GURU OUTLOOK: JIM ROGERS ISN’T BUYING THE EQUITY RALLY
This week’s guru outlook brings you Jim Rogers. Rogers has become infamous in recent years for his prescient calls on the global meltdown and the commodity boom, but long before that Rogers became famous for co-founding the Quantum Fund with George Soros. Rogers and Soros helped steer the fund to a miraculous 4,200% return over the 10 year span of the fund (see here for the Soros Guru outlook) while the S&P 500 returned just 47%. They ran what is considered to be one of the first truly global macro hedge funds.
Rogers has an interesting outlook currently. He has been very vocal about his inflationary outlook, but doesn’t see the liquidity driven bubbles that some other see forming. In fact, he doesn’t see any bubbles in anything other than the U.S. treasury bond market:
“The only bubble I see forming in the Western world is in the U.S. government bond market. Other than that I don’t see any bubbles going on.”
Rogers, a follower of Austrian economics, absolutely hates that the Fed is bailing out the banks and attempting to print us to prosperity. He thinks the winners in this printing press environment are commodities which he believes are in the middle of a secular boom. Paper assets and the dollar are the losers in Rogers’ scenario of money printing while real assets win. Rogers is a huge bull on gold miners and gold:
“no new large gold mines have been opened in decades. Some of those mines are over 100-years old. They are all depleting. On the other hand, central banks have huge Gold reserves above ground — and they are less interested in selling than in the past.
If you adjust Gold for inflation and go back to its former all-time high in 1980, Gold should be over $2,000 an ounce right now if you want to say it’s reaching new inflation adjusted all-time highs. That does not mean Gold has to get back to a true all-time high. Nothing has to. However, I suspect that given all the money printing in the world, we will see much higher prices for hard assets.”
Despite his optimism regarding gold, Rogers is actually more optimistic about other commodities:
“Despite Gold’s potential, I think I will make more money in other commodities such as silver, cotton, or coffee — all of which are terribly depressed.”
What does Rogers think about the equity markets? He has been very vocal about his investments in China, but isn’t currently buying equities as they reach new highs:
“I am not buying any stock markets around the world right now, they have all gone up a lot and I do not like to buy anything when its been going straight up for a while.”
Rogers sees enormous headwinds for the global economy. He thinks the government has simply kicked the can down the road, but this doesn’t mean he is betting against equity markets. Rogers does not want to stand on the tracks when the Fed Printing Express comes down the line. He has no idea how high the Fed can push equity prices:
“This is one of the few times in my life I have not had shorts anywhere in the world. I have also not had a lot of longs in the stock market because I’ve chosen longs in commodities and currencies. I have kept away from shorts because there is a gigantic amount of money being printed and it has to go somewhere. I thought some of it would end up in the stock market, and it has.How much higher can the equity markets go? I don’t know. There are a lot of problems in the economy, but I don’t know when those problems will cause a downdraft in the stock market. All we’ve done is paper over the problem, so I expect we’ll have to deal with those issues in the future. Printing and spending money we don’t have simply prolongs the problems and makes them worse in the long run.”
In this scenario, he thinks commodities are a no-brainer:
“If the world economy improves, commodities will lead the way due to demand and shortages. If the world economy does not get better, commodities are still a great place to be because governments are printing so much money. And, if the world economy doesn’t get better, they will print even more money!”
What is his favorite investment? Rogers absolutely loves farmland:
“I’m convinced that farmland is going to be one of the best investments of our time. Eventually, of course, food prices will get high enough that the market probably will be flooded with supply through development of new land or technology. If you can tell me something else where the fundamentals are so attractive…I’d be happy to put my money there, but I don’t know of any other place.”
Maybe a foolish question, but the “supply” of farmland is MASSIVE…right? I just don’t know how this would be a great investment, in our lifetime at least. I mean if farmland becomes a great investment, then wouldn’t we be in a situation where the world would be coming to and end or survival of the fittest is in effect and therefore we would be living in a futuristic version of the dark ages a la “Time machine” –1960?
http://www.imdb.com/title/tt0054387/
Just a thought. What do you think TPC?
Mark Reply:
November 12th, 2009 at 7:22 AM
Usually the best value investments are those that you would feel crazy getting into. They are cheap, underapprecaited, and the last investment you would feel good about it.
