BUBBLE SPOTTING….

I’ve laid my cards on the table and so have a few other notable bubble spotters.  But few would argue that Robert Shiller is not the king bubble spotter and in an article today Professor Shiller showed his hand.  Where’s the next big bubble?  Like John Hussman and myself believe Shiller says a bubble is forming in commodities, but Shiller is far more exact.  He says the commodity bubble is leading to a much bigger bubble in farmland.  He says:

“A continuation of today’s commodity-price boom seems more likely, for it has more of a “new era” story attached to it. Increasing worries about global warming, and its effects on food prices, or about the cold and snowy winter in the northern hemisphere and its effects on heating fuel prices, are contagious stories. They are even connected to the day’s top story, the revolutions in the Middle East, which, according to some accounts, were triggered by popular discontent over high food prices – and which could themselves trigger further increases in oil prices.

But my favorite dark-horse bubble candidate for the next decade or so is farmland – and not just because there have been stories in recent months of booming farmland prices in the US and the United Kingdom.”

It’s nice to know I am not the only one who is seeing signs of irrational exuberance in these markets.   But like my housing market call of 2006 it’s likely that I am early to the game.  But forewarned is forearmed….

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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Comments

  1. Rocky:

    Your analysis ignores a fundamental fact. Humans also produce dommodities. Change in population will change the production as well as the use side of the commodities equation.

  2. You guys want to know a sign of a top in farmland? In any country?

    I. E. My financial planning office in Ohio is located beside a real estate broker who has specialized in farmland for 40 years. I’ve known him very well during that time period.

    We’ve bothfirst hand the intial farmland price bubble in the 70′s and the following bust in the mid-80′s (remember the nationwide Farm-Aid concerts with Jon Cougar Mellencamp and Willie Nelson?) The song “Rain on the scarecrow” comes to mind.

    This guy owns almost zero stock investments. However, he has over 5,000 acres of “prime” farmland free and clear. Recently, I heard him speaking of whether he should start selling off some of the farmland that he’s doubled his money on over the past 5 years. That my friends is one of the signs of a top in farmland in Ohio anyway.

    Another sign of a top? According to public information on farmland sales in Ohio, it seems that most of the buying is coming from amateurs or non-farmers (also known as the general public) Who always gets into a market last? You guys know the story.

    I don’t know of any lifetime active farmers who are buying at the current price levels.

    They do however, want to cash rent the farmland on the shares method.

    My experts (in this case, actual life long farmers) are telling me that farmland per acre prices are too high to be sustained here. Like everyone else who is over the age of 50 in the midwest, they’ve seen this movie before (1972 to 1986) and they know how badly it ends.

  3. You guys want to know a sign of a top in farmland? In any country?

    I. E. My financial planning office in Ohio is located beside a real estate broker who has specialized in farmland for 40 years. I’ve known him very well during that time period.

    We’ve both seen first hand the intial farmland price bubble in the 70′s and the following bust in the mid-80′s (remember the nationwide Farm-Aid concerts with Jon Cougar Mellencamp and Willie Nelson?) The song “Rain on the scarecrow” comes to mind.

    This guy owns almost zero stock investments. However, he has over 5,000 acres of “prime” farmland free and clear. Recently, I heard him speaking of whether he should start selling off some of the farmland that he’s doubled his money on over the past 5 years. That my friends is one of the signs of a top in farmland in Ohio anyway.

    Another sign of a top? According to public information on farmland sales in Ohio, it seems that most of the buying is coming from amateurs or non-farmers (also known as the general public) Who always gets into a market last? You guys know the story.

    I don’t know of any lifetime active farmers who are buying at the current price levels.

    They do however, want to cash rent the farmland on the shares method.

    My experts (in this case, actual life long farmers) are telling me that farmland per acre prices are too high to be sustained here. Like everyone else who is over the age of 50 in the midwest, they’ve seen this movie before (1972 to 1986) and they know how badly it ends.