Wednesday, March 2, 2011

Seven Meals From Anarchy?

"If you read any economic, financial, or political analysis... that doesn't mention the food shortage... throw it in the trash, as it is worthless."
- Eric deCarbonnel,
Because a frightening scenario is already beginning to play out in cities and countries around the world.
And I'm not just talking about the value of the dollar, the yen, the euro or even China's yuan.
This rapidly approaching scenario is a top-priority concern for these governments... and every other government on the planet.
In short, the looming crisis I'm writing you about today is "the Crisis"... the one that makes all doomsday scenarios come true.
The government bailouts and central bank interventions, which have held the financial world together during the past two years, will be powerless... there will be no playing nice with other countries... when this crisis hits, it will be about the raw act of survival.
"In a real crisis, food will be 
more valuable than gold or silver." 
- Bill Heid, Survival Seed Bank

Gold? It won't be worthless, but it won't be as valuable as most people want to believe.
Silver? Same thing, if this scenario plays out as I expect it could.
Stocks, bonds and other paper assets? Only a select few will do you any good at all when this crisis hits and it all comes unraveled.
You see, there is one thing people simply will not tolerate...
Of course, as you may have guessed, what we are talking about is a major food crisis.
Let's think about this: If you were a government official, the last thing you'd want is a nation full of hungry, restless people... right?
The Spanish proverb explains the danger... and how quickly a nation can turn on its leaders:
"Civilization and anarchy are only seven meals apart."
Sure there are some people born into hunger, so they never know the difference.
However, for hundreds of countries around the world, food has never been an issue... until now.
Until now, we've pretty much taken food for granted.
But that is changing -- fast.
Maybe you've seen the news...
Like the lead paragraph of an article in the Sunday Times:
"The specter of food shortages is casting a shadow across the globe, causing riots in Africa, consumer protests in Europe and panic in food-importing countries."
And there was this article in the Financial Times:
"Fears grow over global food supply."
And what about this recent article from the New Zealand Herald...
"Riots spread as global food shortage worsens."
What's more, I found dozens of other articles all leading to the same basic conclusion as that of Tim Lang, professor of food policy at the University of Leeds, who summed it up by saying:
"We are sleep-walking into a crisis."
Fact is, most people have no idea how close we are to anarchy. They don't realize how quickly a civilized society can spiral into chaos. And they certainly don't want to admit it.
Despite all the press, despite all the food shortage riots going on right now... they just don't believe it will really happen to them. (I'll explain why people don't believe it can happen to them in just a minute.)
Many people believe food shortages only happen in third-world countries... and that used to be the case.
However, thanks to the growing global population and the urbanization of the U.S., India and China, the problem is getting much closer to home.
Empty Shelves... in Just 72 Hours.
"The world, that understandable and lawful world, 
was slipping away." 
- William Golding, Lord of the Flies

Did you know, stores typically only have an average of 72 hours of inventory on handand very few families are capable of producing their own food, so even a temporary shortage of food supplies could be catastrophic?
Let me ask you a question...
How many meals would you allow yourself, or those you care about, to miss before you "took matters into your own hands"?
I know we like to think we're "civilized," but I have to wonder how many meals I'd be willing to miss before I started looking at... "options."
My guess is, not many more than seven.
So far, most food shortages in the U.S. and other countries have been largely weather-related...
Image: London Store ShelvesFigure 1 - London Store Shelves -
November 2010
Consider the aftermath of hurricane Katrina for instance.You couldn't even get water much less milk and bread.
Then there was the tsunami in Indonesia...
The earthquake in Haiti...
The blizzard just before last Thanksgiving in London that left store shelves empty...
Droughts, floods and many more.
A recent Reuters article quoted analyst Chris Mann of Traders Group Inc. in Chicago, who had this to say about how delicate the supply-and-demand balance is right now:
Even if we have a good year, we are not going to have the inventories we've seen before. I really do think the time of cheap food prices is over... Everything is set to the point where supply equals demand right now. But if you pull one thing out of it, or if you disrupt the equation in some little way or tweak it, I think, with inventories as tight as they are, it will really have an impact on prices. A drought, a flood, anything.
But what if a food shortage was not event-related? What if, instead, it was a true shortage --something that can't be fixed easily in just a few days... war, famine, pirates, labor strike, currency collapse? You can begin to get a sense of how quickly things could get out of hand...
What If Prices Simply Get So High, So Fast... 
That a Large Portion of the Country 
Simply Can't Afford Food?

