Lessons In Fiat Reality: "Why I Learned To Trade Less And Love The Farm"

Tyler Durden's picture

Stephen Diggle is one of the least well known (except to his clients) and yet most successful hedge fund managers over the past decade - having made around two-and-a-half billion dollars during the financial crisis - but in the last few years, he came to a dramatic (and we hope enlightening for many) perspective. This fascinating presentation, in his own words, discusses "how , having made that fortune trading, [he] came to conclude that [he] wanted to preserve the real value of that fiat money windfall, [he] had to get away from trading and buy, own, and operate real assets with real cashflows." - most specifically farms. From being ridiculed as a 'Cassandra' in the mid to late 2000s, Stephen's conviction then that the world was heading for a crisis was as high as his conviction now that in order to ride the wave of global central bank intervention and the implicit macro-economic waves that will crash on every shore in the forthcoming years, that farmland (preferably diversified) is the best risk-reward 'trade' in the coming decade. An intriguing tale of reality and un-greed and everything you need to know about agriculture (from demand to demographics and from fiat-debauchment to interventionist policies) but never knew to ask. An inspiring and insightful brief presentation that offers more depth than any Jim Rogers' mini-clip on CNBC.

 

Inflationary concerns...

 

and macro drivers...

 

The 'real' price of land (in USD)...

 

and in Oz of Gold...

 

Probably the most famous proponent currently of investing in farmland is Jim Rogers, who remains among the most prescient of investors; unfortunately he is offered neither the time or space to detail this view among the mainstream media. We hope Stephen's presentation provides all the color needed to comprehend this global macro view.

 

 

(h/t Grant Williams)

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bigdumbnugly's picture

those adorable sheep notwithstanding i presume?

ThisIsBob's picture

Adorable sheep?  Win-win.

Offthebeach's picture

Sheep bigot!

I know she loves me.
If ewe knew her like I know her, ewe'd love her too.

Gully Foyle's picture

bigdumbnugly

Ah New Zealand, where men are men and sheep are scared.

I am Jobe's picture

I thought that was in the USSA too. Pussiification of Amerika spreads.

prains's picture

Gully

just one game of rugby, it's all i ask, just one game

you'll have to tape the man boobs down though they might get bruised

JohnG's picture

 

 

Can I get in on that?

Unless I am mistaken (I drink a lot....) Gully used to have some sense.  Now, not so much. But I still drink a lot.

citrine's picture

Michael Burry recommended to invest in farmland few years ago

 

thomasincincy's picture

looks like a bubble. they must be sniffing glue at the fed, not ink

DoChenRollingBearing's picture

The main problem I have with owning farmland is that the local or national .govs can tax it.  Also, as a general rule, agriculture has a low rate of return.  High taxes, not much money: bad combination!

Another consideration, mentioned by thomasincincy above, is that farmland prices are high, certainly in Iowa and probably the rest of the USA.  I read somewhere that the CHEAPEST biomass producing farmland would be in central PARAGUAY!  Far away from the comforts that us "gringos" are used to.  At least if you had farmland in the USA and land in Paraguay you would have diversification in that sense..., as George W. Bush is rumored to have a big ranch in Paraguay (Google it).  "W", whatever you think of him, is not as stupid as many seem to think.

thomasincincy's picture

My city's population according to the most recent census is equal to the year 1890. I believe it peaked sometime in the 50's and has declined ever since. In the mean time, population has grown in what i believe at one time were only trade towns between rural  and urban areas. Where I'm living now should probably still be farmland or forest

Kayman's picture

And farm Labor to work the land. Look up the Russian/Ukrainian experience with American Hedge funds in the past.

Zadok's picture

I'd be interested. Links?

holdbuysell's picture

Negotiating alloidial title may be a path to never paying tax on the land.

verum quod lies's picture

Agreed, and I have a few issues:

1)      I didn’t hear him mention the political risk of owning one of the key control commodities for government to clamp down on.

2)      I believe he has invested in, and in order of importance, Uruguay, the US, and New Zealand. If you really believed the “developing” world demanded more food, wouldn’t you want to locate next to it?

3)      He said: “you can’t eat gold.”