That is why they end up doing well!
Consequently, while farmland is plentiful, the prices of land has gone down so much that it is practically worthless. Thus the investment theme would be to buy at very cheap prices. Find someone to farm it for you, to pay off the expenses, taxes, loan payments. Then in time, maybe 20-years the cycle repeats and land is valuable again.
richard morey Reply:
November 12th, 2009 at 11:52 AM
My family has owned farms in the Midwest for 100 years, and prices for the best farmland have never been higher, having roared in recent years. They went up substantially last year and this year – even more the previous three years. I also have friends in India, where farmland has gone up even more in price. So Mr. Rogers’ bullishness cannot be due to low prices in the largest crop-producing areas in the US or India.
I have followed Mr. Roger on this topic, and I still have no idea why he is so bullish on farmland. While I respect him a great deal, I have yet to hear him sufficiently explain his views, nor are his views shared by those who own the land (though they sure hope he’s right!).
jm Reply:
November 12th, 2009 at 8:44 PM
I bought land 2 years ago in Iowa (while living in CO), based in large part to Rogers saying to buy farmland. Yes, he was recommending it back then too. Its simple, commodities are in a bull market, they have a long way to go, maybe another 10 yrs. If corn or wheat triple in price, which will happn, then what will happen to the land that grows the corn and wheat. More valuable commodity, more valuable land…nothing more complicated than that.
Brother Dave Reply:
November 12th, 2009 at 12:01 PM
It’s still about location. Rural areas near “edge cities” or larger population centers are good candidates for this idea. You may be able to trade your city/suburban home for a small farm property within reasonable driving distance. Farm income offsets living costs while population growth heads toward you.
I just found a SE PA listing for a comfortable older home and outbuildings on 160 acres for $600k. You can probably replicate this up/down the east coast.
But will the wife go for it? We always did like “Green Acres.” I’ll try telling her she looks like Zsa Zsa.
dave Reply:
November 13th, 2009 at 1:19 PM
brother dave, that was eva not zsa zsa.
TPC Reply:
November 12th, 2009 at 8:26 AM
I think Rogers is mostly interested in the ability to cultivate the land. Buy the plot of land and start growing corn, wheat, etc. That’s where the money will come from. Not the actual land itself.
MAM Reply:
November 21st, 2009 at 1:54 PM
Mr. Rogers is bullish on farmland because the world supply of food is becoming insufficient to feed the world. He realizes that over time, food will hold its value and as such, farmland will become very valuable.
Unfortunately we aren’t as rich as Jim Rogers where we can buy farm land and be a big player in the commodity and currency markets so we have to play the short term fluctuations of the equity markets. Unless you want to play commodity etfs which have performed dastardly to say the least. Need I mention UNG and USO?
lionary Reply:
November 12th, 2009 at 8:25 PM
As I recall hearing him say in a fairly recent video, Jim Rogers said that he was investing in agricultural land through a fund (not buying farm land).
I saw an interview with Rogers and he was asked if he was selling any of his Chinese stock since it had gone up so much. He said no. He was not taking any new positions but he wasn’t selling either.
Here’s an interesting story about oil reserves from the quardian.
http://www.guardian.co.uk/business/audio/2009/nov/10/oil-international-energy-agency
I think that company earnings may surprise to the upside for some time. Companies might even exceed Wall Street analysts’ “bullish” estimates of 2010 earnings (now $75). That could easily “justify” SP500 over 1,200. That may come soley via margin expansion even on lower to flat sales.
The profits of the company I work for are back to 2007 levels even though sales are down 20%. Employees have received no salary increase for the past two years now (nevertheless managers, including me, have received higher than normal bonuses) and headcount has been cut fairly dramatically. (My employees are clearly under stress and discontent but they have no alternatives. I have no alternative to reduce the workload.) Even salary workers is some divisions have been forced into several days off per month without pay. My company is a private company which has a reputation for being good to employees. More cuts are planned for the future even though sales are seen to be modestly improving. We are targeting record profit levels in 2006.
I am very bearish on the economy but I think that companies will continue to screw their workers offering low or no salary increases for the foreseeable future. Most employees will have no choice but to accept the situation and as unemployment rises the balance of power moves further away from the employees to the employer. Benefits will be cut as the recessionary recovery drags on.
