“Grub” Investing – What to do when cities start to burn

Discussion in 'Trading news and analysis (syndicated content)' started by Oakshire Financial, Feb 16, 2012.

  1. Oakshire Financial

    Oakshire Financial syndicated content Official Contributor

    We renewed our series on FOUR ‘G’ investing last week with a look at guns. This week we turn to food.

    But before we get there, a quick word.

    We thank you always for your feedback – positive and negative – and encourage you always to speak your mind. Not solely for our benefit, of course, but for that of your fellow readers, who profit abundantly from the wealth of opinion and outlooks that are offered here. Last week saw a bevy of fascinating observations – and astute criticisms. Keep it up.

    Farmland Redux

    Last May, we wrote at length about the ‘back-to-the-country’ movement we saw developing in America, and we still believe the trend will continue to gather steam. CheckBack Country Buying Binge, Investing in the Great Migration, and An Agro-Investor’s Guide to Growing Profits for more on the matter.

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    Today, we return to the theme with a slightly different twist.

    To begin, let’s have a look at Greece, a country that’s clearly on fire and doesn’t appear to have a chance of turning itself around in the near term.

    Without descending into histrionics, let’s just say that the Greek reality will likely serve as a model for us going forward.

    In that country, urban workers of every stripe, most between 45 and 65, are flocking to the countryside in search of a new life of manual labor and material austerity in the face of a shrinking government employment base and a failed cradle-to-grave welfare system.

    Here’s Greek unemployment for the last year:

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    Many people are on the move in Greece, where the only options available are to move to the country or to move out of it. While the official Greek unemployment rate hovers just below 21%, the rate for those between 15 and 29 stands at an astonishing 35%.

    Is it any wonder Athens is aflame? Is it any wonder, also, that the agricultural sector in that country is the only one showing robust employment gains, with better than 32,000 returning the land over the last two years. In a country of just 11 million souls that’s astounding. It’s the proportional equivalent of better than 800,000 Americans returning to farming in just 24 months.

    Expect it.

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    Grow your own Grub; Why don’t more want to do it?

    Whether you’re a “prepper” or you’ve always longed to live off-grid, whether you’re just fed up with city life or are unemployed and looking to scale down, simplify and start anew, a move to the country to plant some seeds likely already appeals to you.

    Not so for everyone.

    There will always be those who prefer to take to the parks and the legislatures, joining whatever the latest movement may be and demanding free everything from those who have more than they. They’ll be encouraged, too, by opportunistic politicians who see in the demonstrations a chance to come off as populists and earn a few more votes.


    But for those with a little foresight, who are ready to take their skills and savings and go rural, setting up independently, bartering, growing, hunting, fishing and otherwise living healthy on their way to overcoming the inevitable financial breakdown that looms, we tip our hats.

    And as the move takes hold, we expect the demand for farm machinery to increase. Companies like John Deere (NYSE:DE), Caterpillar (NYSE:CAT) and engine-maker Cummins (NYSE:CMI) will see gains alongside agri-business giants like Monsanto (NYSE:MON) and Archer Daniels Midland (NYSE: ADM).

    And while it’s fun to pick stocks, we feel it’s wiser to choose an ETF that will do the homework for us.

    What to Choose?

    At this stage, we’re steering away from the commodity based ETFs in favor of those featuring commercial-agricultural firms, and we’ve got two for you.

    Both are international in scope and feature the biggest industrial, fertilizer, feed and food wholesalers on the planet.

    The first is the Market Vectors Agribusiness ETF (NYSE:MOO), with over $6 billion in market cap and a nominal yield of 0.68%.

    The PowerShares Global Agricultural Portfolio ETF (NASDAQ:pAGG) offers a more generous 2.26% dividend, but is a lot smaller, boasting a market cap of just over $114 million, though it does hold a greater number of international names in the portfolio.

    Here’s a graphic comparison:

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    MOO is up 4% in six months. PAGG is down 2.5%.

    Another potentially significant difference between the two is liquidity: PAGG is a far more thinly traded issue.


    Many happy returns,

    Matt McAbby

    Senior Analyst, Oakshire Financial

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