4)      Etc, etcetera. But he lost me with glib dismissal of what could go wrong and the anecdotal tales of “trades” gone right.

5)      He would be more credible if he actually knew more about farming than “it’s hard work.”

 

Landrew's picture

Yes he is! The wife bought it!

DoChenRollingBearing's picture

IIRC, W's undergrad grades beat both Gore's and Kerry's.  Maybe he just worked harder in school...

I'd be interested in any link you have re his wife owning the Paraguay land, or any (recent) links, about the whole "Bush has land in Paraguay" thing.  Paraguay has seen a LOT of Brazilians moving in because of cheap arable land.  I wonder if Soros' investment in S. American farm & ranch land holds any in Paraguay.  See my comment on Barron's article "Commodities Corner" about Soros and the company he has 20% of owning 700,000 + acres in S. America:

http://tinyurl.com/8c2rjxh

Ratscam's picture

i worked for IRSA in Buenos Aires for three months. Back in the late 90s they were officially a RLST development company but 50% of their revenues came from trading, lead by the Elsztain brothers. What they traded i don,t know since trading operations were heavily separated from the RLST part. Just saw the funny chuby guys with their curly hair laces on both sides of their heads through the glass walls.
Soros at that time was invested in IRSA as well as in Cresud, which at that time was the biggest agricultural land investor in Argentina. Second was the Benetton family from Italy with investments mainly in Patagonia.

Beam Me Up Scotty's picture

Exactly DoChen.

Problem with land is, they can tax you right out of owning it.  And, just how are you going to keep someone else off of your land if you aren't around to defend it?  People who have lake cabins or 2nd homes will find squatters living in them if the SHTF.  And land isn't portable either.  It has plenty of drawbacks.

francis_sawyer's picture

Greeks (& others) are turning their rooftops to gardens...

Gully Foyle's picture

DoChenRollingBearing

Depends on how much profit you want to make.

If you use part for your own garden you make a serious dent into your pay out for fresh fruit and vegetables. Plus you know exactly what you use to fretilize and treat pests. None of that organic bullshit most people buy at the store.

Taxes are usually cheaper on land because it is undeveloped. Not sure about the big farm states though.

The real trick is to buy land and them start discussions with big Tobacco planning for the legalization of Marijuana.

I'm looking at rural land locally. Right piece can be rented out for crops or hay or grazing and logged and possibly drilled for gas.

I don't need to make millions of dollars just enough to cover taxes and a little more.

( There was alocal fundie Christian family who bought like a hundred acres in Costa Rica in the 90's. By this century they sold it and moved back to the home farm. Don't know what happened, but they weren't the type to cut and run.)

Jon Bong Jovi's picture

I've been looking at Timber and Farmland for investment reasons the past two years. I invest heavily in commercial real estate and wanted to trade some strip malls and office buildings and place the proceeds elsewhere. Problem is the supply of decent property is not there. Sure plenty of shitbag properties are out there as REO's, but quality assets are few and far between.

djrichard's picture

Yes, a bubble fueled by the bankers (of course), working hand-in-hand with gov which props up a fake market for ethanol.  http://www.reuters.com/article/2012/09/05/us-usa-ethanol-farmbankers-idUSBRE88413O20120905 

 

Maybe this is a way to get a bubble going for housing market again.  Basically make tear-down-housing an additive to gasoline, lol!

Urban Redneck's picture

The dust bowl and financial panic fixed the farm land bubble of the 20s, and the banks became the biggest owners of farmland, and when the banks look to offload their acquisitions, it's not in thousands of small pieces to individual buyers, it's in large portfolio pieces to institutional scale investors.

laserjock's picture

Rising human meat consumption? Don't see it happening. The last time I consumed human meat it tasted a bit like chicken, which is a lot less expensive by the way.

SilverFish's picture

Not if you're just eating poor people.

icanhasbailout's picture

I think more likely than hitting 11 billion people is an engineered mass starvation that lops at least a billion off the current count.

Ident 7777 economy's picture

 

 

 

 

 

 

Here's where the future IS going to change:

 

"and macro drivers...

 

No green transformational changes on the horizon"

 

 

Bzzzt and SO wrong!

 

Anybody know what Professor Emeritus George Miley (U of I - Urbana Champaign) is up to?