At any sign that margins are deteriorating companies will immediately overreact and we will see significant new layoffs and cuts in benefits. A new wave already appears to be starting. Even though jobless claims are modestly declining, unemployment may still rise to 12% or higher, which is terriblem but companies don’t believe in a social contract. Corporations only care about profits which drives managers bonuses (and maybe they care a bit about shareholders from time to time).
Each company does what is good for itself and its managers not for the majority of its employees or society as a whole.
My AMD stock is up 20% today! I am glad they worked out their dispute with Intel and continue to place manager’s and shareholder’s interests above those of their employees as well (not really).
BleakoEcobamics Reply:
November 12th, 2009 at 8:43 AM
Rob, This was well said, and I think you are right on. I work for a large Fortune 100, in comp & benefits no less, and I can tell you that you have very well described the corporate environment for employees and likely management decisions. The co’s with healthy balance sheets will guard margin with all diligence, the others will simply take their workforce down with them … either way, it’s not good to be a worker drone these days.
Our Man in NYC Reply:
November 12th, 2009 at 11:11 AM
Rob/Bleako — you’re both undoubtedly correct (and it’s reflected in the stunning productivity gain nos we’ve been seeing) but surely it’s not sustainable in more than the short-term?
1). ‘06 Margins were already a record high (at least for S&P 500 cos)
2). At some point consumers need to buy stuff…the combination of frozen nominal wages (for many) and the need for debt reduction would seem to imply that it’s going to be a while before the consumer comes back. Eventually, that works its way up to companies potentially through both volumes & prices (i.e. deflation).
Our Man in NYC Reply:
November 12th, 2009 at 11:13 AM
PS. In advance of tomorrow, Go Hoyas!!
TPC Reply:
November 12th, 2009 at 11:27 AM
I like the sound of that! Hoyas should make a run at it again this year….
lionary Reply:
November 12th, 2009 at 8:02 PM
Another Hoya lurking here. Good luck. Hoya Saxa.
Roger’s is not doubt a genius, but, even geniuses lose their touch over time. Look at Einstein after his Theory of Relativity. What he doesn’t touch upon is that even though nations around the world are printing money they are essentially printing money for all the same reasons. Having said that, I agree with his theory that the only bubble up ahead is in the U.S. Government bond market.
Einstien got stuck on gravity and thought it related to everything including the sub atomic level. He did not have the technology to view these structures. Figuring out that more people with consume more food, and require more commodities is not high science. Rogers will be right as the Fed and other Government continue to debase their paper currencies. Gotta eat!
I agree with Jim Rogers when he predict that the farmland will be one of the best investment of our time and even in the future time.And no matter if “supply” is Massif or not, and it isn’t any more a question of the developement of technology. For that we have just to compare the actual world market’s trends and commodities prices with the past situations, and we can see easily that the present situations are worst, the prices are increasing and even some commodities are used for other objects …like green energy and other using…. So I think that’ll be more a question of quality and quantity of products offered in the market for human consumption.This last point is very important, when we know that there aren’t many possibilities to develope new lands, and even we saw also that technology impact isn’t always a safe way to improve things ….and at the end we have to keep in mind that unfortunatly there is only one earth with limited ressources……………
How about some love on my gold call yesterday. Dollar did a mooonshot this morning right off the support levels. The gold short looks absolutely awesome.
TPC Reply:
November 12th, 2009 at 8:49 AM
One day does not make a great trade. Unless you’re George Soros circa the early 90’s….Looks solid so far. I like your dollar bottom call. We’ll see how it pans out. Hard to stick with a trade like that where the fundamentals don’t exactly rhyme with the technicals though….
SpiderTrader Reply:
November 12th, 2009 at 10:15 AM
Gold taking a nosedive now. Great play on the anti-reflation trade.
Anon Reply:
November 12th, 2009 at 11:15 AM
GLD down 75bps. No cigar yet. Maybe if it falls 500bps
SpiderTrader Reply:
November 12th, 2009 at 12:03 PM
No cigar, but with a mental stop in at about EUR $1.50 I think it’s looking like a great risk/reward bet.
Anon Reply:
November 12th, 2009 at 12:07 PM
Agree. Decent risk/reward here.
david Reply:
November 15th, 2009 at 8:31 AM
nice one day call fool.
gold will be at 1250 this year and will continue to move higher.
playing the downside for one day on the back of a huge bull is risky business and not real bright.
