Somebody's Coveting My Assets
By John Phipps
Life is never as funny as it is to an 11-year-old boy. Especially when it's not supposed to be. Take confirmation class at church.
First go back 50 years or so, and remember that the Bible meant the King James Version in most small churches. So when one of the girls in the class is asked to read aloud the Ten Commandments, the boys perk up, waiting for the always hilarious No. 10.
"Thou shalt not covet thy neighbor's house, thou shalt not covet thy neighbor's wife, nor his manservant, nor his maidservant, nor his ox, nor his ass, nor any thing that is thy neighbor's.”
The embarrassed girl slows toward the end of the verse, dreading the already barely contained sniggering. The pastor pinches the bridge of his nose and reconsiders his calling. Ah, happy days…
Covet Thy Neighbor. It's not so funny now. In case you haven't noticed, people are driving by your farm and coveting like crazy. Yes, they covet your ass(ets).
Clearly, folks have taken notice of the remarkable returns in commodities. They have also noted how our revenue stream in grain production has been nearly bulletproof, thanks to mandated markets.
Furthermore, those markets paint a pretty bright comparison to 1.6% one-year certificates of deposit. Now throw in aggressive outreach programs to general investors by the real estate industry, and voila—we're pressuring land prices swiftly past prudent P/E ratios.
Haven't we been here before?
Since many of us are heavily invested in land compared with other assets, this may seem like a good thing, but it's only an abstract calculation. Having to take advantage of asset price increases means actually selling the stuff—an outcome we link to failure.
It also means that expansion by ownership (as seems to always be the case) will remain a leap of faith. But there may be a difference this time around.
- FEBRUARY 2010