD futures to offset the private forward BUY of the rancher’s cattle and then got caught up in a futures market confiscation or collapse, the feedlot might be so financially hamstrung that they might then DEFAULT on the PRIVATE contract with the rancher. This same dynamic could also happen with grain farmers who forward sell grain to an elevator on a private contract. Or it could happen to a feedlot that forward buys feed grain from an elevator. It could also happen in the petroleum markets, and on and on.

I just want to remind people that there are lots of private treaty forward contracting going on, and always have been. In fact, I have almost always advocated to my clients that they look to a private treaty “cash market contract” with feedlots or elevators first before using futures, because that way the feedlot or the elevator is the entity carrying the hedge in the futures market, and thus posting margin and meeting margin calls. For my guys, it was frequently worthwhile for them to cede a few cents on their side in exchange for not having to tap a line of credit for margin calls, and have that cash available for other uses, or to just have the ease of mind that comes from NOT having one’s interim cash flows exposed dollar-for-dollar to market movements.

But, it was fair to say that whenever a private treaty forward contract was entered into, EVENTUALLY someone laid that risk off on the futures market. Some big players are still so attached and dependent on the futures market, and simply can not comprehend or execute a paradigm shift – which betrays a massive weakness of intellect – that they are still trying to operate as usual, with their brokers, likewise in denial, telling them that “everything is just fine”. The sensible players and producers are wising up, and are now even shunning private treaty forward contracts in fear of counterparty risk should a cascading collapse occur.

This MF Global situation isn’t just about a few bucks being stolen from a brokerage firm. Both the scope and cascading consequences of Corzine’s actions put this firmly in the domain of economic treason – as in an act of economic war upon the United States and her people. This is why I told Peter Schiff that execution should be on the table for Corzine. Treason, in whatever form, is a capital offense. If Schiff hadn’t cut me off, I would have explained this. Capital punishment is serious, solemn business. It’s not an inflammatory rhetorical tool. If execution is ever put on the table, there had better be a solid, well-thought out justification for it. In this situation of massive economic treason, it would be fully justified.

I continue to marvel at how the cash cattle marketing skillset that I was taught and continue to teach is EXACTLY the remedy for what is happening around us. The answer is not in ever more complex derivatives, but in the simple, millennia-old arithmetical art of physical commodity arbitrage. It truly is amazing how the Lord works and moves.