= $5

Welcome to prices in the not too distant future here in the US. Get used to it because commodity prices have shot up dramatically recently and that is where prices are heading. I am going to show you why this is a good thing. Well, OK, not for everyone, but at least for you and I. Yes, we are going to make money from this!

All of these items have something to do with coming out of the ground and going up. Wheat has seen prices around $15.75 per bushel when only last year it was around $4 per bushel. Corn in 2006 was around $2.25 a bushel and now it is around $5.80.

Can you see why your prices for the items mentioned are going to go up?

There are actually two major factors at play.

Here are very, very simplistic answers for this and there are more factors, but here is basically what is going on.

Only about five years ago if we say the US Dollar was actually worth a Dollar, it is now worth only 50 cents.

So if you had stashed $1,000 under the mattress five years ago and got it out today, it will only buy $500 about worth of stuff. Actually, it will buy less than that but we will not go there now.

Why you ask?

The short simple answer for this is the Feds have been busy printing lots and lots of money. So if you have twice as much of something all of a sudden, that means that it is worth ½ as much. That is what they did with your money.

The other factor is the demand for all of these things is going up for two main reasons.

Reason #1 is because there are 70 million more people every year that want to eat and people also want better things for their families like better food and a new car.

Reason #2 is at least with the grains, it is directly related to the Global Warming hysteria that was created.

Do not get me wrong, I care about the environment but I also retain common sense about it too, which far too many people seem to have lost.  You can be environmentally friendly without hurting the economy and folks like you and me.   But when you have things run by Politicians, who in turn are run by special interest groups, you see the results.  In case you have not noticed yet, they only special interest they have in you is taking more of your money. 

The minute they say that by virtue of the very act of breathing you are polluting, you would think the people would know something is up and the alarm bells would go off. They should smell a scam, a shake down, a snake oil salesman, but for whatever reason they did not. Now everyone is paying the price and paying it big time and the bill is going to continue to go up every time you eat, put gas in your car, or do pretty much anything.

What happened because of the Global Warming hysteria is that a quite a number of people bought into the whole alternative fuel bit and a lot of the grains that used to go to feed us directly in the form of Corn Flakes and flour for bread, and indirectly to feed cattle, pigs, and chickens, is now going to make ethanol to “Stop Global Warming.”

This is a great example of unintended consequences that is laughable that was created by a whole bunch of people that failed to use logic in their thinking. Either that or they knew what was going to happen and simply did not care.

Stupidity, ignorance, or intent, take your pick, it still got us here.

The fact of the matter is that the same people that wanted all of this to happen are now are saying that ethanol is really bad for the environment and already have done their best to outlaw it through back door methods in the latest energy bill that was signed into law.

And no, I cannot make stuff this good up folks, it really did happen. See my previous article.

The bottom line is that in the past 18 months we have seen the prices of many commodities shoot up 50% to 300%.

OK, so we have established the environMental loons have helped create this problem, the big question is how do we make money off of it?

Because no matter how stupid and counter productive we think it may be, the reality is these prices are here to stay for quite some time.

Is there still a chance to buy corn futures or wheat futures perhaps?

How about actually buying a farm?

Seriously, believe it or not, if you have cash, buying a farm can be an oblique way to get into the market,have a hard asset underneath it and make some great returns.

You do not have to know how to farm, just find someone that does and split the profits with them. There are so many grants and low cost loans out there for farms it is not even funny. Yet there are some great deals on farms too from people that don‘t have the capital or the know how to make use of that asset.

I know that I looked at a farm recently and just missed getting it for around $1,000,000 and it would have returned over $3,000,000 in four years at current prices. Not too bad and yes, I am on the hunt for others as I write this, not only for myself but also for clients.

Are there stock plays in this? I can think of several, one being ConAgra. CAG ConAgra Inc (NYSE).

Nevertheless, there are a lot of ways you can make money out of the situation if you think about it. If you have some suggestions on how to play what is going on, I would love to hear your ideas.

This entry was posted on Thursday, March 13th, 2008 at 1:54 pm and is filed under 20 Percent Plus Returns, Economics, Investing, Investing Alternatives, Stupidity Multiplier Alert. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.