Exploring Bubbles

Later this morning I am due to be interviewed by the WSJ about “scarcity” as an investment theme which I think means water and ag-related equities. As an amusing coincidence Robert Shiller is calling out farmland as the next bubble. Pragmatic Capitalist Cullen Roche has more detail on Shiller and he is sort of in agreement, he is focused more on commodities as a bubble in the making. The two are related but not precisely the same. Farmland is not a bubble and I am quite certain it will not become a bubble. Bubbles are all encompassing events that take many things down with them. For example the US housing market turned out to be a bubble taking down many world stock markets, many world fixed income markets and many world GDPs. As the bubble was inflating there were astounding statistics about equity extraction, a proliferation of mortgage products requiring no money down, an abundance of house flipping television shows and anecdotally a couple of people I know actually thought it was impossible to lose money in real estate. Ditto the tech bubble. Since that was more of a stock market-centric event I would add that there were dozens of publicly traded, unprofitable internet stocks with little to no revenue with market capitalizations well north of $100 billion. A few years ago I was on CNBC and asked whether solar stocks were a bubble. I think I was on to discuss this because of a couple of bearish of articles I wrote about solar for theStreet.com but either way it most certainly was not a bubble. At the time...

Exploring Bubbles

Later this morning I am due to be interviewed by the WSJ about “scarcity” as an investment theme which I think means water and ag-related equities. As an amusing coincidence Robert Shiller is calling out farmland as the next bubble. Pragmatic Capitalist Cullen Roche has more detail on Shiller and he is sort of in agreement, he is focused more on commodities as a bubble in the making. The two are related but not precisely the same. Farmland is not a bubble and I am quite certain it will not become a bubble. Bubbles are all encompassing events that take many things down with them. For example the US housing market turned out to be a bubble taking down many world stock markets, many world fixed income markets and many world GDPs. As the bubble was inflating there were astounding statistics about equity extraction, a proliferation of mortgage products requiring no money down, an abundance of house flipping television shows and anecdotally a couple of people I know actually thought it was impossible to lose money in real estate. Ditto the tech bubble. Since that was more of a stock market-centric event I would add that there were dozens of publicly traded, unprofitable internet stocks with little to no revenue with market capitalizations well north of $100 billion. A few years ago I was on CNBC and asked whether solar stocks were a bubble. I think I was on to discuss this because of a couple of bearish of articles I wrote about solar for theStreet.com but either way it most certainly was not a bubble. At the time...

Sunday Morning Coffee

A few weeks ago I was interviewed for an article on CNBC.com about investing in farmland. To read that article but none of my blog posts I came across as a cockeyed optimist without a care in the world about this riskless, one-way trade. A lot of context did not make the the article as published. Farm investing via capital markets is not a riskless, one-way trade. There are quite a few considerations to investing in these stocks, specifically the ones I mentioned as they are the ones I try to follow and understand. One thing I mentioned in the interview, not mentioned in the final article, was that despite part of the story here being the search for assets not correlated to stocks most of the farm stock got pasted during the financial crisis. The theme is perfectly valid. Although kind of muddied I said the demand for better diets is constant which creates a long term tailwind but these things offered no shelter and I don’t expect them to offer shelter the next time the stock market has a bear market decline. I have unyielding faith in the theme but not so the equities; if I ever buy one of these for clients it will just be one name probably at a 2% target weight. Note that I have researched several names, they’ve done well in the last couple of years but am not ready to commit client money here and am not sure when or if I will. There is also an important thing to understand, or at least appreciate, about the running of these businesses....

Sunday Morning Coffee

A few weeks ago I was interviewed for an article on CNBC.com about investing in farmland. To read that article but none of my blog posts I came across as a cockeyed optimist without a care in the world about this riskless, one-way trade. A lot of context did not make the the article as published. Farm investing via capital markets is not a riskless, one-way trade. There are quite a few considerations to investing in these stocks, specifically the ones I mentioned as they are the ones I try to follow and understand. One thing I mentioned in the interview, not mentioned in the final article, was that despite part of the story here being the search for assets not correlated to stocks most of the farm stock got pasted during the financial crisis. The theme is perfectly valid. Although kind of muddied I said the demand for better diets is constant which creates a long term tailwind but these things offered no shelter and I don’t expect them to offer shelter the next time the stock market has a bear market decline. I have unyielding faith in the theme but not so the equities; if I ever buy one of these for clients it will just be one name probably at a 2% target weight. Note that I have researched several names, they’ve done well in the last couple of years but am not ready to commit client money here and am not sure when or if I will. There is also an important thing to understand, or at least appreciate, about the running of these businesses....

The Big Picture for the Week of December 19, 2010

Earlier in the week I was interviewed for an article about farmland investing. I’m not sure how I was found for this or when it will run by I first explored this about two and half years ago. Coincidentally this came up in the comments on yesterday’s post in terms of my interest in exploring things like farms and fisheries. I am a big believer in blending together holdings with different types of attributes in an effort to deliver a better risk adjusted result, manage the correlation of the portfolio to the broad market and manage the volatility of the portfolio compared to the broad market. The space, that being farmland, is very difficult to access. There are a couple of US based companies that sort of fit the bill including a bulletin board stock that seems to be popular in this context but the last time I looked there was no information to try to research. I think the potential is as a foreign component to a diversified equity portfolio; a small component. If you click through to that post linked above you will see plenty of names to research some of which are gone due to take over (not aware of any failures but maybe there were), they generally have English versions of their websites and the information is not that difficult to navigate–note that I am giving the benefit of the doubt that none of these are fraudulent companies. Another coincidence is that Alphaville linked to a post from big picture agriculture that is a great read for doing some learning. Although the post is more...

The Big Picture for the Week of December 19, 2010

Earlier in the week I was interviewed for an article about farmland investing. I’m not sure how I was found for this or when it will run by I first explored this about two and half years ago. Coincidentally this came up in the comments on yesterday’s post in terms of my interest in exploring things like farms and fisheries. I am a big believer in blending together holdings with different types of attributes in an effort to deliver a better risk adjusted result, manage the correlation of the portfolio to the broad market and manage the volatility of the portfolio compared to the broad market. The space, that being farmland, is very difficult to access. There are a couple of US based companies that sort of fit the bill including a bulletin board stock that seems to be popular in this context but the last time I looked there was no information to try to research. I think the potential is as a foreign component to a diversified equity portfolio; a small component. If you click through to that post linked above you will see plenty of names to research some of which are gone due to take over (not aware of any failures but maybe there were), they generally have English versions of their websites and the information is not that difficult to navigate–note that I am giving the benefit of the doubt that none of these are fraudulent companies. Another coincidence is that Alphaville linked to a post from big picture agriculture that is a great read for doing some learning. Although the post is more...