The world’s biggest investors have more in common than you think. Warren Buffett gained his wealth through strategic acquisitions of businesses, while Bill Gates amassed over $125 billion through Microsoft Corp., which he founded in 1975. Michael Burry rose to prominence after he correctly predicted the U.S. housing market crash in 2008, and is often touted as the “Big Short” investor.
Despite their diverse backgrounds, Buffett, Gates and Burry have several similar investment choices. But the one that stands out the most is farmland. While this seemingly orthodox investment choice has turned heads, the inflation- and recession-proof nature of farmland makes it one of the best assets to hedge portfolio risk. Median inflation-adjusted returns on farmlands over the past 50 years stand at 6.1% per year.
As of 2022, inflation-adjusted net farm income was $167.3 billion, according to the U.S. Department of Agriculture.
Despite a 19.8% dip in the stock market during the first quarter of 2020, farmland values experienced only a marginal decline of 0.1%, reflecting its resilience against economic downturns. The downturn during the onset of COVID-19 marked only the second negative quarter for farmland in the past three decades.
Gates And Buffett’s Love For Farmland
Buffett has often preached the benefits of investing in large-cap stocks or bundled index exchange-traded funds (ETFs) rather than opting for relatively riskier small-cap and mid-cap stocks. Buffett’s interest in farmland dates back to his high school years when he bought his first farm in Nebraska for approximately $10,000. His net farmland and agricultural property holdings are estimated at at least 400 acres.
“If you said … for a 1% interest in all the farmland in the United States, pay our group $25 billion, I’ll write you a check this afternoon,” Buffett said during Berkshire Hathaway Inc.’s 2022 annual shareholder meeting. “[For] $25 billion I now own 1% of the farmland. [If] you offer me 1% of all the apartment houses in the country and you want another $25 billion, I’ll write you a check, it’s very simple.
“The apartments are going to produce rent and the farms are going to produce food.”
Gates owns 270,000 acres of farmland across the United States, making him the largest private land owner in the country. While Gates’ portfolio accounts for 1/4000 of all farmland in the U.S., his sizable ownership raised concerns regarding monopolistic practices and price gouging.
However, Gates defended his ownership, stating, “I have invested in these farms to make them more productive and create more jobs. There isn’t some grand scheme involved — in fact, all these decisions are made by a professional investment team.”
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Burry has focused on acquiring agricultural land with adequate water sources.
“I believe that agricultural land — productive agricultural land with water on site — will be very valuable in the future. I’ve put a good amount of money into that,” Burry said. “I’m interested in finding investments that aren’t just simply going to float up and down the market. The incredible correlation that we’re experiencing — we’ve been experiencing for a number of years — is problematic.”
While the value of the housing market keeps fluctuating, the price of farmland is expected to keep growing because of its inelastic nature. Given macroeconomic headwinds, including food insecurity amid the prolonged Russia-Ukraine war, domestic agricultural farmlands are expected to remain in demand.
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TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
