5 ms·

I honestly do not get it. How can you make any assumptions about an investment when you only consider prices then and now? I mean, this land has produced goods

by patall 10y ago

I honestly do not get it. How can you make any assumptions about an investment when you only consider prices then and now? I mean, this land has produced goods for a hundered years, why aren't those counted to the three times the investment itself has increased in price . This is true for other inverstments too, but still you have to include that in your calculation. An oil field is even worth less after you have extracted the oil, still it might have been a good investment.

ianai 10y ago
Thats the takeaway. People buy farmland for reasons other than property values since property values of farmland basically increase at inflation. It feels very humdrum.
- Animats 10y ago
  Farmland is a form of industrial capital. It's only worth what you can make with it. Since the prices of agricultural products are flat or declining (agricultural productivity has improved) and transportation gets better over time (so farm location matters less), that exerts downward pressure on farm prices. As population in developed countries levels out and starts to decline, overall property values should decline. That happens, but not in a helpful way. What seems to happen is that population concentrates more. This is very visible in Japan. Tokyo and Osaka are doing fine, while small towns are winding down as young people leave. It's true for parts of the US - Detroit, Cleveland, Youngstown - where the heavy industry left and nothing replaced it.
  - ianai 10y ago
    We are probably not the target audience.
  - patall 10y ago
    I disagree. While the price of agricultural product declines, the production increases. And because transportation gets better, the population change in the developed countries matters less as you get to serve the world market. Also, at least in europe, we get massive subventions that end up as an investment without risk. And also: population is not a good measure for the need of agricultural need. For example, the growing demand for meat in China is said to be of greater impact to the world market than the population increase.
tuna-piano 10y ago
This just in: Bonds are terrible investments. 30 year coupon-only bond has not increased in value in 30 years* *Not including the coupon payments
- MagnumOpus 10y ago
  I get your point, but a pedantic remark: The price of 30 year coupon-only bonds have increased by 30%+ in the last three years alone, because a constant coupon stream becomes more valuable if interest rates are lower. (The parallel to a rental real-estate investment is obvious.)
  - tuna-piano 10y ago
    I understand that point, but a real question. If you buy a 30 year coupon paying bond at $1 with a 5% yearly payment, won't it be a $1 bond in $30 years, regardless of whether it is $1.05 at year 28?

by patall 10y ago

ianai 10y ago

Thats the takeaway. People buy farmland for reasons other than property values since property values of farmland basically increase at inflation. It feels very humdrum.

Animats 10y ago
Farmland is a form of industrial capital. It's only worth what you can make with it. Since the prices of agricultural products are flat or declining (agricultural productivity has improved) and transportation gets better over time (so farm location matters less), that exerts downward pressure on farm prices. As population in developed countries levels out and starts to decline, overall property values should decline. That happens, but not in a helpful way. What seems to happen is that population concentrates more. This is very visible in Japan. Tokyo and Osaka are doing fine, while small towns are winding down as young people leave. It's true for parts of the US - Detroit, Cleveland, Youngstown - where the heavy industry left and nothing replaced it.
- ianai 10y ago
  We are probably not the target audience.
- patall 10y ago
  I disagree. While the price of agricultural product declines, the production increases. And because transportation gets better, the population change in the developed countries matters less as you get to serve the world market. Also, at least in europe, we get massive subventions that end up as an investment without risk. And also: population is not a good measure for the need of agricultural need. For example, the growing demand for meat in China is said to be of greater impact to the world market than the population increase.

tuna-piano 10y ago

This just in: Bonds are terrible investments. 30 year coupon-only bond has not increased in value in 30 years* *Not including the coupon payments

MagnumOpus 10y ago
I get your point, but a pedantic remark: The price of 30 year coupon-only bonds have increased by 30%+ in the last three years alone, because a constant coupon stream becomes more valuable if interest rates are lower. (The parallel to a rental real-estate investment is obvious.)
- tuna-piano 10y ago
  I understand that point, but a real question. If you buy a 30 year coupon paying bond at $1 with a 5% yearly payment, won't it be a $1 bond in $30 years, regardless of whether it is $1.05 at year 28?