26 February 2011 - Marketplace lessons to be learned

During the last week of February we were reminded, once again, that volatility is in the marketplace every day of the week. The tension and the violence in the Middle East, particularly in Libya, impacted market prices at our U.S. markets dramatically.

Concern over what might happen to a part of the world that provides so much of our energy sent stock prices sharply lower on Wall Street, while at the same time pushed oil prices to a 2-1/2- year high. It also sent wheat, corn and soybeans down the daily limit at the Board of Trade and livestock futures sharply lower at the Mercantile Exchange, as the dreaded word “uncertainty” dominated investor thinking. But there are some lessons to be learned from this market volatility.

When people don’t understand what is happening, they become nervous and frightened, and the result is mass selling, often computer-generated. Lesson No. 1, something I have been saying for several decades. “Prices never go the same way forever. There is always a price correction.” While I feel this correction was overdone and the market will eventually get back to price reality, we must always be mindful of the fact that it can happen at any given time, often for reasons that are unknown at the moment. Also remember that very often, what impacts prices on our farms, ranches and on Wall Street happens outside the borders of the United States. Like it or not, we are in a global marketplace.

There is another lesson we should learn (and remember) that goes back to the oil embargo of the 70's, and $148 oil earlier just a few years ago. As long as we depend on oil from foreign countries to provide us with the major portion of our energy supply, we are always in danger of being held hostage by those countries.

That is why I so strongly disagree with those people and environmental groups in this country who are opposed to ethanol, bio-diesel, wind farms (Not in my back yard) or drilling for new oil. We have pretty much proven we are not willing to cut our energy consumption, so if you are opposed to home-grown alternative energy sources then I simply conclude you like the idea of supporting those Middle East countries who don’t like us and use our oil dollars to launch terrorist attacks against us and the world. That may be harsh, but that’s how I feel; we can’t have it both ways.

It is time to learn from history and remember the market lessons of this past week....Prices never go the same way forever; We live and work in a global marketplace; We must cut our dependence on foreign energy. Remember these points because there will be a written test!

My thoughts on Samuelson Sez.