Take a look at this article that appeared recently in The Globe and Mail as I was writing this letter to you:
Food prices hit a record level last month, according to United Nations statistics, and are forecast to grow by more than 30 per cent this year. In a worst-case situation of critical shortages sketched by Citigroup Inc. analysts, prices could skyrocket by as much as 75 per cent.
It's easy to imagine how quickly the natives would become very restless... how quickly survival would do away with the rule of law.
Let's face it, the governments can't afford to add millions of new people to the food stamps program... truth is, they can't afford to pay for the 39.68 million, or 1 in 8, Americans already on food stamps.
So, based on the projected 30% to 75% increase in prices by the above article, those 39.68 million people on food stamps would get 30% to 75% LESS FOOD THAN THEY ARE USED TO GETTING.
Or, put another way... One month's worth of food would be cut to one week's worth of food. That's a three-week shortage just from an increase in prices.
Now, imagine a city like New York where large segments of a densely populated urban area are poor and using food stamps...
Do you see how quickly we can have large portions of the population going without food for two to three days?
Imagine... millions of hungry, irritable people fighting over the same scraps of food... babies crying... looting... robbery... or worse...
Keep in mind that people in many of these large urban areas don't have giant refrigerators and walk-in pantries to store food... they literally buy "just enough" food to get by.
What's more they have absolutely no way of growing or providing for themselves -- when things hit crisis mode, their only option will be stealing.
Indeed, "seven meals from anarchy" may be just about right.
The Bigger Problem...
"The next economic war or conflict can be over the race for scarce [food] resources." 
- Indonesian President Susilo Bambang Yudhoyono, as reported by BBC News January 2011

I'm not showing you these stories to scare you. Instead, I'd like to show you how you can protect yourself from the coming crisis.
First, you need to realize, the food crisis is not new. It's simply accelerating.
Chris Mayer, editor of Capital & Crisis, may have stated it best when he explained,
This [food crisis] has been in the works for a long time. It was there for all to see. The ratio of arable land to people has been falling for decades. Gains in crop yields have slowed. Population has expanded and income levels have grown. Diets have shifted. More people are eating more meat, which is much more grain-intensive to produce.
Please understand, this is not just a global problem... it's an American problem, too.
Let me take just a second to show you what's really going on in the quote above.
Because, the facts are pointing to long-term problems...
First, there's the "arable land" problem...
The facts are shocking.
According to the study Food, Land, Population and the U.S. Economy, "Over the past 40 years, approximately 30% of the world's cropland has become unproductive."
The authors go on to say, "During the past 40 years nearly one-third of the world's cropland (1.5 billion hectares) has been abandoned because of soil erosion and degradation."
So what is arable land? In short, it's land that is suitable for growing crops.
Below is a chart from the Global Education Project showing how land around the globe is becoming degraded from things like street-water run-off, construction... even wind and rain.
Image: Global Education Project
Without good arable land, it's not just hard to grow food, it's nearly impossible. But that's only part of the problem because...
The second problem is the decrease in crop yields around the world...
A basic tenant of farming is crop rotation. However, with subsidies and demand for corn and other crops expanding, many farmers may be more concerned about the short-term payoff than they are about long-term crop sustainability.
As investors, we've seen how only keeping the next earnings date in mind with no regard for the long-term viability of a company can come back to bite you. I guess you might say the farmers on Main Street are catching on to the ways of Wall Street... and that can't end well.
Third, our global population continues to rise...
According to a United Nations report, "Each day 200,000 more people are added to the world food demand. The world's population has increased near fourfold in just the past 100 years"(Source:UN Population Division, 2007).
But that's just the beginning, because the global population is projected to increase from 6.7 billion (2006) to 9.2 billion by 2050... just 39 years from today. In other words, if you are 50, then you will likely be sharing this planet with an extra 3 billion people by your 89th birthday.That's like adding another 10 people for everyone you now see in America.
Image: Global population, estimates and projections
It only took 12 years for the last billion to be added, a net increase of nearly 230,000 new people each day, who will need housing, food and other natural resources.
Here's the thing: The largest population increase is projected to occur in Asia, particularly in China, India and Southeast Asia, accounting for about 60% and more of the world's population by 2050.
Now, this may be stating the obvious... but during that same time, good ol' planet Earth will NOT be adding any new land for growing crops.
So, where will the food come from?
The truth is, no one knows for sure how we'll continue to feed these 200,000 new people who join us every single day. That's what makes this coming food crisis a near certainty.
But, there's still another factor...
Fourth, diets are changing...
According to an article on the Financial Times website, "... people [in emerging markets] with rising incomes want to eat higher-quality food -- notably chicken, pork and beef. That in turn increases global demand for grain for animal feed."
This is nothing new...
Because whenever a country becomes richer, the diet of its people improves. The people move away from rice and wheat into meat and other protein-rich foods.
But, the demand for wheat and rice doesn't go away... in fact, it can actually increase.
Because the wheat and rice is now used to raise beef, chicken and pork.
Fact is, emerging markets, as both food consumers and food producers, are transforming their own diets at an unprecedented pace. That means the way the whole world eats is going to be transformed, too.
Listen, here's what you need to understand about these four problems I just mentioned above...
Each of these problems was expected on some level. There are people and companies working very hard to find solutions. Governments are spending money to fix the issues.
But, what they were not expecting was the sudden demand this next catalyst is creating...
Double Dose of 
Unintended Consequences...

