A New Take on Hard Asset Investing

Buying hard assets is all the rage.

Although in the case of gold, perhaps less than it was a few weeks ago.

Even so, with central banks printing money, investors are still worried that inflation will rear its head soon.

Hence the demand for gold, silver, property, artwork, land, and…um…cheese.

Is cheese really an investment? For some, it appears so. But it’s not the only tasty hard asset out there. There’s another that could be just as lucrative…and it won’t stink up your home…

Before we fill you in on the details, we should explain the cheese reference. This story from the UK Daily Mail reveals all:

Former milkmen will have a slice of their retirement savings rolled up in cheddar cheese as Cathedral City maker Dairy Crest attempts to solve its pensions pickle.

The dairy giant has agreed to offer £60 million worth — 20 million kilogrammes — of its maturing cheese stock as security for its pension fund as it battles to fill the holes in its final salary scheme.

At first it seems crazy — cheese in a pension fund. On reflection, it’s not so crazy. The idea isn’t that the fund pays out cheese to its members in lieu of a pension.

Instead, the idea is the pension fund holds a claim over the cheese assets and receives the proceeds when Dairy Crest sells the cheese in the future.

Cheese Beat Shares and Gold

But this isn’t the only case of pension funds using odd means to boost a pension fund gap. According to the Daily Mail, drinks firm Diageo has ‘deposited’ 2.5 million barrels of Scotch whisky into its pension fund.

And retailers Sainsbury’s and Marks & Spencer have used some of the companies’ property as security in their underfunded pension funds.

You can hardly blame the pension funds for turning to hard assets. With the recent trouble in Europe over governments defaulting or restructuring bonds, 20 million kilos of cheese seems a better bet than government debt.

And when you look at the track record of cheese over the past three years, you can see why the pension funds are happy to buy it.

According to the Chicago Mercantile Exchange, cheese block futures have risen from USD$1.42 in October 2009, to USD$1.88 today (the price peaked at $2.08 last October).

That’s a 32.4% gain. It’s not far behind the S&P 500’s 45.1% gain; slightly better than gold’s 31.7% gain; and nine-times better than the S&P/ASX 200’s 3.8% gain over the same period.

The only problem with cheese is that it’s well, a bit whiffy. The good news is there’s another tasty hard asset (actually, a liquid asset) that’s just as good as cheese. And luckily, it’s much more pleasing on the nose…

And Now for a Liquid Asset

We’re talking about wine.

According to data compiled by the world’s leading wine experts, an index of fine wine prices has gained 30.7% since October 2009.

That beats the blue-chip Australian stock index by eight times over the same period.

While past performance can’t guarantee future performance, it shows that investors are prepared to give more unconventional investments a go.

Saying that, over the past few weeks speculators have driven down the price of hard assets and commodities. You’ve seen that with the slump in gold and silver prices, and companies linked to those commodities — resources stocks.

So if you believe in the Investing 101 basic lesson of ‘buy low, sell high’, this could be the best time in five years to get your hands on hard (or liquid) assets.

Of course, like all investments, you can’t just buy anything and hope it will go up. If you buy a bottle of Jacob’s Creek chardonnay from your local bottle shop it probably won’t bag you a big return. That’s why it’s vital to find the wines that should increase in value the most.

Sound hard? Don’t worry; you don’t have to become a wine snob. Our old pal Nick Hubble has done a lot of the groundwork for you with this unusual asset class…

Raise a Glass to Fine Wine Returns

In his latest issue of the Money for Life Letter , Nick reveals the how, what, where, why and when of investing in the red and white liquid.

Like any investment, punting on wine is risky. Pick the wrong vintage or the wrong estate and it could leave you with an underperforming asset.

But then again, wine has something going for it that gold, shares and property don’t have. If it turns out to be a dud investment at least you can drown your sorrows by drinking a glass or two of the stuff.

Seriously, if you want to punt on an investment that did eight times better than the stock market over the past four-and-a-half years, then this is worth checking out. You can see Nick’s analysis, including the ins and outs of wine investing, here.


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Ed Note: There’s more to investing than stocks and gold. In today’s Money Morning Premium Notes , Kris reveals the top 10 reasons to invest in the growing wine investment market, plus he reveals the top drop that bagged investors a 920% gain between 1999 and 2009. Could today’s market give investors similar gains? Click here to upgrade now.

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