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Thursday, 14 June 2012

Playing the market

“Buy land, they're not making it anymore”

I told a very successful friend to spend his bonus on buying a farm in 2007.  Land prices in East Anglia were just beginning to rise to around £3,000 an acre for arable land mark.  To his lasting regret, he ignored my advice, as he felt he had "missed the market".  I know he still kicks himself to this day, since land values have continued to rise in this area, with an average of £6,500 per acre and, in some places, going for over £8,000 per acre.

When looking at these prices, you have to remember that owning one acre of farmland on its own isn't going to earn you a lot of money.  With bigger farm machinery and tighter, precision farming, you need to own a large block of good quality Grade 1 or 2 land. You need to have farmed it properly, kept an eye on your ph's, trimmed your hedges, cultivated it properly, got the correct drainage and have the relevant farm buildings to command this sort of price but still, the bruise on the shin is pretty permanent now....

So what will I tell him this year, 5 years on?  I would still recommend investing in farmland.  Farming is anti cyclical.  When everyone else is buying new cars and going on foreign holidays, food is cheap.  Therefore farming is not hugely profitable.  When food prices rise, so do farming profits and we tend to splash out on new machinery and re-roof the cowshed.  If this recession is going to continue, land prices will continue to rise.  The minute the "boom" starts up again, land prices freeze until the next "bust".

What would I recommend getting out of?  This is far more interesting from my point of view.  If I were in charge of a bit investment portfolio, I would begin to look at two areas that are beginning to lose their credibility and hence will, over the next 10 years, begin to lose their profitability.

The first is the diet industry.  When Jo Swinson et al were researching the Body Image Report, one of the most contentious issues was the efficacy of a "diet".  There has been a call for NICE to investigate the diet industry and for the diet industry to produce an evidence base to prove that "diets work" as opposed to the usual publicity guff.  (Please note I am refusing to put a link to the "I lost 40lbs and Prince William fell in love with me" type article which passes for "proof" these days).

I have noticed more and more bloggers and more and more research swinging the pendulum.  The recent campaign started by Lydia Jade Turner to stop a representative of Jenny Craig talking to the Alliance of Girls Schools was a case in point.  So a section to watch and maybe review before the evidence base outcome.

Secondly, I would be watching that other industry that is based entirely on guilt, self-loathing and very little evidence base - the gym.  Having read this article (thanks to the Fairy Blogmother), I wonder how soon it will be before people begin to see a correlation between the two industries above.  Will people realise that it is just money for old rope?

Walking around an acre of farmland would probably turn out to be a cheaper alternative to gym membership over a 10 year period and you never know, you might even make a profit at the end of it.

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