Where Can Investors Hide Today?

Author:  Tom Schenk

If the political and financial landscape seems to be getting a little crazier to you, you are not alone.  What happened in Cyprus a few weeks ago set a new bar for what the governments and central banks can – and will – do.  It also demonstrates how powerless the citizens can be.

ScrewedToday’s investors are extremely challenged to find some “place holder” for the wealth they have spent their life accumulating.  After Cyprus, I think we can scratch “cash in the bank” off of that list. Government bonds? Who wants to buy a 30-year Treasury at a 2.95% yield?  Any guess what would happen to the principal if rates rose?  Stocks are not cheap.  And adjusted for inflation, they really haven’t gone anywhere in the last decade plus companies can always issue more shares.  Buying at the highs may not end well. And after 2009, when we saw stocks drop by half or more, how do you quantify your risk-adjusted returns in this asset class?  And let’s not forget about the hundreds of trillions of esoteric derivatives that are collateralized by this stock and bond markets where volumes are dominated by elaborate algorithms and high frequency trading systems.

Gold and silver? Those are a classic store of wealth (even though they do not cash flow), but we have also seen the US government (in the 1930’s) make it illegal to own.  Could they confiscate it today?  They don’t have to; all they have to do is declare, say, a 50% tax on any sale. Would they do that?  I have no idea. But until last week, I sure didn’t think they would talk about taxing our retirement savings, either.

Hardly a day goes by when I’m reading about some guru advising investors to move their assets abroad.  Really?  Would you really feel better with storing your wealth thousands of miles away in Europe or some developing economy country? There were no classes in business school that taught us how to cope with today’s investment climate.

That green paint could be worth more than we all think.

That green paint could be worth more than we all think.

By process of elimination, I believe the last thing a government would do is jeopardize its domestic food supply.  For that reason, I believe that good US farmland may be one of the last, best places for investors to preserve their wealth.  It’s not a place for a get rich quick home run, but it may be perhaps the best oasis in a landscape increasingly filled with risk that is almost impossible to define anymore by conventional analysis.

In the last 10 years we have observed how fast money can move in a panic.  None of the problems that caused that panic have been solved; they have only gotten bigger.  Now is a better time to trust your own gut feeling, or common sense, or what else you want to call it.  Don’t split hairs over a 4.5% cap rate or a 4.38 % or whatever.  If farmland feels like a good place to invest, get out and look at the property, meet the farmer, look over the operation and make your decision and get a good night’s sleep.  Time may be shorter than you think.

Tom Schenk is the Director of Business Development for TerViva, working with landowners to develop new strategies for new agriculture crops.  Tom has worked for over 20 years in trading agriculture commodities and acquiring farmland for investment purposes.

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