No farmland etfs yet, but if farmland prices are a good investment, buyers wil spend more money to make that land more productive. That’s good for MON, DE, etc. Maybe people have other ideas along this land.
Since it takes 10 pounds of water to make a pound of corn, railroads will ship a lot of midwestern corn west to ship to water-short China to feed the beef and poultry required for China’s growing demand for protein. YUM Brands commented on the protein business in China in their latest quarterly report. Foreign investment is moving into Brazilian agriculture. Ultimately this should be good for the depressed dry bulk carriers who will ship this grain from Brazil, Africa, and America to the Far East. BNI’s grain shipments this year have held up well relative to other categories.
TPC Reply:
November 12th, 2009 at 9:21 AM
Check out the latest rail data. Grain up 10% while everything else is flat or down…..
http://pragcap.com/rail-data-shows-incremental-improvement-still-in-recession
Farmland is simply a play on real estate, and Jimmy being a value investor, likes it. Does he know that world population is decreasing? I wouldn’t try to do everything he does. Did he get out of oil before the fall? Isn’t his big China investment due for a correction after this run up? Sure it is. He knows commodities, but tends to miss the changes in direction. Never go long after a big run up(period).
thehynie Reply:
November 12th, 2009 at 10:12 AM
China has had a big rally, but it’s still down 40% from the peak. The Chinese economy is sending mixed signals. I got out two years ago, got back in mostly lower, and have sold most of my Chinese positions already. Maybe I’m too early. I don’t have a clear picture, and it doesn’t look like Rogers does either. I spent 3 weeks in China this summer trying to figure it out, and I’m still not sure. When you don’t have a clear picture, you trade something else where you do. Isn’t that what Rogers is really saying?
Maybe populations are declining overall, but farmland is really a play on global gdp growth, not population. The Monsanto play is a bet that more expensive farmland means people will pay up to increase the productivity of that land. MON recently increased the outlook for acreage for a new product.
But I’m just nuts, because I got long the UUP this week at 22.50 and I must be the only guy in the world who thinks the dollar is cheap.
Tyler Reply:
November 12th, 2009 at 10:53 AM
thehynie: Thanks for your good thoughts. Keep it coming on this topic.
-ty
From what I’ve read, it has been suggested that China, India, etc, will become more prosperous and eat more and import more food due to there large populations and limited farm-able land.
Farmland in the U.S. Midwest was in a bubble as of late 2007, according to this article:
http://www.farmanddairy.com/columns/farmland-price-bubble-will-burst/8288.html “Farmland Price Bubble Will Burst,” December 6, 2007
My broker says that average prices have since retreated modestly (perhaps 6%), but have far to go in order to return to historical value.
I think Rogers may be wrong in another respect. During hard times people can save by eating less meat. If this becomes widespread in the U.S. and abroad, that’s a lot of farmland freed up from producing corn and soybean (for livestock). It’s just not as simple as saying the supply of farmland is limited.
Some counterpoints on agricultural land:
http://seekingalpha.com/article/148224-13-agriculture-myths-busted-this-bubble-is-ready-to-pop
13 Agriculture Myths Busted: This Bubble Is Ready to Pop
The contrarian view is a difficult one to take, but often worth considering, especially in this case. There seems to be a prevailing mentality that farmland is a great investment right now. It has some well known and very vocal advocates such as Jim Rogers, George Soros, Marc Faber, Fortune magazine, BlackRock, and a number of hedge funds. It is thought to be something secure during this time when little appears to be secure. People assume it will continue to rise in value because the world’s population is growing and “people have to eat”. It has corporate and political clout because of corn ethanol mandates as well as current agricultural policies and subsidy programs.
I don’t agree with any of the reasons people promote agricultural land as an investment right now. To prove my point, I’ll use a “myth buster” approach.
Myth #1. As world population expands, the demand for arable land will soar.
Just because population increases, doesn’t mean food will be produced and evenly distributed to everyone, and at a price to cover expenses of production. This has been proven many times over during this past century. Commodity prices, like the oil story we are now witnessing, are directly related to the economic health of individual nations throughout the world. Major global food distribution agencies are already seeing decreased revenues in contributions from developed nations due to this global economic downturn. Exports of our U.S. agriculture commodities are lower, except to China, which will likely decrease importing them soon, with its rising unemployment and decreasing export income.
