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Chris on Yahoo! Finance: The Wisdom of Owning "Things" vs "Paper"

Wednesday, October 20, 2010, 9:44 PM

Last week, Chris traveled to New York City for his second appearance on Yahoo! Finance's Tech Ticker. 

Chris joined host Aaron Task in Tech Ticker's Nasdaq studio to discuss his latest outlook on the 'Three Es,' namely that the fast-approaching arrival of Peak Oil and shortages of other key natural resources is going to put the breaks on global economic growth.

For traditional investments like stocks and bonds, which are priced on assumptions of future growth, this spells trouble.  How do you price these instruments in a world of flat - or even negative - growth?  No one knows for sure at this time, but Chris is confident the future price for these asset classes will be materially less than they now command.

Couple that with Chris' concerns about the money printing and currency debasement that the major world economies are pursuing, and it's no wonder that he recommends investors look to increase their holdings of hard assets vs "paper" ones.

If you haven't seen them already, these clips are worth watching.  Aaron does a good job of probing Chris for actionable investing guidance, and you'll see that Chris is comfortably in command using the Three E framework to provide cogent, well-rationalized answers to the questions tossed his way.

Buy "Things" Not "Paper": Chris Martenson's Case for Commodities vs Stocks

In World Without Growth, Buy "Water, Food and Warmth", Chris Martenson Says

 

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17 Comments

Travlin's picture
Travlin
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Re: Chris on Yahoo! Finance: The Wisdom of Owning "Things" ...

Thanks for the update Adam.  It is good to see Chris getting wider exposure.  Travlin

idoctor's picture
idoctor
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Re: Chris on Yahoo! Finance: The Wisdom of Owning "Things" ...

Thanks Adam & Chris.... Great to see this.

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Ivo
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Re: Chris on Yahoo! Finance: The Wisdom of Owning "Things" ...

We're so used to reading Chris's thoughts that it always feels like a very nice gift indeed when you actually see Chris talking. Thanks for posting this.

SingleSpeak's picture
SingleSpeak
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Re: Chris on Yahoo! Finance: The Wisdom of Owning "Things" ...

What makes Chris so credible is that he doesn't treat people like idiots. He says, "Take a look at my story, and either accept it or reject it." He leaves out the part about, "only an idiot would reject it". If this approach was more prevalent, we might move forward faster in our preparation as a society.

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Re: Chris on Yahoo! Finance: The Wisdom of Owning "Things" ...

Agree, good to see Chris speak. Thanks, Adam.

Chris, can you go into detail on why commodity ETFs and futures are not a good investment? This is one non-asset way to hedge my (small) wealth.

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cmartenson
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Re: Chris on Yahoo! Finance: The Wisdom of Owning "Things" ...

dbworld wrote:

Agree, good to see Chris speak. Thanks, Adam.

Chris, can you go into detail on why commodity ETFs and futures are not a good investment? This is one non-asset way to hedge my (small) wealth.

BusinessWeek managed to explain all in a nice, concise article:

Amber Waves of Pain

Like so many investors in the spring of 2009, Gordon Wolf needed to dig out of a hole. A 68-year-old psychologist in Napa, Calif., Wolf was a buy-and-hold sort of guy, yet the nest egg he had entrusted to his broker at Merrill Lynch (MER) was suddenly down by more than 50 percent. The broker had invested much of it in a range of exchange-traded funds, or ETFs, a relatively new financial innovation that was replacing mutual funds in the hearts and portfolios of many investors.

An ETF, which can be bought or sold like a stock, attempts to track the price of a particular basket of assets—tech stocks, for instance, or high-yield bonds, or commodities ranging from wheat to gold to oil to natural gas. The commodity ETFs were supposed to offer a hedge against equity losses, but in the crash of 2008 everything fell in tandem. Now it was early 2009, and Wolf was watching oil fall to $34 a barrel. That had to be an opportunity, he figured, so he called his Merrill broker and asked about the U.S. Oil Fund (USO), an ETF designed to track the price of light, sweet crude. "This seems to be something good," Wolf told the broker, and had him buy about $10,000 of USO.

What happened next didn't make sense. Wolf watched oil go up as predicted, yet USO kept going down. In February 2009, for example, crude rose 7.4 percent while USO fell by 7.4 percent. What was going on?

The short story:  The ETFs get mercilessly front-run by pros.  

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Re: Chris on Yahoo! Finance: The Wisdom of Owning "Things" ...

Travlin wrote:

Thanks for the update Adam.  It is good to see Chris getting wider exposure.  Travlin

It does seem like his message is gaining some steam. Hopefully at some point soon it will grow exponentially and we'll see a "hockey stick" of interest.

Rector's picture
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Re: Chris on Yahoo! Finance: The Wisdom of Owning "Things" ...

Chris,

As an owner of USO, I still don't get it.  What does "front run" mean?  I am hosting a conference at my home for a bunch of friends who I finally got to watch TCC on Saturday night.  Several of them called and practically demanded a meeting which we are holding at my house on Saturday night.  

