Tuesday, December 21, 2010

Livin' off the Fatta the Land

If you take a look at the right hand side of this blog you will notice a few sites that I like to follow.  One of them is Sovereignman.com (introduced to me by @Shamrock5000).  Yesterday, Sovereignman posted a link to a Stansberry Research video that sounded like a doomsday "public service announcement."  The video took about an hour to get through and contains important information about the devaluation of the dollar, piling US government debt, and a lengthy teaser advertisement for you to become a Stansberry client (boring).  If you want to take an hour to watch this click here (LINK TO VIDEO), or you can just keep reading and I will sum it up for you.  

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.    

Tuesday, December 14, 2010

Take a Splice out of Life

For nearly a decade I was a deer stuck staring into headlights, frozen by the barrage of information coming at me from every corner of Wall St (for the record: none of it was inside information).  The financial software applications that occupied my desktop real estate continuously vomited mountains of information, giving me little time to learn about how the rest of the world was being launched into cyberspace.  Having spent a few months away from the streaming stock quotes, bloomberg terminals, and flickering bid-offers, I have discovered just how powerful (and critical) technology has become to businesses and the everyday user. 

It is shocking to see how much influence websites and apps have in changing the way we communicate, make buying decisions, entertain ourselves, educate our children, etc.  Entirely new industries are emerging overnight and staying on top of the countless new outlets is an arduous task to say the least.  Take Groupon for example.  Today, there are apparently some 500 Groupon copycat sites globally and if you gave me a penny for every business I have heard or read about in the past month that aims to be "the Groupon of (INSERT PRODUCT OR SERVICE HERE)," I would have a dollar.  The internet is growing and changing faster than we are able to process it because the content providers are no longer the cartel of tightly knit media elite...the new content providers are (get ready for it).......us!!  And there are a helluva lot more of you and I than there are Rupert Murdoch, Richard Branson, Sumner Redstone et al.   

"User generated content" or "consumer generated media" or whatever you want to call the process of freely posting information on the internet, is changing the way the world interacts as we speak.  It seemed like everyone watched "60 Minutes" with Mark Zuckerberg a couple weeks ago but I gather that few went online to catch "60 Minutes: Overtime" when Lesley Stahl interviewed Chris Cox, Facebook's head of product development. 

I thought this short interview was really thought provoking and it validates why websites like facebook, twitter, groupon, four square, quora, and kiva are in a position to give the power back to the people.  Content that is created by us (particularly by those within our network...i.e. anyone's email address we have) may be richer than content provided by the experts (who we no longer trust?).

The blending of technology and user generated content will create massive opportunity to "splice":  businesses must fuse themselves to the growing stream of information we (as in the collective we) are posting online.  This will allow business to become more competitive, understand their customers, identify new trends early on, innovate, get instant feedback, and the list goes on and on.  I am curious what people think about this short interview.