The main point is that the US has no way out of its deficit spending and federal debt load - the interest payments on the debt will become too great, thus, the liabilities will grow in such a way that the only solution is for the dollar to be devalued even further (it fell 8% in 2010). What does devalued really mean? In a nutshell: your savings will be worth less because the prices of goods and services will become much much higher in the future (see my post below on "The Frog"). Stansberry suggests we can take action to protect ourselves from such events by doing some or all of the following:
-Own physical gold (buy a gold coin or buy stock in PHYS)
-Own physical silver (buy a silver coin or buy stock in PSLV)
-Have access to a rural place (call Aunt Ida on the farm and tell her you have dibs on the extra bedroom)
-Own money in a foreign currency outside the US (this is trickier)
-Own stored food in your basement (twinkies can withstand nuclear holocaust)
-Own land
I want to focus on the last one for a second. Land. Maybe Lenny and George from Of Mice and Men had the right idea? I recently contacted a land broker because I am curious about the idea of owning land as a hedge to the aforementioned travesty that some the doomsayers are predicting. The investment properties of owning land appear to be multifaceted. First, if real assets appreciate (real assets meaning things you can touch, live on, or drop on your foot and they hurt) due to inflation, then the value of the land should rise. Second, if you are growing crops on this land and the prices of those crops rise, you stand to gain by selling those crops to the people without land (this can also be achieved by leasing parts of the land to farmers). Third, you can eat the food grown on the land so the "personal survival" box is checked as well. If you think about alternative investments, few cover all of these bases. Sure you can buy food with gold and silver but what happens when you eat all your food and spend all of your gold? Land appears to be the better hedge.
Rather than go out and borrow money to buy a massive tract of land, I think the idea of a land collective makes total sense - pool a group of people together to buy a piece of land. There really is power in numbers here. If you ever NEED this land (and I say this because clearly we all see that the grocery stores are still fully functional and our money still works), you have a group of people that will be farming it with you and protecting it with you. I will take it a step further. You want land that has access to freshwater. You need water to grow food no? If you live in Michigan you are in a great position because you are surrounded by the equivalent of a fresh water ocean.
I am not saying commit your entire life savings to an idea like this but why not spend 5% of it on a share of farmland that is within 2-3 hours drive from your house. This should not break the bank. Others are jumping on the land grab as well. George Bush just bought 100k acres in South America. John Malone (telecom magnate) bought an $83million piece of land in New Mexico at around $300/acre. Bill Gates bought a 500 acre ranch in Wyoming. Of course these are not small purchases and they have the luxury of private jet escape pods to get them to wherever they need to go, but you can see that the "smart" money is involved in this.
I am curious what people think about this topic. It is seldom talked about and is clearly not as sexy as investing in AAPL or some high yield bond fund. But if you were to commit some of the money going into your IRA or 401k (which the government may have some influence on in the near future) to something like this, I think you get closer to whatever a "well rounded investment portfolio" should look like. If anyone is interested in exploring some kind of land collective/partnership/mutual fund, please let me know. We already have a few people on board. Something to ponder for 2011.