Myth #2. Farmland is proving that it can hold its value through these tough economic times.
Much of recent year price stability has been due to speculation. Many of the investor class have driven farmland values. If farmland values start to go down, or, if commodity prices make farming unprofitable, expect some dumping to occur, because that’s what investors do. If we didn’t have this investment occurring, we’d have already seen greater price reductions.
According to one source, land values have gone down 20% already in other countries, which would suggest the U.S. is lagging in a farmland price correction. Prices are down 18% in Brazil, 12% on the Canadian prairies, 20-35% in Russia and Bulgaria, and 70% in the Ukraine.
Myth #3. Farmland year-over-year value increased the first quarter of ‘09 according to Chicago Federal Reserve figures.
The increase for the entire year ended up 2% in the Chicago Fed’s region. The price trend started downward towards the end of ‘08. The Illinois, Indiana, Iowa, Michigan and Wisconsin district was down 6% in the first quarter of 2009, the steepest drop in 24 years.
In a survey, thirty percent of bankers in this district of most productive farmland expected farmland values to drop further, while the remainder expected them to be stable.
Myth #4. There is a limited and dwindling supply of land to farm because of climate change.
This statement may or may not be true for the U.S., and only time will tell. Erratic weather and rainfall may certainly cause production problems. Zones are also changing, and we have yet to know how this may help or hurt overall production. Warmer climates generally produce more food. Production has been strong, so far.
Myth #5. Ag land is a great inflation hedge.
Ben Bernanke, the European Union, Bill Gross, and Paul Krugman are worried about deflation. Why are you worried about inflation? Deflation causes assets to decrease in value and this unwinding process is far from over. We all know what this has done to the housing and commercial real estate prices. The process has barely begun in the sector of farmland real estate.
Furthermore, if you consider the rapid increase of input costs, especially when the energy crunch hits a few years from now due to the current decrease of investment in maintenance and new drilling projects, this statement might not even hold up in an inflationary environment.
Myth #6. Ethanol needs will cause farmland values to continue to appreciate, requiring 33% of corn production by 2010.
In 2009, projected corn use for ethanol production will actually go down by 100 million bushels, according to recently released data. This is a very surprising and interesting statistic, given all previously forecasted predictions. Why? Once again, it comes down to the economics of ethanol production. Twenty or more plants have gone bankrupt and around 30% have reduced or stopped production.
When this political product fails, we will have a huge corn surplus. This factor is huge, since ethanol has been the driver of the Midwest’s farm economy in recent years.
Myth #7. Agricultural commodities are headed towards a bull market.
Large corn acreage numbers released a week ago surprised everyone and caused a steep drop in price. The latest commodity figures show corn, soybean, and wheat prices all down this year due to increased production forecasts. Corn must return $4/bushel to break even and it is predicted that it may fall below $3/bushel this season. Inflation-adjusted corn prices are much lower than in the 1970’s, when they would have been the equivalent of $11/bushel. Higher and higher input costs increase risk. Monsanto’s (MON) corn seed price increased 20% this year, and soybean seed 35%. Corn seed prices can be $150-$240 per bag. I’d expect this year to be the final year of increased production, because agriculture production mirrors the economy.
All previous recessions have meant decreased crop production. It seems possible that the dairy model could be a harbinger for the grain model going forward. That is, the cost of producing milk has exceeded its price and many dairy farmers are going out of business.
Myth #8. Urbanization will continue to eat up the best farmland across America.
In the past this has been true, but it won’t be going forward. This housing expansion has come to a near halt, due to the credit bubble popping. We have been left with a glut of houses which will take years to assimilate. The current trend is away from suburbs into higher density urban living. Two thirds of American’s live in urban areas.
While total acreage numbers may not be impressive, we are experiencing the biggest urban agricultural movement since the Great Depression. Church grounds, empty lots, home yards, and balconies everywhere are being turned into urban gardens. In the rural areas, the opposite is happening. Abandoned farms are still being bulldozed to add acreage, as our industrial farms consolidate and get ever larger.