 

 

 

If you don't, you ARE behind the curve.

 

 


HarryHaller's picture

...and unfortunately cold fusion is still classified as a 'perpetual motion machine' by the U.S. patent office.  Lot's of smart people around the globe (like Andrea Rossi at the U. of Bologna) have constistently repeated exothermic cold-fusion reactions, but until they can get a patent, they will just be the Nicola Teslas of our age.

Ident 7777 economy's picture

 

This is going to be a "game changer" as George Miley says at a conference presentation this last summer ... Professor Emeritus (of physics) George H. Miley from the University of Illinois at Urbana–Champaign who reveals a working device at about the 17:55 point in the video below … he begins his report at the 5:30 point:

http://www.youtube.com/watch?feature=player_detailpage&v=N1m2wQevFAY#t=325s

 

His slide materials can be seen in a pdf file here:

http://newenergytimes.com/v2/conferences/2011/WGES/WGES-Miley.pdf

 

Rossi to test hot-e-cat in the next 6 months producing steam for a steam turbine to demonstrate direct generation of electricity ...

http://ecatreport.com/andrearossi/turbine-trials-with-the-hot-cat-to-start-in-a-few-months

 

Going forward, this is going to be interesting ...

Ident 7777 economy's picture

 

 

 

"Big Oil" down-rating posts on an alternate energy source they can't control?

 

My, my ...

 

masterinchancery's picture

UN now estimates it will peak at 8 billion, with low fertility rates in many countries.

cnmcdee's picture

It's crystal clear to me.. Eventually this is all going to go to crap,  probably very soon actually even this fall the markets will start to implode, and it could be quickly triggered out of the EU and Germany's lack to fund the ESF as Tyler has reported.

 

But farming itself will not even be the profitable commodity due to price controls, land grabs, soviet style commune setups and many other due to fail schemes that the US government will be imposing over time as it gets worse and worse.

 

The real profiteers ARE THE ONES WHO GET OUTSIDE THE FAILING SYSTEM.  It means those who think, act, and operate like the Russian Mafia - who deal in cash, who do not pay their taxes, who may even use force on their neighbors to meet supply and demand for the power vaccuum. 

The real profiteers will be GHOSTS, unseen by the government, quietly f*cking them out of their tax money and via that conduit the few that survive and prosper.

A black market will soon come for milk, eggs, and cheese, bullets etc.  A huge demand will be for moonshine, anyone buying a fish canner can make a fortune making the own moonshine and cutting out the governments profits as it was in Russia the depresed masses will revert to the bottle.

Watching this website is like looking through a telescope at the iceberg headed for the titanic, so we know well ahead of everybody else what is coming, but it makes no difference if we make no preparations, we just have the comfort of knowing earlier than the rest of the asleep numbed down public.

 

LawsofPhysics's picture

What makes you think the "government" won't have "ghosts" of their own.  Please, pull your head out of your ass, several governments have been in the "ghost" business for well over 100 years.

Many of us brew and distill and many of us are vets or active duty, but if you don't think these activities require large swaths of productive farmland, you are an idiot.  Gonna be real easy to pick out such activity with IR-equipped drones, might help to have a friend or two on the inside.  I think you are looking through the wrong end of that telescope dude.

TahoeBilly2012's picture

Sacramento Valley riceland is dirt cheap. Anyone out there want to invest? I will manage aquisition and management. Sac River is a goldmine of water and rice will eventually explode north, plus you get free duck blinds!

Vegetius's picture

Population numbers are way off, we are looking at mass starvation and war, War, WAR. The farming situation is not as rosy as it was, just one fact-

Due to farms in the south of the UK being taken over by Tesco and other Multi-national player's in food, these smartest guys in the room have reduced some of the best farm land on the planet to a matrix to hold the chemicals that they spread. In other words the land is destroyed. This was great land abused by people who despise real farmers and think that farming is just the same as any other industry.

 Latifundia and the late Roman Empire that’s where we are food wise, close to the end.

 

Bobportlandor's picture

Potato famine come to mind?

