Rogers: Farmers will make 'huge' amounts of money... An aging workforce... China pushes agriculture... Doc Eifrig dispenses wisdom (and profitable trades)... Jeff Clark's new gold stock pick...
In an interview with China's national English-language newspaper China Daily, legendary investor and commodities bull Jim Rogers sang the praises of farming. Rogers said you'll "make a huge amount of money" if you buy a farm and become a farmer today… "The price of your products is going to go up. You're going to make more and more money every year… The price of your land is going to become more and more valuable."
Rogers, ever the contrarian, believes farmers will be some of the most successful people in the world over the next 20 to 30 years. (He noted how terrible the business has been for the past 20 or 30 years.)
Today, farmers are dying out. The average age of a farmer in America is 58. It's 66 in Japan. But the world still needs food (more and more, in fact). Still, farming will have to become more profitable in order to attract labor and capital.
We expect the situation in farming will develop a lot like the mining sector... We discussed the global shortage of mining employees in the November 16, 2011 Digest. As demand and prices for metals increased, the normally low-margin business of mining improved. But the workers weren't there:
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According to Sigurd Mareels, director of global mining for McKinsey & Co., there's a "historical shortage" of mine workers around the world. Australia, the world's largest source of iron ore and the second-largest gold producer, needs an additional 86,000 workers by 2020, according to the Minerals Council of Australia. That's on top of the current work force of 216,000. Miners in Australia – some of whom commute from the Philippines and New Zealand – make between $100,000 and $200,000 a year. |
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"It's a tight labor market and difficult cost environment," said Ian Ashby, president of the iron-ore division at BHP Billiton, the world's largest miner. To attract workers, BHP and other miners are building recreation centers, sports facilities, and art galleries in mining towns. Costs to attract and pay new talent decreased earnings by $1.2 billion in the first half of 2011. (BHP Billiton still earned $11.2 billion over that period.) |
In farming (as with mining), we expect capital will be pulled into the sector as the products become more attractively priced and the return on that capital gets better.
If you don't want to become a farmer, don't worry... There are still ways to profit from the boom. For example… Rogers suggests you can sell seeds, fertilizer, and tractors.
The biggest driver of food demand is China. Food is one of the first things people spend their money on as they get a little bit wealthier. As China's economy modernizes, its gigantic population is growing wealthier and will spend some of that money on eating better.
The Chinese government knows the country needs food... It's already giving incentives to farmers. As we noted during our time in Hong Kong…
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Jing Ulrich, the JPMorgan managing director who spoke at the Hong Kong conference, said the Chinese central bank cut the reserve ratio by two percentage points (in addition to the two previous cuts) for several hundred branches of the Agricultural Bank of China earlier this month. Lower reserve ratios mean the bank may hold less of its deposits in reserve, freeing capital for lending. |
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"It's March," she said. "Planting season is coming." The move will allow the Agricultural Bank to lend more money to the Chinese agricultural sector. The central bank wants to specifically support local agriculture with its latest stimulus efforts. |
Jim Rogers also just gave an interview to our own Frank Curzio, editor of Phase 1 Investor and Small Stock Specialist. On the latest installment of Frank's S&A Investor Radio podcast (now available), Rogers – whose bullish view of gold is well-known – explains why he expects a pullback in the precious metal... and what might lead him to short it. To listen for free to all of Frank's podcasts, click here.
"What is all this 'amazing' stuff Dr. Eifrig will teach me? Why should I care?"
We received some predictable responses to last week's discussion of Dr. David "Doc" Eifrig's Retirement Millionaire. As we mentioned, Doc's work in Retirement Millionaire and his other advisory Retirement Trader is gathering a "cult-like" following among our more sophisticated readers.
In addition to building one of the greatest track records in the history of financial publishing, Doc has also devoted an immense amount of time and energy to producing material that will help readers become vastly smarter investors and traders. Some of our readers love the opportunity to learn…
But not many. A lot of folks react with skepticism and apathy. After all, it's simple human nature to avoid the "work" involved in learning something new... And it's common knowledge on Wall Street and the financial publishing industry that most people aren't interested in acquiring timeless wisdom... wisdom that allows them to safely compound wealth at 10%-20% per year.
Most people are simply interested in "hot stock tips." They believe that if they could just pick the next great stock and place a huge chunk of their portfolio into it, they'll get rich. They never give a thought to the risks involved or how the position fits into an intelligent mix of assets in their portfolios. They never learn how to identify and value a great business. They never consider exit strategies.
We find it bizarre that so many of our readers believe they can achieve investment or trading success without even a basic understanding of business and risk management. It's like opening up an Italian restaurant with no knowledge of pasta, pizza, red sauce, or wine. You're going into the situation dramatically unprepared... And you won't last long.
