Perhaps The Best Investment For Surviving The Coming Dollar Collapse

Here at The Dollar Vigilante (TDV) we have written for years about The End Of The Monetary System As We Know It (TEOTMSAWKI) or, to put it more bluntly, the coming collapse of the US dollar.  Our total body of work on the subject is enough for a book… and will soon be a book entitled “Escape from Amerika”.

Our focus and tagline has been “Surviving and Prospering During & After the Dollar Collapse”.  We constantly lay out the facts on why the dollar will collapse but today let’s take a focus on one of the best ways to survive and prosper as that occurs.

HARD ASSETS – WHATEVER BERNANKE CAN’T PRINT

By far our biggest advice since founding TDV in 2010 has been to get into precious metals.  And, importantly, to internationalize those metals so they are not at the risk of any one government and especially the one who purports to own you (and we wrote “Getting Your Gold Out Of Dodge” – a 100-page report specifically on that topic – which is free to TDV subscribers).

And, of course, we’ve been proponents of bitcoin, which could be called a “virtual” hard asset, since $3 in 2011.

One item that we have mentioned sporadically over the years in the TDV newsletter but have always been a proponent of is owning foreign real estate… for a number of reasons.  But in public we have not expounded on the importance, and possible investment value, of owning foreign agricultural producing land.

We will rectify that today.

THE CASE FOR OWNING AGRICULTURAL LAND

If you believe as we do that the US dollar is going to collapse and the entire financial and monetary system will soon go through a massive change, then owning foreign (outside of the West) agricultural producing property may be one of the best ways to survive and prosper during this period.

Here are the three main reasons for that belief:

Reason #1: It Can’t Be Re-Patriated

As the West continues to devolve the insolvent and bankrupt overly-indebted governments in the West will continue to feed off of the assets of their own citizens at a rising pace – just ask any Cypriot.  This is far from just conjecture as it has happened continually throughout modern history.

In 1933, the US government confiscated the gold of its citizens and did not even allow them to own non-jewelry gold until again until the 1970s.  More recently, France has increased its top income tax rates to 75% and even tried to move them to 100% as they skirted with going “full commie”.  Never go “full commie”. 

There have also been a rash of pension fund seizures throughout the West.  In 2009, Ireland seized €4 billion from its Pension Reserve fund. In 2010 Hungary told its citizens to remit their private pension funds to the government. Later in 2010 the French parliament took €33 billion from their national reserve pension fund and in 2011 $80 million in private retirement funds were transferred to the state’s pension scheme in Bulgaria.  And, in September of this year the Polish government confiscated the bulk of the assets of the country’s private pension funds.

Think it won’t happen in the US?  In fact, it already has.  Every penny of Socialist InSecurity funds have already been taken and spent by the US government with an IOU left in its place.  And Congress has had initial talks about nationalizing IRAs (this is one of the reasons why we believe it is crucial if you have an IRA to turn it into a self-directed IRA – which you can do at TDV Self Directed IRAs).

With a self-directed IRA you can then invest in asset you would like, worldwide, including foreign agricultural land.  And if/when the government tries to nationalize your IRA they will simply not be able to repatriate foreign property.

Reason #2: People Need To Eat

While we expect TEOTMSAWKI to wreak havoc throughout the world and cause an economic depression that will be written about in future bibles there are a few things that people will still need to survive at the most basic level: energy and food.

In that sense, agriculture is depression proof… even for the type of super-depression we are expecting.

To add to the bullish case for agriculture is pure demographics.

The world population has gone up nearly 700% in the last century.  That is a lot of new mouths to feed, literally.

That is really the only chart you need to see to make the case for agriculture as a solid investment.

Reason #3: An Escape Hatch

We expect life in the US and many other of the most indebted Western countries to be nasty and brutish during this collapse.  So much so that we regularly recommend people just get out of those regions.

But, where to go?  The two regions that we have constantly identified as having the best chance of surviving this collapse in relative peace are Asia and Latin America.

