Bubbles, Bubbles Etc.

[swissie]

There is a lot of talk about the R/E price increases in Thailand that are taking place.

If it were to be, I have seen a few other "Bubbles" in my lifetime. Ranging from stockmarkets, silver, soybeans, copper = you name it.

As soon as a widely tradeded good increases in price more than other goods in the same basket, speculaton starts (regardless of the reason it started to "outperform" the rest of the "Basket") After the initial kickoff, the game is to sell the basically overpriced item to someone that is convinced, that the object can be sold to someone that believes it can still be sold at a higher price to someone that believes it can be sold again to someone at a higher price, that believes it can again be sold to someone at a higher price. Etc. etc................................................

And, at some point, the music stops. As it always happens, all of sudden there are only sellers left and few buyers. No Harvard-Professor is able to foresee when this will happen, But nevertheless, when it happens, it happens with breathtaking speed, unfortunately hard to put in any sort of future time-frame.

But as far as R/E prices in rural Thailand is concerned, I am fairly at ease. Of course, every rice-farmer expects that in the near future a major shopping-mall will open next to him.. But, chances are, that this will not happen must be around 99 %.

After that, as far as land-prices are concerned, it will be back to "how much rice can I get from this land". This was the "measuring-stick" for the last 500 years, and it will be in effect again as far as land values are concerned and the hype is gone. The hype is gone in the US, R/E prices are 50 to 70 % below 2007/2008 levels.

Cheers.

[mccw]

Your saying land in the sticks still = a fair crop return or not?

What % on investment does that work out at?

[swissie]

Your saying land in the sticks still = a fair crop return or not?

What % on investment does that work out at?

There are no rules written in stone concerning this. But, and only as a guideline: If the interest is 2 % for parking money in the Bank, the return for actually working a business should be at least be 3 times that (= 6%). But even if it were arond 10 %, the temptation to sell land becomes overwhelming, if today a price is beeing offered that would already incorporate a annual yield of 10% for, lets say, the next 10 years. Most people would consider sellig today. This is a bit of what's happening currently. For better or worse for the seller or buyer? Only the future will tell who has lost or won in this game.

Cheers.

[cheeryble]

I think your comparison of say rice returns is perhaps valid and compares to value investing in the stock market.

However I don't think you can say "it should be 3x what you I get in the bank". Who said so, God? It's not how it's historically been I don't think. Rather a valid measure might be "My net return is X% on land valuation if I have someone run my harvest."

I believe this figure has always been low....hate to quote figures but I'm sure my wife has spoken of the returns on rice land they own and have contract farmers harvest.....and it's been nowhere near the 6% you mention.

Someone more knowledgeable might hone this a bit.

[Khun Jean]

It is all about inflation.

In th elong run the rest is just small numbers.

If you get 2% from a bank and inflation is 5% (nowadays it is higher) you loose value every single day.

Food prices normally follow inflation so having land that produces would at least stay the same value.

With crops it is more how much there is available on the market, lots of rice, lower prices. Pretty easy.

If you see everyone starting rubber tree businesses and chopping down their palm, you can bet that palm will go up in value and rubber down.

My bet for the future would be to use the least amount of fertilizer and oil (tractors and stuff) as possible because those are the main cost, maybe aquaponics or permaculture. This produces a lot when mature and needs little work. Solid earnings, but patience is needed. Scales very well.

[mccw]

Any links about perma culture?