The Eternal “Safe Haven” Wall Street is Hiding from You

We need to talk about something…

You see, there’s been a growing trend in the stock market that Wall Street doesn’t want you to know about.

That’s because this could prove to be the biggest investment opportunity for the next three decades.

And with the Dow finally crossing the 20,000 mark today, the Wall Street billionaires are going to work even harder to keep it secret…

So they can keep all the profits to themselves.

Unfortunately for them, I don’t agree with what they’re doing.

So I’m going to tell you exactly what “safe haven” they’re hiding.

And it’s not gold…

Why Wall Street is Hoarding Farmland Assets

Due to population growth and rising incomes, the demand for food is steadily rising. Likewise, urbanization (particularly in the developing world) is increasing the number of people who are dependent on others to grow and produce food for them. Here are few key numbers that might paint this picture better:

  • 1 Billion: the expected world population by 2050. Based on that number, food consumption will need to double by 2050, too.
  • 70 percent: the percentage of the world’s population that will be living in urban areas by 2050, according to the Food and Agriculture Organization (FAO).
  • 2015: the year that China abolished its one child per family policy, which points toward huge expected population growth. In fact, births rose by 7.9% in China last year.

When you add all of those factors, it’s no wonder we’ve seen the inflation of food outpace the Consumer Price Index (CPI) over the past six years. And there doesn’t seem to be any sign of this trend stopping, either…  People have to eat, in booms and busts, which makes this a recession-proof industry. That’s also why Wall Street doesn’t want you to know about this.

But now that you know, let’s talk about how you get in on the action. As you can see below, the choices are plentiful…

But I want to get to the core of agriculture – and these are the five main methods of profiting:

  1. Trading Public Exchange Traded Notes (ETNs): According to the data in the chart below, the majority of agriculture ETN’s have outperformed the ETF market on average.

The one thing to keep in mind is that they lack the liquidity to trade unless you plan on being in it for the long haul. The other risk, which you can see above, is that the ETNs are specific to certain types of crops and livestock, meaning that they could carry individual commodity risk.  For example, while the last 10 years have been great for the sugar industry, the cocoa industry has suffered. So your best bet here is to diversify your ETN holdings in order to curb that individual risk. By the way, you wouldn’t be able to take advantage of options here, either, because these investments are not optionable.

So you’ll want to speak with your financial professional to determine whether or not trading ETNs would be suitable for your portfolio.

  1. Commodities: There is liquidity in some agricultural commodities (such as grains and cattle). That said, keep in mind that venturing outside of this arena can be dangerous due to the thinly traded markets. This risk also comes from leverage that commodity contracts contain, which can be a double-edged sword to novice investors and traders.
  1. Farmland Stocks: There are farmland stocks out there, such as Adecoagro S.A. (AGRO) in which you can invest. Keep in mind that the real money lies in farmland manufacturing. So while there’s certainly still profit opportunities in farm stocks, it might not be as lucrative.
  1. Private Placement: This is an area that can offer the most returns – but also comes with the greatest risk. Private placement involves investing in a limited liability company (LLC) or limited partnership (LP) designed to manage either public or private offerings (or both) while also looking to pay dividends regularly to its shareholders. The problem with this avenue is that transparency is dark, meaning it’s hard to judge the value of your portfolio the same way you would look at the value of publicly held shares. Private placements are really more of an option for accredited investors. Accredited investors are those who have an annual income of $200,000 ($300,000 joint income) for the past two years, with the expectation of earning the same or more.

Farmfolio, which offers asset ownership of the farm providing the investor the ability to outperform the publicly traded ETNs and sell their Farmshares, is an example of private placement for accredited investors.

  1. Farming: Organic farming is the new chic, but you must know what you’re doing and you also really need to farm outside of the U.S. if you want to get rich. That’s because between labor costs, regulations, and a short growing season, it’s tough to do extremely well in the U.S. Latin America offers the best of all worlds when it comes to farming… but you still have to get your hands dirty.

To your continued success,

Tom Gentile

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