This great article was published in International Living and written by Chris Hunter
On Saturday, December 6, 1941, few Americans had any idea that their country was about to be plunged into war.
The following day, Japan’s “Operation Hawaii”—what became known as the Pearl Harbor attack—killed 2,402 Americans and plunged America into war against Japan and Nazi Germany.
Right now, mainstream investors have a similar view of the world as Americans did before that fateful day in December 1941. Although they know a crisis has struck (back then it was the outbreak of war between Germany and Britain; today it is the 2007-2008 stock market crash) they feel safe in the knowledge that everything is “under control.”
This is why so many investors are choosing to place their savings in U.S. government bonds—traditionally thought to be “safe havens.”
Unfortunately, given the jaw-dropping rise in America’s national debt (which is predicted to exceed the nation’s entire economic output in just two years) these traditionally “safe havens” are about as safe as Pearl Harbor was in 1941.
The fact is we tend to base our view of the future on past experiences. And if you were born during the two decades after the war, the past has been, broadly speaking, good to you.
In the great bull market the 1980s and 1990s, stocks trended upward and handsomely rewarded buy-and-hold investors. And America’s debt was relatively stable.
This is the pattern boomers naturally expect to resume once this crisis is over.
The problem is this resumption to “normality” is a pipe dream. Take a look at this chart from David Rosenberg, chief economist and strategist at Gluskin Sheff. It shows that, for the last 12 years, U.S. stock markets have been extremely dangerous places to put your money—swinging wildly from extreme highs to extreme lows.
My beat is long-term wealth protection. That means finding sustainable wealth-building alternatives to volatile stocks and soon-to-be toxic U.S. government debt.
One solution is timberland, for two reasons.
1. Timberland is a great hedge against inflation. Over the last century timber prices have outrun inflation by an average of 3.3%.
2. Timberland is a great way to diversify your investments. Timberland does not move in step with stocks. So when stock markets dive, timberland remains relatively stable. For example, in 2008 the S&P 500 index of U.S. stocks plunged 38%. But timberland rose by 9.5%.
In other words, timberland is great portfolio insurance. It gives you peace of mind that if we do get another leg down in stocks—another Pearl Harbor-style surprise attack from, say, a default by Greece or a blow-up in China’s real estate market—your investments won’t take a big “hit.”
There are a number of publicly traded companies that allow you to invest in timberland, such as Plum Creek Timber (NYSE:PCL) and Rayonier (NYSE:RYN). But these carry significant risks, particularly their tendency to use large amounts of leverage.
I’m exploring a much more direct way to invest in timberland through one of our strategic partners at Bonner & Partners Family Office, the wealth protection society set up by IL’s founding publisher last year.
It’s a Latin American investment company that manages not only timberland, but also vineyards. And it means our members will have the opportunity to buy timberland for up to one hundred times less than in North America.
Editor's note:Bonner & Partners Family Office is a wealth preservation forum for people who are serious about their money. If you think you could make use of the research and contacts available to Bonner & Partners Family Office members, let us know.
To read the full article in International Living just click here
If you would like to diversify your investment portfolio have a look at Nature Walk our most recent project, which combines the safety of a teak timber investment with the huge potential of development land with seaviews close to Jaco.
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