Smiling From Argentina The Rude Awakening
Laguna Beach, California
Wednesday, October 25, 2006 - Investing in the new emerging bull in commodities,
- Simple food chain math – Cows consume feed, feed
consumes water...
- The romance of Argentinean farmland, how to diversify
with global mutual funds and plenty more...
-------------------------------------------------------------------------------- Eric Fry, reporting from Laguna Beach, CA... Only three months have passed since Eric Roseman urged the
attendees of the Agora Wealth Symposium to "Buy anything
that can grow wheat on it!" "Wheat is in a long-term bull market," Roseman declared.
"I'm bullish on grains. I'm bullish on agriculture. I'm
bullish on ethanol..." "The agricultural sector has been lagging most other
commodity sectors since 2001," he continued. "The metals
are way up. The energies are way up. But very few of the
ags have made much of a move. That's about to change.
Declining crop yields, coupled with booming demand from
China and India will cause the grain markets to soar. And
let's not forget ethanol. This new source of demand for
corn and sugar is growing at a very rapid pace..." Almost immediately, the prices of wheat...and corn...and
soybeans began soaring toward the heavens – the very same
heavens from which very little rain has been falling. Drought conditions in most of the world's grain-growing
regions, coupled with the booming demand that Roseman
identified, have caused the prices of all major
agricultural commodities to soar. Wheat, for its part, has
climbed more than 40% since Roseman's prophetic speech at
the Symposium. Over the same timeframe, the CRB Index of
all major commodities has actually FALLEN. 
If, as Roseman expects, the agricultural commodities are in
the early stages of a long-term bull market, it might not
be too late to "buy anything that can grow wheat on it."
In the column below, Bill Bonner, the employer of your editor
and one of the latest gringos to buy property in Argentina,
describes a fertile land to the south that can, indeed,
grow wheat on it... --- Commodity Special ---
$400 Became Over $200 Million With This Once-Secret Profit
Blueprint A pizza delivery boy turned his measly $400 savings into
over $200 million. Savvy investors have followed suit and
turned mere thousands into hundreds of millions — and now
you can too. Get in on gains of 379%, 396%, even an astonishing 519% in
as little as 12 days with this world-renowned resource
trader's system. Get the details here: http://www.isecureonline.com/Reports/RTA/ERTAGA21 ---------------------------- Smiling for Argentina
By Bill Bonner We haven't been to Argentina in many months...but we try to
keep up with what is going on down there. For example, yesterday, a friend sent a photo of a house
for sale. It is a beautiful place, in fashionable Palermo
Chico...with balconies outside, and attractive woodwork in
the interior...and about 3,000 square feet of space. A
similar house in Paris would cost $3 million or so. In
London or New York, you might spend $5 million or more. But
in Buenos Aires, the price is only $800,000. "Were I not living in Asia," writes our old friend Mark
Faber, "I would consider buying a property there. Buenos
Aires is a beautiful city with a pleasant climate, and I
would recommend it to those of my U.S. readers who are
thinking of relocating... My friends in Argentina are of
the opinion that Buenos Aires real estate prices will never
approach prices in Miami, New York, and London, and I am
inclined to agree with them. However, the colossal price
difference could narrow in the future, especially if there
was a financial meltdown, which would hit real estate
prices in financial centers very hard." Argentina is recovering quickly from the sharp slump of
2002, when GDP fell 10.9%. In U.S. dollar terms, the
economy was more than cut in half from '98 to '02, and one
out of every five people was out of a job. The only thing
comparable in American experience would be the Great
Depression. But Argentina did not stay in a slump like the United
States in the 30s, or Japan in the '90s. Its currency
collapsed, and the government had no money to prop up
losing enterprises. So, the slate was wiped clean fairly
quickly. Since '03, in fact, it has had one of the fastest-
growing economies in the world - with growth rates around
9% annually. Unemployment dropped down to single-digit
levels, and the country produced trade surpluses - led by
the agricultural sector, which was greatly aided by a
cheaper peso. Currently, Argentina's trade surplus equals
about 10% of its GDP, compared to a NEGATIVE 7% for the
United States. Argentina's stocks reflected the turnaround.
From the low in '02 to today, the index has risen 491%, one
of the best performers in the world. Is it too late to invest in Argentina? Not necessarily.
Mark Faber's "Gloom, Boom and Doom Report," suggests three
different ways. The first is property, which except for the
very top-end, still seems cheap. The second is electrical utilities. Because of popular
pressure, the Argentinean government refused to allow
utilities to raise prices. The average residential
electricity bill is only $10 per month. Naturally, the
utilities saw little interest in expanding capacity. Also,
investors did not rush to put their money into the sector.
