When All Else Fails, Agri-Food Investment Will Be There
Ned Schmidt, August 11th, 2009
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Sometime people do learn from history, though the number that intentionally do so are few. Perhaps one of the largest groups of people that seem to lack the ability to learn from history is composed of economists. The facts that they choose to intentionally ignore are near mind boggling. Two asset bubbles, technology and housing, were claimed to be non existent, until they collapsed. Now, that same group of myopic number crunchers believes that economic growth in Western economies is about to reignite. Is some skepticism appropriate?
Now again, in the aftermath of the Federal Reserve doubling its assets, we wonder if deja vu is not recurring. With Chairman Bernanke running for reappointment in January as Chairman, the Federal Reserved has launched Cash-For-Clunkers III, the monetization of the Obama Regime's massive deficit. With the Obama Regime in failing and fading mode, can any good come out of all this monetization. Easy money twice created asset bubbles that burst, so the Federal Reserve will try it again. Little wonder Chinese government condemns U.S. economic policy, and ignores the advice given by U.S. economists.
The Chinese economy continues to grow, by almost 8% in the latest report. Perhaps we now know what Mao's last words might have been, "Do not listen to Yankee economic dogs!" While the Obama Regime focuses on destroying wealth, the Chinese government continues to create it. Will that record of growth be uninterrupted? Of course the answer to that question is no. But China is about where the U.S. was in 1900. The good part is yet to come!
Investors have wisely sought to protect their wealth from the policies of governments such as the Obama Regime and Argentina, to name just two of the most dangerous. They have done so by buying and owning Gold. Policies now being pursued in Washington, D.C. have a lot in commmon with the wealth confiscation policies of Argentina. That nation has done so twice in recent history, once by seizing bank deposits and once by nationalization of private pensions. Gold may become the only defense against continuing wealth confiscation by governments. By the way, worry little about your Gold being confiscated. They are too busy going after everything else you own.
But, as we have said before, investors need an offensive component to their portfolio. We cannot participate directly in the wealth creating activities of China. We can, however, invest in those companies and assets that will benefit from that wealth creation. One of those major beneficiaries of China's wealth creation is Agri-Food. As people get wealthier, they eat better.
The World Soybean Research Conference VIII is being held this week in Beijing, China. Can that be happening just by chance? Can that be happening cause Beijing is known as a great resort city? Or, can it be happening be happening cause China is world's biggest importer and consumer of soybeans? China has learned how to solve the problem of hunger, and food is not the answer. Income is the answer! They will simply buy the soybeans and whatever other Agri-Foods needed.
As our first chart below portrays, those involved in Agri-Food investing have been doing very well. Does that mean those running these companies are brilliant? No. And no, they are not creating social networking web sites, or other such drivel. Nor do they prosper from the clicking of web-based advertisements. But yes, they do serve the Agri-Food chain serving BRICA, Brazil, Russia, India, China, and ASEAN. Global consumption of Agri-Food is a continuous, ongoing process not subject to fads. It is a necessity.
