Positioning for a Food Riots Economy

by: Kevin McElroy

On Monday I wrote something that caused my coworkers to look at me even more sideways than usual.

I said, “I think we can expect the words “food riot” to enter the American lexicon sometime in the next 18 months, and I don’t say that flippantly.”

Just to be clear, “lexicon” is a fancy word that means vocabulary – and “food riot” is a phrase that refers to a group of angry, hungry, violent people who destroy property because they feel (among other things) that food prices are too high. And yes, to answer any questions from the peanut gallery in my office, I do believe we’ll see food riots in these United States of America sometime in the next year and a half.

I’m belaboring this point because I want to be crystal clear with this prediction, not because I especially like making predictions. Quite the opposite, actually – I detest making predictions because it’s so easy to be wrong on the scope, specifics, time-frame, location, etc. In that vein, if I am wrong about this prediction, it will probably be a matter of my timing rather than anything else.

But where am I getting these crazy ideas? Let’s take a look at an interesting chart from the folks over at shtfplan.com:

This chart shows us that food stamp participation has risen sharply – with no signs of slowing since early 2008. Currently, over 42 million Americans rely on food stamps – or 1/7th of the entire population. Okay, so the very fact that more people are on food stamps isn’t cause for alarm. But what it means is that 14% of people in the United States already can’t afford to feed themselves – and that number is rising. I don’t know what number of people it would take to break the camel’s back. The number already seems ludicrously high.

The other side of the coin is that food prices are rising too – for three simple reasons:

  • The first reason is just plain old bad luck. Bad weather around the world, including heat waves in Russia last summer and flooding in Australia right now, continues to put a crimp in global food stocks.
  • The second reason is sustained levels of higher energy prices. Oil is a vital input to most food production in the developed world. Higher oil prices necessitate higher food prices.
  • The third is a global currency devaluation race. Trillions of newly minted dollars will increasingly find themselves competing with trillions of yuan, yen, euros, etc. to buy an already diminished supply of food.

Perhaps the most common response to these facts is to say something like, “wow that’s scary!” But fear is something that children feel when they don’t know how to deal with a situation, or they don’t understand something.

I’m a grown man and for that reason, I don’t fear these trends. I am preparing myself and my family for the likelihood that these trends will continue down the same inevitable path. You won’t see me in a food riot, because I’ve been positioning my portfolio for survival and maybe even profit during the times to come.

Don’t wait for the Government to start talking about this problem. By then, it will be far too late. Start protecting yourself today, if you haven’t already. Here’s what I’m doing:

I regularly buy physical gold and silver. I’ve stopped paying much attention to the price, though I do try to buy on dips if at all possible. (Both are in a dip right now!)

I’ve been buying durable food goods like rice, beans, pasta, flour, salt, etc. It’s impossible to buy “enough” of this stuff, but a 6 month supply isn’t too difficult to amass. I recently bought a bunch of different fruit and vegetable seeds. We don’t have much of a yard, but seeds are cheap and if stored correctly they remain viable for a while.

I also own shares of blue chip companies that will probably continue to be profitable no matter what happens. I'm continuing to buy shares of precious metal miners, oil exploration companies, and other commodity-based securities.

You’ll notice that none of these things is really “crazy” to own, even in boom times. In the event that I’m 100% wrong, and everything’s going to be A-okay-terrific, I can use or sell all of these different assets, and probably not take too much of a bath.

Disclosure: No positions at time of publication