Sustainable Agriculture Advocate, Fund Manager Predicts Market Crash, Agriculture Downfall
Agriculture, like the stock market, is distorted -- distorted by interventionism. At least, that's what Mark Spitznagel thinks. He's the CIO of Universa Investments, a hedge fund with about $6 billion in assets. He's also a farmer, and a big proponent of sustainable, pasture-based agriculture. When he isn't executing exotic option trades, he's at Idyll Farms in Northport, Michigan, raising goats for cheese. While those activities may seem far removed, Spitznagel sees many parallels in both of his businesses.
Two coming crashes
In particular, he's expecting both to crash -- the market and the agricultural industry. Spitznagel is a big believer in Austrian Economics, an unorthodox school of thought that opposes much of the current economic establishment. In his new book, The Dao of Capital: Austrian Investing in a Distorted World, Spitznagel blames the Federal Reserve for the economy's problems, arguing that its persistent distortion of interest rates is the ultimate cause of economic calamity.
By meddling with market forces -- pushing interest rates down below their natural level -- Spitznagel believes the Fed has created an unsustainable economic boom, one that will inevitably result in a bust. Spitznagel expects the S&P 500 to fall by 40% sometime in the near-future -- and though that may sound like just another doomsday prophecy, he made a similar call in 2008, doubling his funds as the market collapsed.
Spitznagel sees parallels in agriculture, where interventionism has distorted natural processes. He doesn't blame the Fed, but rather excessive use of petrochemicals, monoculture farming, corn subsidies, and most notably, GMOs. Rather than work within the confines of nature, the current agricultural system distorts natural processes. As with the economy, these artificial techniques may work well in the near term; but in the long run, he thinks the outcome will be the same -- ruin.
Meddling with DNA
GMOs are created when scientists modify an organism's DNA. When it comes to food, the aim is generally to increase yield -- crops are modified to be more resistant to disease, drought, and pests. GMO-containing foods have been around for about 20 years, and proponents argue that they're just as safe as non-GMOs; Monsanto states on its website that there has been "no credible evidence to show harm to humans or animals."
But Spitznagel disagrees, instead telling me that "GMOs are going to be a slow disaster." GMOs, genetically modified foods, permeate the U.S. food supply. By some estimates, they're present in 75% to 80% of conventionally processed foods, though you'd mostly never know -- companies aren't required to label their products for GMO content.
A ballot initiative in Washington State would've required food manufacturers to do just that; unfortunately for its supporters, it failed to pass. But despite Spitznagel's hatred of GMOs, he's glad the ballot initiative failed. As a proponent of the free market, he doesn't want consumers to rely on the government for their food safety.
"GMO labeling represents more mandatory government intervention," Spitznagel said. "More bureaucratic power in our private lives. We rely on government for our safety, but end up ultimately less interested and less informed about what we eat. [Instead of labeling GMO-containing foods] we should stop subsidizing GMO production."
Indeed, one clear example is trans fats. Although researchers had been warning about the dangers of trans fats since at least 1994, the FDA is only now (almost 20 years later) moving to ban them. Consumers, believing the FDA had their back, may have mistakenly consumed trans fats for many years when they otherwise would've done their own research and looked out for themselves.
The problems of interventionism
As it is with the markets, so too, is it with agriculture. Despite attempts to engineer positive outcomes -- both with the economy and in agriculture -- the natural processes will reappear to exert themselves. The market, juiced by the Fed, will fall, while the agricultural industry, addicted to heavy-handed interventionism, will crumble.
Assuming Spitznagel is right, of course.
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