Betting on Gold and Farmland

Things are looking bleak in the United States. Almost no one is seeing a turnaround anytime soon.

A recent USA Today/Gallup poll found 82% of respondents thought the U.S. was still in a recession. And 54% of them expect the economy to be as bad or worse a year from now.

A very successful speculator, however, is making a surprising wager.

Michael Burry, the hedge fund manager who helped create credit default swaps to profit from the housing bust and was featured in Michael Lewis’ The Big Short, is making a surprising bet.

He is betting big on the United States.

But not the way you probably think.

He’s actually betting on the United States in a way that will prove very successful over the next few years, but most investors will miss out on.

Worlds Apart: A Big Opportunity for the U.S.

Earlier this week, I told Prudent investors, “It’s clear to see the world is starting to change very quickly. The consequences of the changes will have a big impact on all our portfolios.”

The change is growth.

As the U.S. remains stuck in malaise along with many other debt-laden economies, the rest of the world is running away from them.

In the past few months GDP growth has rebounded sharply around the world. China is on pace to grow 10% this year and 8% next year. Brazil, Russia, and India are rebounding strongly too.

It’s not just the mighty BRICs though. Vietnam, Chile, Colombia, Argentina, and dozens of other countries have GDP’s expanding at annual rates of between 4% and 10%.

The whole world is recovering and is actually creating an opportunity for the United Sates. One that Michael Burry is positioning himself to profit on.

Playing the Cards that were Dealt

Burry recently announced he was betting on gold and farmland – two things the United States has in abundance.

The U.S. is the one of the largest gold producer in the world. China has recently risen to the largest, but Australia, South Africa, and the United States aren’t too far behind.

Also, the United States holds the largest amount of gold reserves in the world. More than 8,100 tonnes of gold sit in U.S. vaults. Despite China’s renewed interest in gold and how it is helping to propel gold prices higher, the U.S. still holds seven times more gold.

Also, the United States is maintaining its position as an attractive place to explore and mine gold (in some states, at least).

The Metals Economics Group found that 7% of all non-ferrous metal exploration spending will be done on U.S. projects. Granted, that’s less than half of exploration spending in mining-friendly Canada and Australia, but it’s more than China and the rest of Southeast Asia put together.

So exploration spending ramps up along with gold prices and a disproportionate of it goes into the U.S., there’s more gold likely to be found in the United States.

The other top investment sector that has caught Burry’s attention is farmland.

He recently said, “I believe that agriculture land — productive agricultural land with water on site — will be very valuable in the future…I’ve put a good amount of money into that.”

We couldn’t agree more. We long held farmland as one of the best investments for the next decade. Whether the world economy collapses prompting currency devaluations, it booms, or somewhere in between, farmland is poised to benefit either way.

That’s great news for the United States because it is home to one of the world’s breadbaskets and U.S. farms are the most productive in the world.

Looking Inside to Capitalize on the Outside World

At this point in the cycle, it’s not much of a surprise to see someone with Burry’s track record jump on the gold and agriculture bulls.

They are two safe places to put your investment dollars that offer exceptional upside potential.

More importantly, it illustrates the principle that there are opportunities out there even though the vast majority of U.S. residents, rightly or wrongly, see tougher times ahead.

For example, during the credit crunch we started looking into Michigan as a place to buy some real estate.

We thought the same thing at first – “Michigan is a socialist experiment gone wrong.”

But after awhile, we realized that much like the United States, Michigan has inherent advantages. Most importantly, it has a lot of water which is required for agriculture and manufacturing. So if there is a decline in the dollar and a significant change in Michigan’s politics, everything could align for an economic renaissance in Michigan.

In order to invest successfully in areas like these, you have to be patient, wait for a good entry point to catch the uptrend, and then ride it for all their worth.

It may be a bit early for Michigan real estate, but now is the time for gold and agriculture.

By Andrew Mickey

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1 Comment on Betting on Gold and Farmland

  1. Absolutely. There has been a lot of big name investors, incluing Soros and Faber, promoting farmland as an investment. I have been a long time follower of Farmland Forecast, and really buy into the thesis that emerging markets such as China cannot be self-sustaining in grain production. The U.S. has a lot of problems, but agriculture is not of of them.

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