Thursday, June 25, 2009

The New Bubble

Dear Readers,

I had been off for sometime and so there was no post. In the meantime you witnessed so many things - rallies fading, investors being in doubt etc etc. Apart from these "not so interesting things" , there are advices coming out from various sources on what could be the "next big thing". Speculators are digging it real hard to find out the next "investment" story as quickly as they can and many have come with interesting conclusions. Some advise buying energy (read crude) as they think its going to be scarce in the future. Some advise buying defensive stocks. Then, some advise buying natural resources like Uranium, some say buy "alternative" energy and some say buy agricultural land. Gold advisers are commonplace (including myself). But, whatever is right investment can be the potential "bubble story" in future. Bubbles are looked at with contempt from common people but speculators shout yum yum if they find one. Today, I tell you what is my take on The Next Big Bubble.

Let me start with basics. What is the basic requirement of a person? or say a living thing? its FOOD. Yes, we all need food and water for basic survival. Yet, recent industrial growth has made growing food as a non-appealing business. Farmers have been out of fashion for long and its today's high food prices that make many economists and speculators think about growth and earning potential in this field. Rising world population and decreasing arable land has made it even more appealing to start looking at Agriculture as next big investment. I think the logic is very good and we can safely assume that in order to fulfill demand for food there is going to be a big up move in agriculture and related investment.

Bubble? how? Well, I am very convinced that this is going to be next big bubble. Its true that demand for agricultural and farm products will grow with growth in population and prosperity but I have few reservations (doubts). First, I think the demand is nearing its peak (it may take some time for this peak to materialize). Why the peak when population is still growing significantly? My answer is - we may be overestimating future demand. Today we consume food in a way that we waste a lot of resources during processing. We have developed a dustbin culture and waste too much of food as our comfort level dictated. However, if economic conditions continue deteriorating in near future, we may change our eating styles and manners. We may start using lesser ingredients and we may restart "backyard garden" culture once prices of basic food items like vegetables become unaffordable. This is human nature to find ways to make things easier and simple (though we tend to over-complicate them in prosperous times).

I think this is going to happen - we will see a lot of people "trying" their luck at agriculture as demand rises and then when its at the peak, mother nature will be quick to turn things around - how? no one knows for sure but my guess is there may be few potential causes - epidemics that shrink global population, global warming, wars... anything. I don't know what will be the exact cause but I am very sure some or other cause will cause global population to stall or may be reverse!

By saying what I've said in no way means I "want" that. In fact, I think the natural cycle of restoring balance will find some way to contain over growing population. I wish if we could manage to grow for eternity without any obstacle but mother nature may disagree. So, prepare for The Next Big Bubble.


  1. Great. If you say agricultural will have a great demand in the future, how become the farmer is still poor?

  2. Not all farmers are poor my friend. Those who have right crops at right places in right time are not poor. Moreover, I am speculating this BUBBLE for future, not now. So, there may come a time when farmers are wealthy and that will be the peak of that bubble.

  3. This article is so interesting, and I definitely agree.
    Agriculture will be one of the next bubbles, in fact, Jim Rogers predicts that the farmers of the near future will be the ones driving the expensive cars and being wealthy.
    You want to make money in the next 5 to 10 years? Go long on agriculture. Anything else I'm putting on my shorts.
    For this week, please be careful if you trade. Even though the Futures are up now, there are signs of a possible decline due to poor fundamental data and due also to large specs making a large shift to net short.
    Exercise caution and good luck.

    Excellent post, Harry! Enjoyed the read very much.

  4. Thanks Dr.

    and special thanks for this warning. U r right, there are signs of short buildup in both the indexes as well as many key stocks.

    Happy trading and Investing...

  5. Very interesting read.

    The logic behind the Agriculture argument is hard to refute.

  6. With the high demand of bio fuel and the fear of having no oil left for our future generations, buying stock in agriculture sounds good.

    Some people argue, "how can we use up all the oil"? It is a known fact though that in Saudi Arabia they only have one oil tower left so it is possible.

    The area where I live for so many years farmers were growing corn fields and letting them die. Than they would receive a small stimulus for the loss. This wasn't very much to get by on, forcing farmers to work in factories and other meager jobs.


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