Joe Salerno writes:
As if any more evidence were needed (see my CB post earlier this week) that the Fed has succeeded, either through ignorance or design, in igniting new asset bubbles throughout the economy, the Federal Reserve Bank of Kansas City just released a survey of bankers that confirms a continuing rise in U.S. farmland prices. The following chart shows the stratospheric year-over-year rise in non-irrigated cropland prices for 3Q 2012.
Does anyone remember the 1980's and Farm-Aid? The Fed induced bubble in farm real estate that collapsed with Volker's increased interest rates? Farmers borrowing to buy land & equipment have their lines of credit vaporized when farm revenues cannot service the debt, who then make the nightly news as their family farms are auctioned off to pay off the debt.
ReplyDeleteHow can one short this bubble with managed or minimal risk?
Jim Rogers made a good call on this one.
ReplyDeleteI remember hearing him in 2008/9 starting to talk about farm land. Would have followed him into the market if I had capital and knew how to buy farm land. haha. The man is a genius.
DeleteActually, he most spoke about it in 2011 and 2012, it was his biggest prediction in recent memory, but you know how he likes to shrug his predictions off.
DeleteI'm not sure if this was taken into account, but I know in parts of the southern third of MN the price of what happens to be farmland has increased dramatically as a result of sand used for fracking that happens to sit beneath the soil. Otherwise we're talking about areas that are in a very severe drought, and have been for years.
ReplyDeleteWTF are u talking about? Frack sand has verry little to do with the increase in farm land prices. Think about it. It fracking sand for fracks sakes!
DeleteDrought for years? Where? Last year was bad but not catostrophic.
The prices are going up on just plain old farm land with no frack sand underneath. It becuase the price of corn and soy beans has been rising. And the government keeps giving farmers support money.
To everyone freaked out about this being a repeat of the 80's most of the farmers are claiming they are using very little leverage to purchase land. Cash mostly. Whether it's true or not I can't be certain, but they aren't complete idiots. They lived through it in 80's and I don't think any of them want their land foreclosed on again.
Thid bubble won't pop unless the price of corn and soy drop. That won't happen unless we hit searious deflation world wide. Or the government quits giving welfare to these wealthy individuals.
Farmers are flush with cash. Where to park it? Stock market? Bonds? IRA? Munis? Or a hard productive asset. This is not a repeat of the 80s...
ReplyDelete