With oil bouncing around the $100-per-barrel price, the cost of moving food from one place to another is adding to the rising food costs.
But it's not just transportation; tractors also rely on fuel in every phase of growing food.
First the ground is plowed... then a pass is made for fertilizer... then the seed is planted... then there's another pass for fertilizer... then there's weed management... then there's another pass for harvesting... and finally two to three more passes are made for cleaning and prepping the ground for the next crops.
Each pass over thousands of acres with 500-horsepower, turbo-diesel engines adds to the bottom line.
In short, the cost of fuel is a direct expense to the cost of producing food.
But that's just one of the consequences...
The other is "going green."
Bio-fuels are putting a strain on the amount of food that actually makes it to market.
Thanks to the recent "green" agenda of many countries, farmers have switched to producing corn and other crops for fuel... instead of for food.
Here's a chart showing mandates through 2012:
Chart: U.S. Annual Ethanol Production
In other words, now that farmers can choose between bio-fuel and food as their crop, the bushel and the barrel are effectively bonded at the hip.
And the trend doesn't look to be ending anytime soon, because the higher oil prices go, the more demand there is for alternative energy like bio-fuels.
Check out this chart and how gasoline and bio-fuel prices are staying in lock-step...
Chart: CBOT Ethanol Nearest-Futures versus NYMEX Gasoline Nearest-Futures
But, that's not all...
Because, there's another problem that is on everyone's mind right now. The problem thataccelerates everything we've talked about so far.
The wild card that could create...
The Perfect Food Crisis Storm...
"Like throwing gasoline on a fire"
So, on top of all these other factors going on right now...
  • Arable land
  • Decreasing crop yields
  • Growing population
  • Changing diets in emerging markets
  • Rising fuel costs
  • Bio-fuel demand...
We have to add inflation to the mix. And not just inflation, but what could turn into an inflationary war as countries around the globe try to inflate away their own debts.
Inflation is to the food crisis what gasoline is to a fire -- explosive and unpredictable!
Of course, you'll never find anyone in the government actually admitting that their plan is to inflate away our debt... or at least try... but that's exactly what happens when governments get in debt trouble.

