plonkee money an english-er's thoughts on personal finance

August 12, 2008

stockpiling food as an investment?

Filed under: investment — Tags: , — plonkee @ 2:02 pm

Get Rich Slowly commentator shevy made the following comment on J.D.’s post about the best piece of financial advice:

Johnny asked: “What’s the best investment for someone who has only $1,000?” Mr. Tobias said, “Nonperishable consumer staples.”

That reminds me of a story Howard Ruff tells about attending a conference years ago with a number of noted hard money advisers.

He got up to speak in front of 800 people and asked,”Do you honestly believe that in a period of monetary collapse that you will be able to safely drive down to your supermarket in your gas-guzzling car, make a selection from a dazzling variety of goods on the shelf, pay them with your personal check, walk safely out the door to your car, drive home and put them in your dependable, electric-operated refrigerator?”

He said that was the first time he ever got an ovation for a question! (Then he was able to give his advice about storing a year’s worth of food.)

But if I had to choose the overall best piece of financial advice I’d probably go with “Pay yourself first.”

I think that survival preparedness is a very American thing. It feels like only Americans would suggest that you need to stockpile food in your house in case there’s, well I don’t know what because some people recommend storing a years worth of food. A year! The longest anyone’s been unable to access food in the United States is probably a week or so in the aftermath of Hurricane Katrina, and then I reckon that most of the food in people’s houses would have been waterlogged.

but what about emergencies?

I understand the natural emergencies are real. In the UK the most likely emergency is flooding as happened in the Gloucestershire and Herefordshire last year, or Carlisle a couple of years ago and, floods like these are likely to recur. But think about what actually happens in such an emergency. Flood water comes in to the ground floor of the house pretty quickly. People are evacuated within a day or so usually in rubber dinghies and taken somewhere else. The flooding subsides within a fortnight. You might not get back home for months and months, but you aren’t in any danger of starving to death.

There’s insurance, and then there’s unnecessary insurance. In an emergency, people need food, shelter, heat and water. It’s the last of these that there are probably the fewest supplies of. There’s little point in having enough food to survive a nuclear winter if you have no available water. Or you’ll be suffering from hypothermia within a few hours. I’m not a stockpiler because I tend to just eat the food when I can’t be bothered to go to the shops, but if you’re going to do it it’s worth being consistent. Personally, I think that more than a few days worth (maybe a week?) of stored food is overkill. We just don’t live in that kind of country.

or monetary collapse?

The countries that I know have suffered severe monetary collapse have been post-Soviet Russia (early 1990s), post-WWI Germany (early 1920s), Zimbabwe (current). In each case the moment of crisis was caused by a political event or revolution – the collapse of communism, the loss of the war and the abdication of the Kaiser, land reform leading to the loss of production of the major cash crop. These are places that did not have robust or developed economies to start off with.

On the other hand, a comparison that is more plausible is the Argentinian collapse of the early 21st century. This led to riots, savings accounts and local investments were wiped out. People didn’t starve though. Argentina is recovering. The best hedge would have been to have diversified investments outside your own country, not a year’s worth of food in the basement.

in reality…

In the end, I guess that if you’re living on the edge, stockpiling non-perishables is not an awful idea because there’s a possibility that you won’t have enough money to buy them in the near future. If you’re worried about a natural emergency, then maybe a few days to at most a weeks worth of food would be enough, and don’t forget about the other necessities. Alternatively, do what I do and decide that the probality of needing to use the stuff in an emergency is lower than the probability of:

  1. eating the stuff earlier because you’ve run out of food, or
  2.  forgetting about it, and letting it go mouldy

And pay yourself first is great financial advice.

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