Time to stand up and say no more to big corps.

reload's picture

Yes V - all true, and the higher crop prices go the bigger the 'incentive' to use increasingly chemical based farming methods. Either way it is a very capital intensive business. In part land prices have been distorted by tax breaks, but even with prime arrable land trading at £10k per acre, just renting it out yields 2+% p/a. So there is plenty underpinning the price--until tax policy changes which could be any time. However don't underestimate the power of the seriously landed classes to influence policy in their favour, just look at the way the CAP has been used to funnel tax receipts to idle members of the rentier class. Buying land still beats buying Gilts in my book!

El's picture

Sadly, I think the likelihood of the government nationalizing farmland is greater than the government nationalizing gold and silver. There is no winning. Find a successful endeavor and the government will do all it can to either hamper your ability or to take it away. That's where we stand.

Colonial Intent's picture

Context is everything.

"Since Obama’s inauguration — his first 1,368 days in office — the Dow Jones industrial average has gained 67.9 percent."

Sofa King's picture

That is actually a detrimental statistic. Being that the cost of living has doubled, the market should have been higher.

q99x2's picture

Another bubble.

machinegear's picture

 

Arrogant financial gamblers who make it big in fantasy fiat land think they know it all.

1.) Millionaires sucking on the taxpayer tit:

http://www.npr.org/blogs/money/2012/08/23/159806895/why-do-taxpayers-subsidize-farmers-insurance

2.) Everyone else is taking it in the ass:

http://www.bloomberg.com/news/2012-10-19/iowa-farms-minting-millionaires-as-rich-poor-gap-widens.html

3.) But this farce is about to come to an end... 83% of farmers are over 45 years old:

http://www.farmbillfacts.org/wp-content/uploads/2012/02/AFTFarmBill_reprint_lowres_Fall11.pdf

Here's a real world ground report straight from the Heartland. Farm land is TOO DAMN EXPENSIVE! Virtually no one can afford it. Those who continue to farm (we'll call them “Group A”) make it by feeding off the tax payer in greater and greater ways like increasing their total acres in order to gain larger and larger subsidies. Others (“Group B”) just call it quits, selling their land to Group A while prices are high allowing them to retire to warmer parts of the country. In the end, this rapid consolidation moves all productive land into the hands of a few eliminating the market for it. How does the absence of a market affect land prices, hmmm?

 

Dollar Bill Hiccup's picture

If I was sporting a net worth of $2bn plus, I'd be farming too.

It's a bit of a different situation than your average, or even above average Joe, is it not?

glenlloyd's picture

I believe the future holds higher taxes at every level. Cities, Counties, State and Federal. They have no way to cover their expenditures and many municipalities contract for projects a decade in a advance, projects they say they can't get out of without penalties, so they're all eying whatever they can to fill coffers that are empty.

Taxes and fees are going up, I'm certain we'll see more 'storm water runoff' like fees coming (thank you EPA) in the future regardless. Governments everywhere are getting worried about where the money they need will come from.

When a government entity grows to such a size that it takes on a life of its own it then sustaining itself becomes the main priority, regardless as to what its original intent was to begin with, and we see this prevalent in govt even at the municipal level. Once that level is achieved the boot begins pressing ever harder on the neck of those who support it, exacting more and more in an effort to keep the machine going. It's self-preservation at any cost as long as it's not to them. Spending cuts and size are rarely considered as options, it's always easier to increase taxes or fees.

The question they never want to answer is what is the proper role of government, at any level? If you ask that you get ridiculous responses about the necessity of what they are doing regardless of the strain on those who pay for it.

news printer's picture

The Banco Santander has suffered a setback in a lawsuit

The court has ruled against the bank and the proposed judge should fix the damage is to pay a total of $ 309 million (about 236 million euros) in damages, expenses and fees and interest.

 

 

earleflorida's picture

http://management.fortune.cnn.com/2012/09/27/john-malone-billionaire-lan...

move over turner...  step aside diller... excuse yourself  murdoch... and get the fuck out othe way 'jolly j.' rogers! ???

LawsofPhysics's picture

My god, wake up people.  Markets and money have always been about one thing, power and control over resources as well as the capital and technology to maintain that control and power.  War is perpetual, always has been.  Yet another hedgie who got rich but lost control and needs to find something to do with his life (try sharecropping then fucker).

Stupid sheep.