These troubled economic times create wonderful, investment opportunity. The corrections in the stock market and depressed real estate prices combined with global inflationary pressures are developing a lush field of investing values.
Yet investors looking for economic safety need to exercise care in how they harvest this financial crop.
Troubled times create distortions. Distortions create problems. Problems create opportunity. Opportunity creates economic safety and financial profit, if you look carefully for value and make sure your liquidity remains safe during the search.
This is one reason why Merri and I love Ecuador. The people are peace loving. The people are independant. Ecuador’s population have a history of caring for themselves. They know how to farm. The food supply is abundant. Ecuador is oil rich. Ecuadorians do not have the expectation that the government should supply their every want, need and desire. There is less likely to be violent civil unrest in troubled times.
Here in the Blue Ridge there is also a history and connection to independence. Heating and food is plentiful. People know how to survive tough times.
One great pleasure in our International Investment and Business Courses are the people we meet and friends made. People always enjoy each other. Merri and I do as well. Some delegates have been coming to our courses for decades, so we were delighted at our course last weekend when one delegate and good friend from North Dakota who has attended many times over the past 20 years was with us.
He told me a some things about North Dakota that started me quickly searching.
First, the Bank of North Dakota, located in Bismarck, ND, is the only state-owned bank in the nation. The bank has over $160 million in capital and is in partnership with over 100 other North Dakota financial institutions. More important because the bank is owned by the state, it has a credit rating of AA.
The main deposit base of the bank is the state itself. Sate law requires all state funds and funds of state institutions to be deposited there. However deposits are accepted from any source, including private citizens.
The bank is not a member of the Federal Depository Insurance Corporation. The State of North Dakota guarantees all deposits regardless of amount (over $100,0000) in the bank. So this is quite a safe place to hold liquid funds.
Do not expect free irons, dinner plates or special incentives to open accounts. Though individuals can open accounts at the bank, this is not the main business so it offers fewer retail services than most commercial banks. The bank only has one office and does not try to compete in consumer banking.
So, how good is the guarantee of the State of North Dakota?
According to an October 7 2008 article at KXMCTV in Minot, North Dakota, the
state has a pile of money. North Dakota is one of the few states with a budget surplus, estimated at a billion dollars.
The state also has some good economic fundamentals. First it is rich in agriculture, beef cattle, milk, hogs and honey producers rank North Dakota among the leading producers.
Wheat is the leading farm product in North Dakota, ranking second in production only behind Kansas. North Dakota grows more durum wheat (used for pasta) than any other state.
North Dakota also leads all other states in the production of barley and sunflower seeds and is a leader in the production of flaxseed (linseed oil).
North Dakota is among the leading states in the production of canola seed, honey, navy beans, oats, pinto beans, rye, soybeans and sugar beets.
Hay is important, grown for livestock feed.
That bodes well for the state in inflationary times…but there is more…energy.
Just beneath its surface North Dakota has a 1,000-year supply of coal. The third largest gasification plant in the world is here. This is the only commercial-scale coal gasification plant in the United States. North Dakota power plants have 4.5 gigawatts of electric generating capacity and are some of the most efficient and reliable in the nation. Energy, real estate costs and taxes are some of the lowest in the country.
Then there is oil. North Dakota has a lot of it. Brigham Exploration Company alone says discoveries suggest 42 million to 71 million barrels of oil.
Brigham shares sell on Nasdaq under the code BEXP.
North Dakota could become one of America’s leaders in energy production. The state has near limitless supply of coal, incredible potential for wind, ethanol and biodiesel production, and increasingly productive oil fields.
Congress has extended several renewable energy tax credits for wind and biodiesel projects, small ethanol and biodiesel producers that will help North Dakota’s economy.
North Dakota is the sixth-largest energy producing and exporting state and has more potential for renewable energy growth.
According to North Dakota’s Department of Energy’s Wind Energy Program, “North Dakota has the potential to supply 36% of the electricity of the lower 48 states through its wind supply alone.” Wind development in North Dakota is taking off, over the past year throughout the state.
North Dakota’s Senator Kent Conrad recently met with T. Boone Pickens as he has developed a New Energy Reform Act, which includes some of Picken’s ideas. The Pickens plan aims to reduce dependence on oil by increasing the amount of clean energy like wind power and solar power.
An ABC news article entitled, “The Backyard Economy: North Dakota
A Look at the Peace Garden State’s Economic Issues” by Christine Byun says:
“Surging commodity prices and a weaker dollar have enhanced North Dakota’s economic strength, leading to stronger growth and continued investment throughout the state.
‘The chances of a state recession are incredibly low,’ said David Flynn, an economist at the University of North Dakota. ‘The most likely scenario would be for North Dakota to continue to grow.’ State Fiscal Management Director Sheila Peterson said state revenues are 13 percent ahead of forecasts, which she partially attributes to ‘solid growth’ in the tourism, energy and agriculture sectors. The state’s bountiful crops play a big part of its exports; agricultural products pulled about $170 million into North Dakota in 2006. Last year, the state’s fertile farmlands produced the most wheat and barley in the nation, according to the United States Department of Agriculture.
“North Dakota is not solely dependent on agriculture. It also exports machinery and crude oil products. The energy industry — both oil and alternative sources — is expanding, according to state labor market analyst Kevin Iverson. The natural resources and mining sector added 4,000 jobs to their payrolls since last March.
“Oil is an absolutely booming industry in the state,” Iverson said, noting that the western portion of the state has benefited as companies direct their attention to the Bakken rock formation as a potential oil reservoir.
“The dollar’s declining value to foreign currencies has is also spurring economic activity in North Dakota. While the state sells almost half its exports to Canada, savvy shoppers from north of the border are crossing in to Grand Forks and Minot to take advantage of what are essentially reduced prices for them and in the process, driving up retail trade.
“A potential weak spot for North Dakota is the state’s lower than average unemployment rate. Economists worry with fewer people looking for work, companies interested in doing business in North Dakota could potentially bypass the state because of the tight labor market and lack of available workers.”
Bank of North Dakota’s website is www.banknd.com
There you have it…places that may be safer than most…places that may offer more opportunity and economic safety in troubled times.
Learn more about economic safety this November. Join Merri, me, Steve, Kjetil Haugan and Peter Conradsen of Jyske Global Asset Management in Cotacachi Ecuador. We’ll review economic conditions, Ecuador real estate, my entire portfolio and investing and business ideas for the months ahead.
Nov 7-9 2008 International Investing and Business Made EZ Ecuador
See the wonderful balconies in the Primavera condos at for sale at $46,000 in Cotacachi.
Nov 10-11 Imbabura Real Estate tour
Then travel to the coast. Enjoy the Vistazul swimming pool on Ecuador’s Pacific.
November 12-15, 2008 Ecuador Coastal Real Estate Tour; Quito Real Estate Tour