As an informed individual, you already know inflation is what happens when too many dollars chase too few goods.
So, if you look at everything we've talked about today... and then you add in trillions of dollars, yen, euros and every other currency on the planet... to the one place where a very real supply and demand problem already exists... well, you get the prefect food storm.
And it's already happening...
Here's a chart of beef prices over the last five years... UP 123%:
Chart: Beef Up - 123%
And here's a chart of corn prices...UP 52% during 2010:
Chart: Corn Up - 52%
Then, there's the price of wheat... UP 48% in 2010:
Chart: Wheat Up - 48%
And of course, sugar... UP 123% over the last five years:
Chart: Sugar Up - 123%
In fact the entire category of "food" is going through the roof as indicated by this "Food Price Index" chart... UP 23% in 2010 alone:
Chart: Food Up - 23%
Hopefully by now you see how serious the situation is... and how close we are to a real crisis... a food crisis... showing up on our doorstep very soon.
Of course some people simply don't believe all this is actually going to happen... or that it won't actually be that big of a deal...
I hope "they" are right.
But what I can't shake is how this hope vs. the facts reminds me of what is known in some circles as...
The "Outside Context Problem"
What is the "outside context problem"?
This is a new, unexpected event that is outside the context of a group of people's understanding. In other words, it's something they never even allowed themselves to consider... because "it" has never been an issue.
Right now, America is a country that is made up of several generations that have never really known food scarcity. Very few people in America have ever been truly hungry. And even those that have experienced hunger did so because of poverty, not because of lack of food supplies.
For the most part, the years of the dust bowl and Steinbeck's Grapes of Wrath have been largely forgotten.
So, because a food shortage has never been experienced, it's outside of the context of possibility for us.
However, just because something is outside our context, it does not mean it can't happen. It only means we are likely to be unprepared for it.
An example would be the Native Americans.
They were living here with no idea other nations existed around the world. Then, one day they see ships approaching... but again, they had no concept of "a ship," so there was no way to quantify the threat.
Of course, we all know how that ended.
So what do you do?
Well, you do what you can, starting with...
The Three-Part Crisis Plan Every Investor Should Consider Now: Protect, Preserve... Then Profit
There are basically three things you need to do in the face of any real crisis...
One is to protect yourself and those you care about most.
Two is to figure out the best way to preserve the assets you have already accumulated.
Three -- and this should only be considered once you have taken action to both protect and preserve what you already have -- you should be ready to profit from the situation.
Now, I know profiting from disaster or crisis may sound cold at first. But my job as researcher and analyst at Taipan is to find ways to help you both protect and to grow your money. And in many cases, crisis leads to opportunity.
However, it bears repeating -- you must protect and preserve first... then, and only then, should you look for ways to profit.
So let's look at this three-part crisis plan...
Crisis Solution Part One -- Protect
First, we need to protect ourselves and those we care about most. Believe me, I know how this sounds. But this is a very real scenario you need to allow yourself to consider.
Don't deny the facts right in front of you just because it has never happened here before.
Let's face it, there's no need to have a big fat retirement account if you and your family can't find food.
Fortunately, there are some pretty simple and straightforward ideas that could save you a lot of heartache and trouble when this food crisis hits.
I'd like to share some of those ideas in a report we've put together here at Taipan.
However, please understand, we are not survival experts -- our specialty is financial reporting, but we believe our research staff covered many of the most important things you need to know in this report.
The title of the report is: "Crisis Protection 101: Protecting Yourself During the Coming Food Crisis."

Crisis Solution Part Two -- Preserve
The next thing you need to do is preserve the assets you already have. The thought of U.S. dollars becoming less valuable is certainly a major concern.
After all, most of us in the U.S. have income that is denominated in dollars, our savings are in dollars, and, most importantly, our retirement and investment funds are in dollars.
If U.S. dollars become worth less (not necessarily worthless), it means that our purchasing power will decline -- we will be able to buy less "stuff" with the same amount of dollars.
But most people don't realize that there is a relatively easy solution.
Instead of owning dollars or traditional blue chip U.S. companies (which currently hold record amounts of U.S. dollars on their balance sheets) you can instead choose to own "stuff" -- the very same "stuff" that will become harder to purchase as the dollar becomes less valuable or should a major crisis break out.
The process is easier than it sounds.
My expectation is that at some point in the next several quarters, we will see a sharp decrease in the value of U.S. dollars -- and we at Taipan all agree we are already beginning to see the early stages of this move.
That's why it's a good idea to own financial instruments that are tied to the price of hard assets -- things that you can touch, feel, eat or use.
This will allow you to preserve the value of the assets you have worked so hard to attain.
While there are many ways to gain this kind of exposure in your investment or retirement account, the easiest approach is to own "hard-asset stocks" that are tied to particular commodities.
A few well selected hard-asset stocks should offer you tremendous pressure against inflation -- and help your investment account maintain a healthy value -- regardless of what the U.S. dollar does in the coming year or two... and regardless of how this crisis plays out...
Holding an assortment of hard-asset stocks is a great way to preserve the purchasing power of your long-term investment portfolio.
I've prepared a special report on what I believe are the three top hard-asset stocks for preserving your wealth as we move through the coming crisis. It's called "Crisis Preservation: Using the Physical Power of 'Hard Asset Stocks' to Preserve What's Yours."

