In an uncertain world it is easy to become confused by the cross currents in the current global economy. The easiest illustration of that fact is the stock market in 2011.
In 2011 the best one word description for the stock market is volatility. We saw huge ups followed by severe downs and at the end of 2011 the stock market indices were remarkably close to where they started 12 months previous. In other words, there was a lot of activity for very little result.
No wonder investors are both confused and afraid about where they should put their money to work. As a result, the vast majority of investors are putting their money in treasury bills, treasury notes, and bank CDs. When you think about it, people are selecting financial instruments with rates of return less than the rate of inflation because they value access to their cash as more important than yield.
In a normal American economy there is approximately $2 trillion sitting on the sideline. The last number that I saw for the amount of cash on the sidelines is $9 trillion. So the fear and uncertainty in the economy today is worth approximately $7 trillion, or three and a half times more than the norm.
In the midst of all that confusion, let me give you facts that should guide your investment decisions:
- In 2011 demographers say that the world population reached 7 Billion;
- Those same demographers estimate that in 2050 the world population will be 9 Billion;
- In other words, over the next 40 years, world population will increase by 2 Billion people;
- Restated, in 40 years there will be 2 Billion more mouths that need to be fed, and those folks will need places to live, work, and play.
Every product we humans consume originates in land. As a result, the demand for land will increase significantly over the next 40 years because of the need to produce more food and fiber.
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