2010; a new year, a new start. But in some ways, we have been here before.

This is not the first time we have experienced a recession, and as tends to happen, governments spend their way out of them. New infrastructure projects, more public sector jobs, and that now oh so familiar phrase, Quantitative Easing, or QE. In other words, the government is flooding the markets with money to stimulate action.

Although deflation has been an equally used buzzword in 2009, as the lack of demand has in some instances had a downward effect on pricing, the smart discussions revolve around inflation, the natural consequence of “too much money chasing too few goods”. Inflation, that by-gone concept of the 1970s! In fact inflation is all around us, with a particularly constant pressure on currency over the years. How many remember when a chocolate bar was 10p?

Although there is a split between forecasters, significant evidence points toward a higher inflationary period and an increasingly weak Sterling/Dollar fuelled by unprecedented government debt. Current house price rises, driven by a lack of available supply are likely to be short-lived rather than upward demand (as sellers wait for prices to go back to “break even” levels) , as the resultant supply increase will outpace demand does increase through higher interest rates. The stock market is having one of its roughest periods on record. Therefore, where can investors look for not only safety, but also results?

In volatile times coupled with vulnerable and weakening currency values, tradable hard assets become investments of choice. The likes of gold, silver, farmland, wine and stamps have proven to retain value in tough times as the measurement and value of cash becomes uncertain. Regardless of the measurement of exchange, or currency, these products show value and become excellent locations to park and secure wealth whilst the world begins anew.

Throughout January and indeed 2010, we will explore inflation hedges in more depth, with the next blog giving investors a comparison of the available options. There are some cracking opportunities even in these times, so I look forward to welcoming you back for another instalment in the next few days.

Since the commodities boom of 2007, investors have increasingly come to realise the underlying benefits of investing in farms. An often misunderstood sector largely due to an unbalanced media view point, this article hopes to redress the balance and inform

In the current climate and to help educate, below are the top 10 reasons to invest in UK Farms:

No over-supply, robust local demand

It has been said many times regarding land, and it is as true today as it ever was, they are not making anymore of it. On top of this, less and less parcels each year are coming onto the market to be sold. According to Reed Business Information’s The Farmland Market Report, there is a huge dearth of land for sale and the volume of sales has been on a steep decline since in 1950. 1 million acres were traded then compared with around 100,000 in 2008; only 10% of the previous high. This is mainly down to the fact that there are many more landowners now than 60 years ago and most do not look to sell unless absolutely essential.

As a result oversupply issues that have hit the commercial and residential property markets are highly unlikely to effect the farmland market. In fact, evidence from experts shows that farm prices remain stable in this and previous recessions and are going up slightly compared to residential property.

As for demand, levels remain strong from local farmers, who are always interested in local businesses as they tend to be “once in a lifetime” opportunities to buy. The only drop has been from lifestyle buyers, who make up a much smaller percentage of the overall market.

Excellent defensive investment against inflation

It is widely regarded that higher inflationary times are around the corner given the extraordinary levels of global government spending combined with the rare sight of extremely low interest rates at the base of a recession. The value of currency has always been eroded by inflation and the next few years may see this increase. There is much talk of a global currency in the future if fiat currencies continue to decline in value. Therefore, the smart investors are looking for tradable assets which can retain their value in more volatile times. UK Farms, and in particular the primeland that they sit on, present such an opportunity to investors.

Tax/pension benefits

Depending on the type of vehicle used, a number of tax reliefs are available to investors, such as Inheritance Tax relief. It is also worth noting that in many cases, farmed land qualifies for SIPP and SASS, the popular UK pension schemes.

The UK presents an extremely secure environment

Due to the UK’s property and land laws, the country is considered one of the safest environments to invest in globally. Although returns may be higher in emerging markets, those investments quite often carry a very high degree of risk.

Undervalued due to weak Sterling

Not only is the UK secure, but its prime farmland can be considered undervalued. The first of these reasons is down to the currency movements. Sterling has declined sharply over the last 18 months, which effectively means the country has a “30% off” sale sign over it. International investors who buy now will have the benefit of profiting from any reverse currency movements as the economy improves.

Buy at 70%, re-mortgage at 100% of the valuation

The second reason for the argument of value is that farms can be picked up in the UK at around 70% of their valued price. This presents not only a capital gain opportunity but also presents a liquidity opportunity. Banks will lend at 100% of the valuation which means an equity release is entirely possible.

8-15% yields achievable

Depending on the project, 8% yields are achievable in the UK; with leaseback deals buying at 60% LTV, the yields are as much as 15.9% based on a project available right now. Compared to the options available in the UK ie. Bank deposits 1%, volatile stock market, property yields dropping below 5%, income is a particularly pleasant current upside for investors.

Buyback option can provide extra investor security

One facet of investment that is always of concern is the exit strategy. If a lease agreement is in place, investors can have extra security that the tenant farmer will buy the farm back at an agreed price level 2,5 or 10 years into the future. If they cannot, this would trigger an event of default, which raises the next benefit of farm investments.

Strong evidence shows farms sell quickly

Again, mainly due to the lack of supply in the marketplace, farms and farmland usually takes 3 months to sell from agent instruction. If you are investing through the right companies, there should be an all-in-one solution available in terms of managing and selling the farm, either by choice or in event of default.

Investment period as little as 18 months

If the farm has been purchased and leased back to the farmer, the investment period can be as short as 18 months. Therefore tie up of capital is the same period unless you are able ot release equity and also allows for potential capital gain opportunities.

