What Investors Fear Most
Inflation is the silent dream killer.
Once upon a time in America, you could entrust your savings to banks, and through the wonders of compound interest your nest egg grew into a robust bird over your lifetime.
Nowadays, the pitiful returns offered by banks seem to be designed to force you to entrust your life’s savings to an insane Wall Street if you want to avoid a retirement in penury.
In 1984, you could get bank interest rates of 11.62% by buying 5-year CDs. That year, inflation was 4.32%.
With compound interest, your investment would have doubled in real value in a decade.
Today, the largest bank in the United States offers a paltry 0.05% interest on 5-year CDs. Inflation rose to 8.4% in March.
By holding your money in savings, you could be losing 8%+ of its value this year.
Instead of your savings doubling in value every decade in a virtually risk-free bank account, at this current inflation rate your savings could lose half their value in just eight years.
“What about the stock exchange?” I hear you say. “It was up 28.3% in 2021.”
Michael Burry, visionary investor made famous by the book and movie “The Big Short,” built his fortune and infamy in predicting the subprime mortgage bubble and crash of 2008.
Burry declared last year that we were in the middle of the “greatest speculative bubble of all time in all things.”
Why keep your pension in the stock exchange which is in the throes of a financial bubble or in the overheated U.S. real estate market?
These markets have rarely been as risky as they are right now.
Now is not the time to be doubling down on the U.S. stock or real estate markets.
The biggest fear investors have isn’t war, pandemics, or politics. What a staggering 79% of investors fear most is inflation.
The antidote to fear is information, but it must be the right information. You can let this fear of inflation convince you to ride the market bubble until it bursts, or you can further your self-interest by protecting yourself now.
If you have investments in the U.S. real estate or stock market… it’s time to cash out some or all of them.
It’s time to explore inflation-beating investments.
These are the traditional investments touted as “inflation busters”:
1. Gold
Once the darling of inflation mitigation, gold stands at US$1,890 per ounce (at the time of writing). I recommended gold as a sell four months ago, when it was above US$2,000 per ounce, and recommended you reinvest in gold when it had fallen back to around US$1,500 per ounce. Gold has fallen 7% since then, but is still close to its historical high. It would be easy for gold to lose another 10% of value, making it a risky inflation hedge.
2. Real Estate
For those seeking hard assets to ride out rough economic times, real estate has always been one of my favorites. However, with the current U.S. real estate bubble, the inherent market risk to your money is greater than the inflation risk. If you want to hedge your market risk, you must look outside the United States for your investment.
3. Index Funds
Another traditional inflation hedge is investing in an index fund like the S&P 500.
This is a way of getting better returns than you would from actively managed brokerage accounts (stockbrokers nearly always make less returns for their clients than index funds do, because stockbrokers just don’t know what they are doing).
However, when we are at the apex of a bubble, even this is risky. When the 2008 crash occurred even safe stock indexes like the S&P 500 lost 48% of their value over six months. We are back in this risk category today…
There is a type of investment that always beats inflation, especially during a time of economic contraction.
Investing is all about the fundamentals to me, and there is no investment class more fundamental than food production.
You don’t want to be investing in commodities like corn or soy. These are always low-margin investments. You want to be in the top end of the food chain, in the high-value food sector.
Why Food Production?
High-value food production is the ultimate hedge in times of inflation for these reasons:
- Inelastic demand. No matter how expensive it gets, people must eat every day. Consumers can’t put off eating until prices decline next year.
- Rising demand due to population increase. The FAO Review predicts that global demand for food will increase by 70% by 2050.
- Demand for higher quality foods. The growing global middle class wants higher quality foods, like exotic fruit and spices.
- Climate change and soil degradation will make food sources scarcer in years to come.
The Ultimate Food Production Inflation Hedge
Some investors don’t like food investments. They think it isn’t as sexy as tech stocks, gold, or luxury real estate.
This disdain doesn’t apply to the sustainable health food sector. This is a rapidly growing market.
Far from the volatility of U.S. markets lies an opportunity to get in on a long-term, high-return investment in a sustainable health food with growing demand.
California produces 80% of the world’s supply of this thirsty crop, but is running out of water fast, and can’t keep up with the growing global demand.
One of the largest agricultural real estate development companies in Europe is using sustainable planning and irrigation in Spain to plant and manage orchards to supply this demand.
Their specialty trees produce two-and-a-half times what most other orchards do.
The trees are insured, there is no debt on the property, and the management company has bought ample water rights to ensure the success of the venture.
The management company also owns processing facilities and has established markets for the product.
Financing is available at 30% down and the balance is due over 24 months.
The Deal
I’m talking about almond orchards in Spain, an answer to the surging global demand for almond nuts, milk, and flour.
Freehold titled farm parcels begin at 7,800 square meters (1.93 acres). The management company plants 50 to 55 trees per 1,000 square meters.
You own the land, trees, and infrastructure.
A 45-year management guarantee is in place. The management company receives 20% of the profits.
The average ROI is 15% for 45 years. Production starts on year 3, and is at full production by year 8.
Investment visionaries are buying up almond farmland. Michael Burry stated, “I believe that productive agricultural land with water on-site will be very valuable in the future… I’ve put a good bit of money into that.”
Our almond guys have their water rights, too.
This is where the guy who made a fortune betting against the mortgage market in 2008 is putting the money he is pulling out of the U.S. market right now.
You have the chance to get in early for a massive projected payout of over 650,000 euros…
The U.S. dollar is at its strongest against the euro in five years, and significant exchange-rate savings come from investing in Europe right now.
A year ago, it cost US$1.22 to buy a euro, and now it only costs US$1.05—that’s a 13% increase in your buying power.
With a 8,032-square-meter parcel priced at 90,387 euros (US$95,308), projected yearly income by year 8 is between 13,558 and 20,789 euros. Income starts in year 4.
This is a safe, crisis-proof, and 100% turn-key investment…
And will be for decades regardless of recessions, pandemics, or Wall Street sentiment.
When you consider the high returns, low risk, durable demand, and long-term, turn-key conditions, any fears you have about inflation should be calmed.
These long-term projected returns nearly double today’s exceptionally high inflation rate while hedging you against market downturns in the United States.
Con Murphy
Editor, Overseas Property Alert