While I try valiantly to avoid giving investment advice, they are persistent in their "what do I do" requests, and many of these are investment related questions.  I am talking about nurses, school teachers, etc. so it is critical that I get this right.  

I have tended toward commodity based investments (discussed here before) and one of those that I have invested in is in fact USO.  Please elaborate if you can so I can fix the problem in my own portfolio, and give sound advice to people who can't really afford a lot of screw ups.  

Thanks,

Rector

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Re: Chris on Yahoo! Finance: The Wisdom of Owning "Things" ...

Rector wrote:

Chris,

As an owner of USO, I still don't get it.  What does "front run" mean?

Dr. Martenson, I hope you don't mind me answering this one. I wanted to learn more about it, so I searched on Google and realized what the problem was.

USO invests in futures of West Texas Intermediate (WTI) crude. Every month, the EFT has to "roll over" into the next month's futures. So the pros buy it ahead of the fund, jack up the price, then sell it to the ETF.

Here's another interesting article: How Traders Are Front-Running ETFs
http://seekingalpha.com/article/165877-how-traders-are-front-running-etfs

Poet

Rector's picture
Rector
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Re: Chris on Yahoo! Finance: The Wisdom of Owning "Things" ...

I get it.  Thank you.  I will proceed accordingly.

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minnsotagal
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Re: Chris on Yahoo! Finance: The Wisdom of Owning "Things" ...

How does one even go about finding farmland with a water source?  Are there any online resources that would help me locate land to buy?  Or, do we just go ask a realtor?  Or, is there a type of realtor that specializes in farmland?

minnsotagal's picture
minnsotagal
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Re: Chris on Yahoo! Finance: The Wisdom of Owning "Things" ...

Hey,

I can't get these videos to play.  Any suggestions?

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Adam Taggart
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Re: Chris on Yahoo! Finance: The Wisdom of Owning "Things" ...

minnsotagal -

The quick answer to your question is buying water rights is often complicated and the options available to you can vary greatly both across states as well as within a state. You definitely want to have an experienced party in the region you're looking at advising you (e.g. a trustworthy realtor who specializes in farmland/water rights) if you're just starting out.

I just returned from a trip this weekend looking at potential farmland to buy. While I've been researching for a number of months, I still feel woefully undereducated at this point. This latest "boots on the ground" scouting trip confirmed that.

But I met with several good farm-specializing realtors who advanced my knowledge greatly. Tapping seasoned minds like these can save you hours of researching online or in books.

While they may not practice in a geography of interest to you, a conversation with one or more of these may be helpful in orienting you on your path to learning more. If you have interest in speaking with one of them, send me a PM and I'd be happy to send you their contact info.

Other resources to consider:

Ned Schmidt is a good expert in investing in farmland. He's given a number of interviews on financialsense.com - you may want to listen to several of those. There was one in particular he gave near the end of last year specifically dedicated to "newbies" investing in farmland. Couldn't find it with a quick search of their site, but with a little persistence you can likely dig it up.

Some books with helpful guidance on what to consider when buying farmland include Five Acres and Independence by Maurice Kains - http://www.amazon.com/s/ref=nb_sb_ss_c_1_27?url=search-alias%3Dstripbooks&field-keywords=five+acres+and+independence&x=0&y=0&sprefix=five+acres+and+independence, Rawles on Retreats and Relocation by Jim Rawles - http://www.cafepress.com/clearwaterpress.112255104, and The Encyclopedia of Country Living by Carla Emery - http://www.amazon.com/Encyclopedia-Country-Living-Carla-Emery/dp/1570615535/ref=sr_1_1?s=books&ie=UTF8&qid=1288031259&sr=1-1

These are just a start. Am sure others here can provide even more guidance. 

Specifically, you may want to skim through and/or post questions to the Definitive Agriculture Thread: http://www.peakprosperity.com/forum/definitive-agriculturepermaculture-t.... There are experienced and helpful folks there who can provide much better guidance than I.

cheers,

Adam

minnsotagal's picture
minnsotagal
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Re: Chris on Yahoo! Finance: The Wisdom of Owning "Things" ...

Wow, Adam, I can't thank you enough for your reply!!!

I really appreciate the information, you're the best!  Smile

promo.myefoods.com's picture
promo.myefoods.com
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Wise advice

Getting onboard early ... and definitely making this a lifestyle thing. Weaning myself off paper and investing in personal security as advised: food stores, power, etc. Will definitely be worth more down the road than a buck in my savings account.

Travlin's picture
Travlin
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Re: Wise advice

promo.myefoods.com wrote:

Getting onboard early ... and definitely making this a lifestyle thing. Weaning myself off paper and investing in personal security as advised: food stores, power, etc. Will definitely be worth more down the road than a buck in my savings account.

Welcome to the site.  There is a lot of information available to help you here.  Sounds like you are off to a good start. 

Travlin 

idoctor's picture
idoctor
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Re: Chris on Yahoo! Finance: The Wisdom of Owning "Things" ...

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