Myth #9. Land grabs by China, Japan, and “sovereign wealth nations” will be the biggest purchasers of Ag land over these next few years.
While this would be desirable to certain nations, I doubt that governments will sit idly by and watch this happen. This is what wars and takeovers are made of. Who controls a nation’s food supply controls that nation, doesn’t it? I don’t see productive farmland as a politically palatable saleable good. The saleable good is what that land produces. I predict this to be a short lived happening, especially given future energy constraints.
Myth #10. An investor can rent the land to get a high return on his or her investment.
Farmland prices peaked in 2008. Cropland rental rates increased again this year. This year’s rental rates are still based upon last years commodity prices and land values. Now, with the higher input costs and lower commodity prices, rental rates will be forced lower. Renters are feeling squeezed.
Myth #11. Good Ag land is ever scarcer and hard to come by.
If you consider the average age of the Midwestern farmer (and elsewhere), there will be a large amount of acreage turning over in the next decade (perhaps 1/6 to 1/3 of the land). If farm profit margins become tight or negative, much additional land will come on the market.
Myth #12. We need to continue to increase our Ag commodity output.
There is a large amount of overproduction right now due to current agricultural policy. If you’ve ever read anything by Michael Pollan or seen movies such as “King Corn” or “Food, Inc.” you know that corn and cattle production aren’t optimizing land use for food growing, but rather are responding to agricultural policy, which is politics.
Our nation has been blessed with a vast amount of rich agricultural land. If crop choices changed to essential grains, beans, fruits, and vegetables, we could feed many more people. It would become less industrialized, however, because real food is more labor intensive. This would employ more people, have lower profit margins, and, consequently, lower land values.
Myth #13. Farmland never participated in the recent bubble that housing did in the U.S.
According to an inflation-adjusted Shiller graph, the average U.S. house price went up 85% from the start in 1997 of $110,000 to a high in 2006 of $205,000. According to a Calculated Risk blog graph of the nominal average U.S. Agland price per acre from 1999 through 2008, farmland increased 100% from $600 to $1200 per acre.
The same chart, inflation-adjusted, shows an increase of 60%. If you take just the state of Iowa, according to an inflation-adjusted graph from ISU, the increase in price per acre was 100%, from 2200/acre to 4400/acre during the same years of 1999-2008.
Disclosure: No farmland, hedge funds, commodities, or stocks owned.
Rene Reply:
November 13th, 2009 at 7:53 PM
Good post Lionary!
Government stats show an average 2%, high risk, return on capital to farmers. Any one know why the ROI is so low?
I know of lots of productive farm land, in an area far from any city and where the population has decreased, which has never regained its 1981 price of $110,000 per 160 acres.
In 1970 farmers were told of an impending food shortage due to population increase and they responded by doubling production on existing acreage.
Production can easily be doubled once more if necessary.
Farmland within a reasonable distance of a large urban center has increased in value by 6% per annum over the last 60 years. (The real inflation rate in my observations). Resulting in a doubling every 13 years. I wouldn’t want to invest now and wait 20 years for the price of farm land to rebound.
It seems as though others deliberately try to deceive people.
Rogers is a brilliant investment guru whose views I respect. I do agree with his view of the upcoming boom in commodities and agriculture. Looking globally, the world’s population will continue to grow and eat more animal based protein (and animals both eat a lot of grain and use a lot of land to graze that could be used for growing grains). Worldwide population growth will continue until 2050 and, barring another “Green Revolution”, food will become both much more expensive and increasingly scarce.
Obviously, DBA, DBC, MOO and COW are all good ideas…but if you want to invest in FARMLAND itself, first think long term investor not as a trader! It could be 5-20 years before you see 10-20x your money back. Please let me know if you’re interested as I could put you into contact with a company that invests directly in farmland and the minimum capital requirement is only $5K (and it is both RRSP and TSFA accessible). The farmland they invest in is inexpensive (downright cheap particularly when when compared to per acre prices in the American Midwest or England, for example), so if you think like a contrarian as I do, you want to buy now when others are not interested…because they will be by 2011-13 as inflation takes hold. Please type “Farmland” in the subject line if you’d like a reply. Thanks.
Brian
canadian165@canada.com
mike stewart Reply:
November 14th, 2009 at 4:36 AM
requesting info on farmland per you offer.