Crisis Solution Part Three -- Profit
Finally, we need to look for areas to grow your money as this scenario unfolds. Whenever a crisis rears its ugly head, I assure you someone is going to make some money. It might as well be you.
As you've seen, one of the biggest problems is the amount of farmland available.
Fortunately for us as investors, technology can get more food out or every acre of arable land... and, in some cases, turn otherwise unusable land into arable land.
ar.a.ble -- adj. fit for or used for the growing of crops.
Because, land is useless if it doesn't produce food. And moving forward, it will be more and more necessary to produce more and more food from each acre of arable land.
I think this headline from an article may say it better than I ever could:
"Arable Land, the New Gold Rush"
If arable land is the new gold rush, then what you are about to discover is the latest in "gold" mining technology...
Hi-Tech in a Cornfield?
Hulking, 500-horsepower, self-steering tractors... citrus-picking robots... satellite-based plant scanning... iPads in a cornfield...
If you thought farming was just overalls and plaid shirts, then you might be surprised.
One of the ways companies are combating the food crisis is through technology. Farming is searching for hi-tech solutions -- solutions that will spread throughout this $134 billion industry.
And let's face it, wherever $134 billion is being thrown around, you can rest assured there are some serious opportunities for investors... because technology may be the only way left to save the planet from food shortages like those mentioned above.
That's why I believe you should consider...
Profiting With These
Three Hi-Tech Farming Solutions...
World-famous investor Jim Rogers sees the opportunity. Consider his quote from The Economist on the future growth and profitability of agriculture globally:
Ten years from now, it may be farmers who will drive the Lamborghinis and the stock brokers will drive tractors or taxis at best.
Even in this day of multibillion-dollar bailouts and stimulus packages, $134 billion is still a lot of money to be spread around.
Now, you could take the obvious route and buy a great tech company like Intel (INTC:NASDAQ), which is developing the atom processor that will drive many of the technologies behind the hi-tech solutions. And if you did, you'd probably do pretty well.
The thing is, I believe you could do better...
I have uncovered three companies that are actively using technology to increase crop yields, lower water usage and create more arable land.
That's why I've prepared a new report, called "Three Ways to Profit From the $134 Billion Hi-Tech Food Crisis Solution."
In the new report, I explain why I believe these three companies are in perfect position to provide solutions to the coming food crisis using technology.
It is my belief that technology may very well be the only way left to fix the problem. And if that is the case, then these companies and their investors could be rewarded.
However, let me remind you: Even if this technology stops the food crisis, all the other factors of population growth -- changing diets, bio-fuels, etc. -- will continue to allow for profits from this sector.
So, even if I am wrong about how bad the crisis gets, you will already be positioned for profit.
Well... that's the three-part food-crisis plan -- protect, preserve... then profit.
The next question is, how do you get started implementing this plan?
That's where Taipan Publishing Group's 22 years of experience comes into play...
As I mentioned at the beginning of this letter, each and every month we guide nearly 250,000 individuals through the markets.
We've helped people make money, and we've helped them protect their money.
People like Betty B., of Peoria, Ill., who recently told us:
I live on my Social Security... so wins like this are very significant to grow my little investment pot... A BIG thanks.
And Sally F. of Tulsa, Okl., who said:
Thanks for the BBI play. We made $1,500 in practically no time! This trade alone paid for my subscriptions.
Then there's Sheri F., from San Antonio, Tex. who said:
I followed your recommendation. I made a $6,315 profit after commissions.
As good as these letters and others like them make us feel, there is a real uneasiness in the office these days.
You see, we sincerely believe that folks who do not take the time to prepare for this coming crisis could lose everything.
That's why we've written this letter, and it's why we've prepared this Three-Part Crisis Plan.
However, this plan alone will only get you so far if you don't continue to monitor the situation very carefully.
That's why we'd like to give you the following three reports absolutely free when you give ourSafe Haven Investor research service a try.
The three reports you'll receive are...
  • Protect -- Crisis Protection 101: Protecting Yourself During the Coming Food Crisis.
  • Preserve -- Crisis Preservation: Using the Physical Power of "Hard Asset Stocks" to Preserve What's Yours.
  • Profit -- Three Ways to Profit From the $134 Billion Hi-Tech Food Crisis Solution!!!

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