As a result, Argentina's power companies produce no more
juice now, than they did before the financial crisis, while
electricity consumption has increased 24%. Thus, the opportunity in the utility sector is obvious. As
demand increases, the government will be forced to allow
prices to rise to increase investment. Existing utility
franchises should rise in value. The third way to invest in Argentina, is to take advantage
of its agricultural sector. Global demand for quality food
is on the rise; the available land and water resources
necessary to produce it, meanwhile, are declining. Currently, the world produces less wheat, corn and other
agricultural commodities than the world wants to eat. The
supply of wheat, for example, will come in at about 605
million metric tones this year. The demand for it is
supposed to be on the order of 613 mmt. The story is
similar for corn, with the gap for both grains being filled
by drawing down inventories. If we read the chart
correctly, inventories are now at historically low levels -
close to the lows set more than 30 years ago, just before
the last major bull market in soft commodities. What has changed most dramatically is the demand side.
While more and more farmland is taken out of production by
encroaching suburbs and highways...the demand for food is
soaring. Forty percent of the world's population - mostly
in Asia - is generating the financial means to buy food on
the world market. The Chinese, for example, consume about
2,500 calories per day - the same as the Taiwanese. But on
the island of Taiwan, the calories tend to be of the animal
variety; the average Taiwanese person consumes nine times
as much meat as his cousin on the mainland. The reds are trying to catch up...with meat consumption
rising at a 20% annual rate. What this means to the grain market is obvious, too. It
takes about nine units of grain to produce one unit of
meat. This is why both China and India, both of whom used
to be self-sufficient in grains, now need to import the
stuff. But from where? On the supply side, the big producers are North
America...the Ukraine...or Argentina. Each has its own
unique problems, but one problem dogging the entire
agricultural sector worldwide, is water. Just as the planet
seems ready to reach peak oil production - the point at
which future production is likely to be lower than past
production - so too, does it appear to be reaching for a
kind of peak water limit. India and China both have their
well-known problems with water, but so does the United
States. The great lake under the American prairie - the
Ogallala Aquifer - is the world's fastest disappearing
water supply. The water under the Klamath Basin in Northern
California is also dropping fast - down 20 feet in the last
three years. Energy companies, hustlers, and hallucinators are trying to
replace oil with grain. But it takes huge amounts of land
and water to produce enough grain to make a significant
impact on energy supplies. And just as it took millions of
years to lay down the world's supply of oil, so too, did it
take millions of years to stock its underground water
supplies. Switching from oil to ethanol will merely suck
the earth dry of water faster...and send food prices
soaring. Argentina's big advantages are that it has a huge
underground water supply - the Guarani Aquifer - and that
the land on top of it is cheap. In terms of productive capacity, an acre in Argentina costs
only about one sixth as much as an acre in the United
States. Over the long pull, investors in Argentine farmland
will probably do well. [Eric's Note: Armed with this information, most of us will
probably do absolutely nothing. We might dream about buying
an Argentinean ranch. We might even troll the Internet for
captivating stories or photos from this romantic land to
the south. But how does one buy Argentinean farmland? And
what does one do with it while waiting to sell it for a
profit? Grow wheat? Unlikely. We are investors, not
farmers. And even if some of us are also farmers, we are
not Argentinean farmers. Fortunately, however, we can
easily invest in water, another precious resource that
promises to reward investors over the long haul. Clean
water may be plentiful beneath the pampas of Argentina, but
it is becoming increasingly scarce throughout the rest of
the world. Our own Chris Mayer, editor of Mayer's Special Situations,
has worked closely with your editors here at the Rude
Awakening to produce a comprehensive report: "Investing in
Water." http://www.the-rude-awakening.com/WaterReport.html For those readers who still harbor a desire to buy
Argentinean "terra firma," we have some good news for you.
Chris Mayer's guest column, appearing this Friday, will
identify a stock that invests solely in Argentinean real
estate. This particular company does not own any wheat
fields, but it does own just about every other sort of
property. So be sure to check back in tomorrow, as Chris
examines the booming Argentinean economy...and then again
on Friday, as he reveals a specific play on Argentinean
real estate.] --- International Commodity Investing --- A one-time opportunity to turn every $2,600 you invest into
a tax-deferred $21,216 in less than two years... The Greatest 24-Month Profit Cycle Has Just Begun...And The
Time To Get In Is Now... Click Below to Read the Full Report: http://www.isecureonline.com/reports/GMF/EGMFGA02 | 