Fortunately, most of the "knowledge base" you need to become a successful investor is just common sense. It doesn't require hundreds of hours of study... only a willingness to learn. For example… last week, we pointed out Doc's "common sense" way to view gold and silver as a crisis hedge... rather than the "hot trend" of the year.
He has also helped his readers grasp the idea of asset allocation. Asset allocation is how you divide your assets, like cash, stocks, bonds, real estate, and precious metals, to build an "all-weather" wealth strategy. Ignorance of intelligent asset allocation ruins more retirements than anything else.
Doc has taught hundreds – we hope thousands – of people to sell options and safely generate consistent 10%-20% income streams off a portfolio of elite, blue-chip stocks.
Yes... we know just the word "options" makes most people shudder. Aren't options the riskiest financial instrument in the world? Many of our readers have "horror stories" of losing 100% of their trading capital in options. But those horror stories were created because of a dangerous ignorance of option basics.
Dr. Eifrig is a former derivatives trader with Wall Street giant Goldman Sachs. He's seen and used dozens of options strategies. He's used his experience and knowledge to build an incredible track record – probably the best in the industry – in safely trading options. He's also devoted many hours to teaching his "common sense" methods.
Doc recently "distilled" how regular retirees with a willingness to learn something new can safely generate 10%-20% streams of income from a portfolio of blue-chip stocks. This timeless information is free to any reader of the S&A Digest...
It's actually free to anyone. Doc discussed his top options strategies in a "two-part" essay series we recently ran in our free e-letter DailyWealth. You can access them for free by clicking here and here. We sincerely hope you learn this idea... and use it to your benefit.
For more from Doc Eifrig, please read last Friday's Digest... It's an interview where Doc discusses how the world's best investors make money… and how he teaches you to do the same thing.
Yesterday, we noted the strong up day for gold stocks, while the rest of the market languished. But the market's down again today. The S&P and Dow both fell about half a percent. But gold stocks are up. Our resident trading expert, Jeff Clark, took note of the sector's strong performance. In particular, Jeff likes one super-cheap gold stock.
This stock is a multibillion-dollar miner trading for less than six times earnings. Plus, it pays a healthy dividend and has no debt (plus a few billion dollars on the balance sheet). And it's proven and probable reserves alone are worth more than four times the current market capitalization of the company.
Despite its healthy position, this gold stock has been crushed like its brethren. It's down nearly 25% this year. But Jeff thinks gold stocks are getting too cheap. And he's ready to start making bullish bets. He expects this particular gold stock to rally above January's price... And subscribers to his S&A Short Report could triple their money if it does. To sign up for the S&A Short Report and access his latest gold trade, click here...
New 52-week highs (as of 4/9/12): Texas Pacific Land Trust (TPL).
Most of you enjoyed my recount of our visit to Augusta. But we offended someone (per usual). We don't share our experiences in the Digest to brag... We work hard… and just want to enjoy the fruits of our labor like everyone else. Send your feedback to feedback@stansberryresearch.com...
"I found the boasting about your club in the Digest today distasteful, even stomach turning. Maybe because just about every recommendation I have followed from you guys so far is in the red and I've even been stopped out of a few. Or maybe its because I know I wouldn't be allowed in and I'm envious and jealous. I'm not sure why at the moment, but I am sure there is a more tasteful way to invite others to apply to your selective club." – Paid-up subscriber Jeff
"I wish I had known you guys were only a couple of hundred feet away in Augusta. I was in one of the cabins enjoying my Stansberry subscriptions every morning in the greatest golf venue in the world. I would have loved the chance to shake your hands and thank you for your services. I spent 30 years as a wholesaler in the mutual industry. I know what it is all about. The public would be better served reading your publications than listening to the advice from brokers. Keep up the great work." – Paid-up subscriber JH
"I enjoyed reading today's (4/9/12) Digest regarding the Atlas 400 event at the Masters' in Augusta. I grew up in Augusta and had the pleasure of working as a gallery guard and score runner at the tournaments in 1947-1949, as a high school student. The winners those years were Claude Harmon, Jimmy Demaret, and Sam Snead. We also saw Ben Hogan, Byron Nelson, and many other famous players. Bobby Jones played in 1947 and 1948, making the rounds with Gene Sarazen.
"I had not been back to Augusta for over 20 years, until last April, for my brother's funeral. He died on Monday of Masters' week, and the funeral was delayed until the following week, for lack of accommodations. I enjoy and profit from your fine newsletters and insightful analysis." – Paid-up subscriber R. Kelly
Regards,
Sean Goldsmith
New York, New York
April 10, 2012