“The corn is as high as an elephant’s eye”

“The corn is as high as an elephant’s eye”
Fourth of July, 2011
David R. Kotok


It was in the grand days of America when Richard Rogers (music) and Oscar Hammerstein (lyrics) won two Oscars with “Oklahoma.” The show/movie is quintessentially a post-World War 2, post-Korean War, pre-Vietnam War American statement.

In the mid-1950s, our citizens had confidence. Our government commanded and earned our confidence. It was led by popular President/General Dwight Eisenhower. Americans were optimistic, the economy was growing; the national debt/GDP ratio was declining; the populace developed families and owner-occupied, single-family housing. We had good public schools. We trusted our banks. We respected our public officials.

When “Oklahoma” was popular, Americans believed in their forward-looking dreams. If memory serves me correctly, on July 4, 1956, I marched in a parade with my Boy Scout troop at Camp Kimble, in southern New Jersey. I was an Eagle Scout with three palms and the Order of the Arrow, and a junior scout-camp counselor. We scouts had a mission. We believed in and taught younger boys the mission and the virtue of America. We recited “trustworthy, loyal, helpful, friendly, courteous, kind, obedient, cheerful, thrifty, brave, clean, and reverent.” And we meant it. True: we weren’t always “cheerful.”

The songs of “Oklahoma” captured the feelings of America:

“Oh, what a beautiful mornin’,
Oh, what a beautiful day.
I got a beautiful feelin’
Ev’rything’s goin’ my way.”

Fast-forward to today. Look in the mirror and answer truthfully. If you are old enough to remember those halcyon days, do you feel the nostalgia? Is the remembrance bittersweet? Would you walk outside and sing this song today?

Let’s get to the corn and the height of an elephant’s eye. Then we shall return to the Fourth of July.

In the last few weeks, we have watched the roller-coaster reports on the corn harvest from the US Department of Agriculture. During the last month, they were very bullish, and then they were bearish, and then they were bullish. To quote our friend Dennis Gartman, “Reflecting the uncertainty of the report and the skepticism with which the numbers have been received,” the USDA has issued a clarifying statement saying they may issue a clarifying statement. It will be released on August 11. Until then, “Confusion will reign,” says Dennis.

A quick digression: readers may want to mark their calendars for Feb. 8, 2012 and attend a special conference in Memphis regarding food prices. Dennis Gartman, an ag economist by training, will be keynoting the dinner. The University of Memphis and the Memphis Economics Club are teaming with GIC for this one. Call GIC, 215-898-9453, www.interdependence.org, to get on the early-bird list.

Back to corn.

GIC board member Michael Drury noted that the “government numbers assumed an average year for acres harvested.” Michael is a personal friend and chief economist at McVean Trading, one of the premier private grain and livestock futures trading operations in the United States. He added that “There are 6 million acres in North and South Dakota where flooding has been severe.” They were planted late (or maybe not at all), but the driving force (Kotok’s view) may have been to collect insurance claims. The crop yield from these late plantings may be insignificant.

There is also controversy about the inventory numbers. And about what the foreign holdings of corn reveal or do not reveal. And there is the distortion that continues because of ethanol subsidies and mandated use, which directs as much as 40% of the corn crop into fuel instead of food. This persists while American policy practices protectionism, so sugar ethanol is not imported. It is much less costly than corn ethanol.

Okay, enjoy the ear of corn on the Fourth of July. And the beef and chicken and other foods that depend on America’s grains. Try to remember that American policy is now starving millions of people in the world because we are driving food prices ever higher. Perhaps we can think about that as we watch presidential candidates genuflect to Iowans. Perhaps, those candidates who are skipping the Iowa caucuses deserve more of our respect. Time will tell.

America’s greatness was captured by Thomas Jefferson in the Declaration of Independence. His final draft said “life, liberty, and the pursuit of happiness.” Historical legend has it that Jefferson’s first draft said “life, liberty, and property.” Jefferson realized that slaves were considered property in some of the original 13 colonies. He knew he could not be honest with his conscience by using the word property, so he changed the next draft to “happiness.” But he realized that wasn’t the best phrasing either. Happiness is very hard to obtain. It is the American quality of seeking it that shone through in Jefferson’s brilliant choice of words. He used “the pursuit of happiness.” Pursuit is the operative word.

Jefferson’s teachings are to watch government closely while working to care for and nurture individual life and liberty. He warned about complaisance. And he called for hard work and honest government. Jefferson and his colleagues did not envision ethanol subsidies nor an American congress like we have today.

We will end with a more obscure American quote. It originates with Calvin Coolidge. By reputation, “Silent Cal” never said anything using more than two words. The famous story about “You lose” is the classic.

We were discussing the American work ethic, American policy options, and the current economic outlook with Tabitha LeTourneau Meyerer. She is a principal with Excelsior Capital in Boca Raton. Tabitha subsequently sent me this terrific quote that Coolidge used to describe the framework for his policy views.

“Nothing in the world can take the place of Persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan ‘Press On’ has solved and always will solve the problems of the human race.”

So said the 30th president of the United States.

We wish our readers a joyful celebration of America’s birthday. We citizens are determined, persist, and succeed in spite of our government, not because of it. Silent Cal can add words to Jefferson’s classic text on this Fourth of July.

American’s birthday: “Oh, what a beautiful day.”

David R. Kotok, Chairman and Chief Investment Officer

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