Latin America, specifically, when it comes to agriculture.  The two countries that I see the most potential for, in this respect, are Paraguay and Chile.

And, as an extra-side benefit, if you own agricultural land in countries like those, you have a nice out-of-the-way place to escape when things really start getting bad.

The Chilean economy is booming based on mining, agriculture and a massively growing, but still very lightly populated, middle class.  Paraguay is behind on its economy but also offers a very tranquil, cheap place to run.

THE CASE FOR FARMLAND INVESTMENT

Farmland the world over is outpacing other real estate properties. For instance, in the United Kingdom, farmland is outpacing the price of prime central London property for the first time in 16 years.  Predictions submit that the average price of an acre could soon hit a new record soon there. And that is in the decaying United Kingdom.

But, all over the world, there is not much arable land on the market. People simply aren’t selling.  Owners hold onto arable land as a long-term investment, like precious metals.

During crisis, arable farmland does better than industrial, commercial and residential properties, as was seen during the 1973 oil crisis and during the 1990 Gulf War and now during the Global Economic Crisis.  Arable farmland is a great hedge against inflationary side effects of quantitative easing.

Because the world is in a period of increasing demand for crops due to changing lifestyles in emerging markets, each acre of arable farmland needs to become more efficient. With emerging economies moving towards a high meat diet, increasing livestock demand, and biofuels diverting crops from food use to energy crops, it doesn’t take a degree in calculus to see why arable farmland is attractive.  Every day there are more than 200,000 new mouths to feed.

Farmland in many parts of the world has seen low volatility compared to other asset classes, like listed equities, and it has experienced approximately 1/4 the volatility of the S&P 500 over the last 20 years. It has a strong linkage to emerging market growth with potential for high cash flow. Farmland generates higher returns due this low volatility.

Investors in public equities must accept nominal returns below 6% over long periods with increasing volatility. Farmland generates higher absolute returns with lower price volatility, meaning farmland offers superior risk adjusted returns over public equities. And, quite typically by a large margin.

The correlation of farmland to traditional retail investments – like equities and bonds and commercial real estate – is quite low. It is important for investors to structure diverse portfolios, and farmland allows the retail investor to do this.

Farmland also comes with a linkage to emerging markets, even if you’re buying in the developed countries. The consumption of energy and agricultural commodities goes up as GDP/capita growth increases, especially early on in the process. Traditional investment advisors will warn you of political risk in “emerging markets”, but we see it quite the opposite as any farm owner in the US will tell you.  The real political risk is in the West. 

If you own arable land, you can lease it out to farmers for example. Then, instead of operating a farm, you can get 100% upfront payments. Thus, by cash renting, arable farmland investors enjoy positive cash-flow without having to operate a farm at all.

To put it simply, farmland is not at risk of becoming a “bubble” like so many economists believe it to be. Some fear this might be the case because investors have piled into the space, but this isn’t reflection of some sort tulip mania, but rather a reflection of a run from the US dollar. Right alongside gold, silver, bitcoin and other types of properties, farmland is being used as a hedge against hyperinflation.

Not only with arable farmland do you get property, but you get a tangible asset with the capacity to provide a return from the crops or in the form of rent. For the first time in two decades, the price of farmland is rising faster than property. Last year, according to experts, the cost of prime arable land increased by 10.7 percent.

BUYING AGRICULTURAL LAND IN CHILE AND PARAGUAY

For a foreigner, especially one who does not speak Spanish, to go into a place like Chile and Paraguay and start from scratch is a very difficult proposition. 

Therefore, we suggest that people unfamiliar with the business and culture look to invest in properties that are already operating and open to foreign investment.

Galt’s Gulch Chile (GGC) has just announced its farm investment program and for TDV subscribers we will lay out the fantastic investment opportunity in this week’s newsletter.  If you would like to hear about the opportunity, you can subscribe to the newsletter or contact Galt’s Gulch Chile directly.