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The Best and The Worst Land In The United States

By Tom Dyson, publisher, The Palm Beach Letter
Friday, January 5, 2007

My friend Bo Keeley lives in the Mojave Desert in a place called Sand Valley. It’s a tough place.

Temperatures reach 120 degrees in the shade and, when it rains, the arroyos fill with water so fast, they regularly sweep away cars and prevent the locals from leaving their houses. There’s no water, electricity, gas, or food. Bo gets his water from the nearest town – Blythe, California – over an hour and half drive from Sand Valley. He uses solar panels to heat his water and power his lights.

Bo hauled a semi-trailer out there for shelter, but he actually lives underground, beneath the trailer, where it’s much cooler. On the first night Bo moved into his hutch, he observed a very strange light hovering above the desert. It was very bright and illuminated the desert floor for miles in every direction. Bo got scared. He packed an emergency survival bag and hiked out into the desert for the night.

He hadn’t realized it when he moved in, but Bo’s trailer sits on the fringe of a U.S. Air Force gunnery range. The eerie light was a flare. Only a dozen or so other people live within a 100-mile radius of Bo’s house. Bo says his neighbors are all crazy. You’d have to be to live in Sand Valley. One of his neighbors – a Vietnam vet – earns a living by collecting scrap copper from the shells and armaments he finds on the range.


I’ve been thinking about land prices recently... specifically Iowa farmland. I think Iowa farmland could be one of the best investments over the next quarter century.Anyway, I was talking to Bo recently. He told me he paid $500 an acre for his land five years ago. It’s probably worth $1,000 today.

Iowa farmland set record prices this year. The average price per acre is now more than $3,000 for the first time in history, according to an Iowa State University study.

Average Value of an Acre of Farmland In Iowa
1980
$2,066
1986
$787
1992
$1,249
1998
$1,801
2004
$2,629
Current
$3,204
Source: Iowa State University

But when I compare the price of Iowa farmland to what maybe the least desirable land in the United States – Sand Valley – Iowa farmland really doesn’t seem that expensive. And when I compare current prices to 1980 prices... same thing. It seems cheap.

I was playing golf yesterday in Jacksonville, Fla., with my friend Hal Masover, a stock and futures broker for a number of Iowa farmers. We got talking about the big flaw in the bio-fuel revolution.

Ethanol is big business these days. There are 106 ethanol plants operating in the United States today. Another 48 ethanol plants are under construction, and seven plants are undergoing expansion, according to the Renewable Fuels Association.

Same with biodiesel. There are 78 plants under construction or expansion, according to biodiesel.org. Hal says the industry is planning 2.2 billion gallons of annual capacity by early 2008. Current operational capacity is only 250 million. These plants all run on soybean oil.

“Almost all modern food has corn in it,” said Hal. “Meat is all corn fed. Sodas are made with corn syrup. We’re on a collision course. You’re taking cropland that’s used for food and using it for fuel.”

“One of my clients owns 600 acres, used for corn and beans,” he says. “He asked me for advice. I told him to expect an offer of $10,000 an acre within the next three years.”

It’s cheap, the rationale for higher prices is strong, and prices have already started moving higher...

Good investing,

Tom





Market Notes


CISCO SOARS IN THE NEW TELECOM RECOVERY

After breaking investors’ hearts for more than six years, networking giant Cisco is in the midst of an amazing bull run...

Cisco was a “one decision” stock in 1999... and that decision was BUY. Internet usage and telecommunication growth was forecasted to the moon and beyond. The growth didn’t get there in time... and Cisco fell almost 90% from its overvalued peak.

The stupendous demand for fast Internet connections and digital media is finally here. To support it, Google is spending about $700 million per quarter to buy additional servers and digital storage.

Nearly every stock related to “reaching out and touch someone” is hitting new highs daily. Cisco is up 60% in the last five months as networking orders pour in for Internet upgrades... and we’re in a full-blown media and telecom boom. Our colleague Porter Stansberry thinks it’s the biggest profit opportunity of 2007.




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