Therefore there is a lot to like about farming and agriculture from an investment point of view, particularly in today’s market.

We’ve all heard the term “short term investments for long term gain” over the years, and particularly within the money markets. Often investors are attracted by the ability to reap their returns in shorter space of time, although in almost every case the risks are greater. Typically minerals such as gold and silver would feature popularly due to their rapid nature of rate changes, thus once the price had been deemed to hit a ‘low’ it would be worth a gamble to invest and hope for the rise.

In finance terms a short term investment can be anything up to as much as ten years, although in more recent times it is referred to as a significantly shorter period, particularly when related to property. Alternative investment opportunities are now becoming more prominent in today’s marketplace too and can contain some very left field subject matter.

Whilst it is difficult to assess which ones are right & wrong, like everything an investment is just that, risk is always involved no matter how solid the security. Take the Ambulance Trading opportunity for example. It provides 10% return in just 90 days, is recession-proof and impeccably secure which is virtually unheard of. The response to the scheme was understandably phenomenal and the take-up was certainly encouraging, although a fair percentage chose not to proceed due to what small risks remained, choosing to wait until 3-4 months down the line. These people will have missed the boat when the door closes but that’s the beauty of this type of opportunity – you snooze you lose!

But are these types of short term investments right for everyone?  I think a better way to address that question is to instead ask what type of investors might be attracted to these kind of opportunities and why? Firstly I would look at time sensitive factors, in particularly the current economic climate. Take bonds for example & their all time low prize funds. They have now introduced a new £25 minimum prize, thus structuring it so you’re likely to win less but more often – not good enough for many. Take looming redundancies in the financial sectors. Many individuals with high levels of savings can live off the short term returns whilst they reassess their futures. Also take those with the funds to purchase property but are reluctant to do so. These opportunities provide them with a means of watching their money grow whilst they wait for the right time to buy.

With this in mind, from a business perspective it’s great to have a successful & proven short term product to offer, but the fact of the matter is that they are not right for everyone at any given time. Therefore it’s wise to diversify and bring to market a short range of products with varying lengths and genres – something Discover And Invest will endeavour to pursue during the oncoming quarter.

So firstly Happy New Year to everyone!  I know many people will be pleased to see the back of 2008, but what lies ahead for us in 2009?  More of the same or some interesting opportunities?

To many it is likely to another year of pure survival, that’s for sure.  Projections for further retail closures, particularly in January (the favoured month for administrators with little stock left), are not looking good.  Property prices are predicted to continue falling, and in my opinion as much as 20% next year.  All sounds very doom and gloom I know…

…however, there are opportunities, and the types of opportunities that exist are for the very reasons most of us need them..quick income.  It would difficult to find someone this year who isn’t looking for quick and stable income generation from another source other than work, whether it be to cover mortgage costs, a certain standard of living, or merely to make ends meet.

There are a number of options we will be bringing to the table in 2009, continuing with our successful ambulance trading project, where the first investors have received their returns.  Any sector backed with government contracts is largely recession proof, and in the next week we will be providing evidence of how the deal has worked from a numbers point of view, with testimonials to boot.  Other sectors we will be active in are renewable energy , which will be discussed in the next month or two, and, strangely enough property, which we will discuss now.

It is many a savvy investor’s belief that property is starting to show value again.  With yields up around the 8-9% mark and interest rates at 6.75% approx. for mortgages, there is a positive cashflow to be had if the right deal can be found.  On top of this, large discounts can be secured to ensure you are covered should the market fall further.  As mentioned earlier I believe a further 20% could be eroded, which means you should look for a 25-30% discount on property valuations.  Add in some tenant insurance and you have a property investment protected against loss of income, loss of equity and generating income on a monthly basis straight away.  The only major downside is a much higher level of deposit, but it ultimately reflects a more secure payment against the purchase and a lower amount to pay back on mortgage.  Remember this is the very factor that has caught so many out on 100% mortgages..!

So discounted, income generating properties are a strong bet for 2009…stay tuned as over the next few weeks we will be bringing to market such deals that match the criteria set.

Imagine a scenario whereby this time last year you are given a fictional, say, £500,000 and the question was asked of you just where you would look to invest it to make it grow. At the time I think I would personally have looked towards splitting it between a number of ‘emerging’ destinations such as Egypt, Romania, Belize, Argentina & the Philippines to name but a few options. Either way, it would have all found its way towards the property sector, perhaps diversifying into land, particularly in the case of Argentina.

Imagine also if the same question was asked of me six months ago. Uncertainty had begun to creep into the property industry, plus an increasing amount of agents threw everything at marketing to scrap for the reducing amount of enquiries out there. One this is for sure, my answer would have been different. Whilst I still might have looked towards the Central & South American destinations for a portion of this amount the remainder would have gone straight to the investment banks. It would have made sense. My money would always be safe with the investment banks, right?

So we return to the present time and I am still sat here with my (albeit fictional) half a million, and I am quite frankly panicking. Only a tenth of this would be protected by the government which would stand me to lose a lot of money if the markets continued their collapse. So my choices would be to move it abroad perhaps? But is there the need when it can willingly remain here? There are options.

There are always ideas that thrive in times of recession and in this particular scenario the prudent thing to do would be to seek securely package alternative investment products of which Discover And Invest has two such schemes, one long term one short. Investments secured by assets are few and far between, but if sought are worth looking towards – just make sure the provider can answer every question and detail regarding timescale and security. Surely if this can be achieved it is best to watch your money grow than be left within an institution in freefall?