Thanks,
Mike Stewart
Farmland, per se, is a nearly nonsensical categorization, and the rage to invest in it by speculators is little different from the REIT debacles of past years, with young hotshots whisking themselves around the country buying one empty warehouse after the other. The goofy idiots with MBAs jumping from one farming state to the next, blathering on their Blackberries and wearing their dusty pink baseball caps, are the rubes, not the farmers and locals wisely selling them land based on blue sky projections of future demand. Shipping should also be on their agenda since easy asset-based financing is available, and these “quants” of course no better than those hapless foreign shipowners just ripe for the pickin’ by nerds who’ve never done a real day’s work in their lives.
Think on these things:
Seeds are being patented by agri-pharma-cons. Costly. Likely not available, unless you are in the favor of the food distribution czar (FDC).
Animals are being RFID tagged. Costly.
Animals are subject to vast amounts of inoculations. Costly and unhealthy.
Animals may be slaughtered en mass by the slightest fear of “dis-ease”.
Most foodstuffs now are genetically modified/patented. Should those seeds fall on your farm you will be taken to court and your land confiscated.
Martial law may be implemented. Costly.
Insecticides, etc, are patented and probably will be required in the near future.
Weather modification will affect farmland output. Costly.
Water may be scarce. Costly.
Riots and theft will increase. Food and water will be high on the list.
Guns will be confiscated.
You may be considered a terrorist for having one.
Life, as we know it, will end.
Lee Puccini Reply:
November 17th, 2009 at 8:27 PM
Unfortunately your probably right.
The problem with the advice is that Jim Rogers is insanely wealthy. “Buy farm land and commodities” is the type of hyper conservative advice you give to someone who has millions. He doesn’t think in terms of a few good small cap companies, a few shorts. He’s looking for a guaranteed 2% gain, not a decent shot at 8%. The coming years of volatility will benefit the informed little guy, not the big guys. (Assuming they ever regulate hedge fund insider trading.)
jm Reply:
November 14th, 2009 at 11:20 PM
KISS…higher commodity prices translate into higher land prices that grow the commodities. more valuable wheat/corn, etc, more valuable farmland…nothing more complicated than that
Folks,
I believe Jim Rogers is right about farmland investments. People who live in areas where the standard of living is rising will improve their diet first and foremost, this means adding additional protein in most cases. Think chicken, turkey, some pork and some beef. These animals eat grain that must be produced.
Also these folks in emerging countries will drive more which takes fuel, when fuel prices go higher as they were a year ago fuel additives, think ethanol for gas and soy oil for bio diesel become more economical. With low fuel prices they don’t make sense but at higher prices they play a part.
Farmland is a hedge against inflation in that it can not be printed at will. It has historically appreciated over time, usually slow and plodding not fast and furious.
Farmland throws off income anually, think dividend. Think of people you know who are wealthy—Don’t alot of those people own real estate of some kind?
I am a farmland owner, we have a small family farming operation. Farmland in my area in east-central Illinois is selling for between $4,000 and $6,000 per acre depending on location and soil types (productivity). We are looking to expand our operation. We can farm more land than we can afford to buy. If you know of anyone who is interested in learning more about buying farmland in Illinois, we will assist them and rent the farm from them providing a return on the investment. Experienced with references available upon request. Don @crist-associates.com
Jim,
How do you feel about Timber as an investment class??
Michael from PA
Why worry about food and farms, we should worry about artificial intellegence, robots, cyborg, and cloning. These things will render all of us in the heard obsolete. Kinda reminds me of Blade Runner ! For you that think these things won’t happen, they already are. The future technological advances will be pursued-moral or not ! All countries will not want to fall behind. And of course they mega wealthy “patriots” will be safe wherever in the world they escape to – leaving the rest of us to fight over the scraps. What a world our children will inherit…
We will make new equity lows according to my charts and my long term USD indicator has been giving BULLISH warnings for some time and I’m still expecting a USD rally.
What effect will this have on commodities ???
Technical analysis can also assist us as to the direction of the economy.
My indicators can identify trend changes before they occur.
They warned me of an impending market crash back in early *2007*
The VIX continues to give bullish warnings as well.
Is the bear market rally ending ?
I post my analysis at this forum:
http://www.zerohedge.com/forum/market-outlook-0
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