Alexis Creek is a 260,000 acre working ranch in the Chilcotin Valley. It is a modern operation with all new equipment, new buildings, a few luxury residences and a landing strip to name just a few amenities. It was recently sold for less than $100 an acre. The Templeton Financial Group (American mutual fund giant) bought the ranch for $23M. That’s a good deal.
The house we stayed in while in Vancouver last winter is a 22,000 square foot mansion set in the British Properties. It is all re-done, renovated, modernized, electrified and beautiful in a big box store kinda way. Unfurnished and lacking even a lawnmower it will, when the landscaping is done on the 3 acres of exceptionally expensive land, be listed for much the same amount as the Alexis Creek ranch. About $23M. THAT is not such a great deal. Not to me, anyway.
Setting aside the madness that is currently influencing our general sense of value, the message is clear: urban is good. Rural is bad. Urban land is valuable, rural is NOT. Never mind the 260,000 acres of land, disregard the ‘working ranch’ component, fuggedabout the ranchy-mansions and country-fancy that are located there, the unequal-in-every-way amount of rich-guy-fancy on 3 acres in Vancouver is deemed by the market as the same worth. Three acres of heavily taxed, sloping mud is equal to 260,000 acres of income-producing land! That’s a distorted comparison to my way of thinking.
Hell, there is so much timber on the ranch land that that likely amounts to something in the millions all by itself.
Back-tracking a sec: I referred above to general madness in our evaluations. Here’s why: I get a Honda mechanic to look at my fuel system on my outboard and I am $700.00 lighter. I can BUY a new, fancy, inverter-genset from Costco for less than that. I can buy a pair of jeans at Costco for the price of a cheeseburger. Two hours of flippin’ burgers at McDonalds will earn me enough to buy an ounce of pure silver. And an ugly-but-running vehicle is driven in to the scrapyard for $500….barely enough to pay for this month’s groceries.
The point: values are way out of whack right now. In some cases, like Alexis Creek and the West Van mansion, the values are way, way out of whack. Crazy.
Even the Costco genset (Champion) is an amazing bargain of sorts. Even if it doesn’t work as well as a Honda (and Champion is trying to make it do just that) the company had to make all the same parts, incur all the same expenses and market it to many of the same customers for a sum that is less than 25% of the Honda it was modeled after. Champion is made in China (owned by a California reg’d firm). Their genset had to be ‘shipped’, warehoused, distributed and sold too.
“What’s your point?”
When comparables are out of whack, disequilibrium results. Balance is thrown. Relativity suffers. Economies wobble. Things come undone.
Everything is related to everything else in a stable economy and so a pair of shoes is worth so many loaves of bread, so many hours of manual labour, so much gasoline. And that just hasn’t been true for some time. Our system of prices – previously somewhat relative to stable, collected perceived values – has been sent off the tracks.
It is a sign.
Here’s another. The Chinese Renminbi (their currency) has been, for the longest time, an internal-only currency. By keeping it in-country, China controlled it. And they did that to great economic advantage. They kept the Renminbi artificially low compared to the dollar and that gave them a huge trading advantage. We got a thriving Walmart, but they got a dynamic economy. And so everything ‘out of China’ was cheaper. That’s good for the local consumer, bad for the local economy.
That sign has been posted – but it took awhile to see it.
They also have the additional advantage of exceptionally cheap labour. They worked that to their advantage, too. And, finally, they benefited from the lack of rule of law (biggest guy wins) and lack of environmental laws. China has positioned itself to be a big influence. And we haven’t seen anything yet. So far, it has only been ‘positioning’.
The positioning is for a purpose. And the Renminbi is starting to flow OUTSIDE China (the BRIC countries, Iran and Africa). THAT is another sign. But what is the purpose?
So, back to the ranch…………why did Templeton buy it? There are lots of good, sound business reasons. Ranching. Climate change. Farming. Lumber. Good return on investment….who knows? But one of the reasons rumoured to be said by someone in the company was that, “We expect another major financial crisis within three years. This is a hedge against that.”
Safe, distant, food-producing landholding as a hedge against a financial crisis? Who woulda thunk such a thing outside of Idaho and Montana?
I, personally, am not a doomsday kind of guy. Getting all Mad Max on people is just too much trouble for most folks. And, anyway, most of the ugly-type preppers will be busy with the zombies so I do not see a lot of physical danger inherent with financial collapse (the zombies will be stopped in Idaho and Montana). A few fistfights over bottled water supplies in California and maybe at gas stations is about it.
But Templeton is smarter than me. Templeton is smarter than E.F. Hutton. When Templeton speaks, even E.F. Hutton listens. And Templeton just made a big statement in the Chilcotin on the economy. We should listen.