G&G Associates Tax & Financial Consulting
As the Recession Deepens,
Protect yourself from Potential Food shortages with One ETF
Dear G&G Reader,
In the rolling hills of the Great Plains, a hard-working farmer got a stay of execution on his multi-generational family farm. His foreclosure has been averted, but in less than three months, his time is up.
He is in the same situation as over 650 other small farmers, according to the USDA, who recently announced a 90-day moratorium on USDA-financed farm foreclosures. Banks won't even break out the number of family farms currently up for foreclosure, so we'll never know how bad it really is...shall I say cooking the BANK books anyone.
It's a drama we've seen play out before..shall I say history repeats itself...AGAIN!
"They...would take no responsibility for the banks or the companies because they were men and slaves, while the banks were machines and masters all at the same time."
That was John Steinbeck's description of the situation in the 1930s in "The Grapes of Wrath." Between 1929 and 1933, one third of all farms were foreclosed -- at a time when 25% of all Americans still lived on the farms. The main reasons were twofold: a credit crunch and an unprecedented drought. Fast forward to 2009 and what are we looking at?
A record credit crunch and an unprecedented drought. Botton line: when farmers can't get credit, they can't plant crops, even if they are still allowed to live on the land. That's a recipe for rising agricultural commodity prices. And since commodity prices are far off previous highs, along with commodity prices in general-- a diversified investment in ag now could be the best investment you can make in 2009.
Enter the this Agriculture ETF(???). (???)tracks agricultural commodity performance through the use of futures on four key commodities: soybeans, corn, wheat, and sugar. It's expense ratio is a reasonable 0.75% while, most importantly, it provides good coverage among three major food staples and sugar, a deeply undervalued commodity.
The ETF doesn't pay a dividend but I expect it to return between 50% and 100% over the next three years...possibly sooner...as farming problems continue to mount on a global scale.
In the past it's traded between $21 and $42. It's currently around $26 and it's considerably undervalued relative to where Ag commodities should be.
There are many problems as a result of the evaporation of credit right now, ranging from the inability to finance automobiles and homes...to the production squeezes in agriculture. Be prepared for rising ag prices in the months and years ahead as the events of the Great Depression play out again beyond the financial markets.
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Tax & Financial Consultant, RFC
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LEGAL NOTICE: This work is based on SEC filings, current events, interviews, corporate press releases and what I've learned as a financial consultant. Nothing herein should be considered personalized investment advice. It may contain errors and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility. Also, please note that due to our commercial relationship with Publc Gold, G&G Associates may receive compensation from a membership purchased at www.publicgold.com/gngpreciousmetals.