In today’s issue:

• Weekly Wisdom - Who even knows what is real anymore?

• Market Musings - The interesting divergence that breaks markets…

• Financial Hack - The primer on farmland investing…

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WISDOM

MARKET MUSINGS

Why the Volatility Split Matters

Let me flag something strange going on in the markets right now.

The bond market is flashing red. The stock market? It’s all smiles.

That’s not how things usually work.

Normally, when risk shows up, both markets get nervous—bonds and stocks. But right now, the MOVE Index, which tracks bond volatility, is running hot. It’s well above its 10-year average. That’s a sign that bond investors are jittery—about inflation, massive U.S. debt, and whether the Fed’s next move will spark something ugly.

But the VIX, which tracks stock volatility, is unusually low. Investors are treating equities like it’s smooth sailing from here.

That disconnect matters.

In past cycles—like 2006, or more recently in 2022—this kind of divergence didn’t last. Eventually, either the bond market chilled out or the stock market caught up (usually with a jolt).

Right now, bond investors are telling you they don’t trust the soft landing narrative. Stock investors seem to think everything is under control. Both can’t be right.

So what should you do?

Here’s how I’m thinking about it:

Stay Short on Duration – I like short-term, high-quality bonds right now. They still yield decently, and they aren’t as exposed to sudden rate shocks.

Shift Equity Exposure to Low-Vol Names – If equity volatility spikes, you’ll be glad to own things like SPLV, XLU, or even utilities and staples.

Own a Hedge – With the VIX this cheap, you can buy puts or VIX-related ETFs for relatively low cost. If equity markets wake up to bond market reality, that hedge could move fast.

No one knows how this plays out, but I wouldn’t bet on this gap staying open for long. And when it closes, I want to be on the side that’s prepared.

Hope this helps you think through your next move.

INVESTMENT OPPORTUNITY

Why the Rich Are Quietly Buying Farmland (And Maybe You Should Too)

A friend of mine, James, called me recently.

He’d just returned from a posh weekend in Montana. Private ranches, big family estates, and a lot of old money, you know? But the one that truly bowled him over? The conversation at dinner was not stocks or crypto.

It was farmland.

“Is that where all these rich people are seriously putting that money?” he asked me.

I told him, "Yes. And they’ve been doing it for decades.”

Why They Like Farmland

Farmland is steady. It’s not going to pinball up and down the way the shares of tech companies do. It does not matter who wins the next election. And it doesn’t disappear like a failed startup does.

It quietly makes food, is all. And this workhorse investment vehicle has delivered annual returns averaging around 10–12% for more than 30 years — with a lot less volatility than the stock market.

Even in 2024, which saw slightly lower returns, farmland remained a relatively strong asset relative to other investments. For the first time, the NCREIF Farmland Index recorded a small negative return, of approximately -1%, largely due to underperformance in some fruit crops. But rental income remained strong. (Buying opportunity?)

It’s Real, It’s Boring, and That’s Great

It’s not supposed to be exciting to own farmland.

Someone pays more for something, then someone else does, too. When prices rise, food prices generally rise, too.

As markets tumble, farmland tends to hold its ground.

And it provides income — about 3 — 5 % annually just from renting it out.

No renters to chase. No broken toilets. No apps to update.

You also get:

✅ Tax breaks: depreciation, 1031 exchanges that can be used to delay paying taxes and even deductions for equipment.

✅ Government aid: USDA programs, state tax credits and money for going organic.

✅ Net added value: carbon credits, water rights and the fact that good farmland is finite.

How the Deals Work

And you don’t necessarily have to farm it either. The vast majority of landowners, of course, rent to experienced farmers.

Cash Rent: The farmer leases land from you for a certain amount per acre. You have a steady source of income no matter what.

Crop Share: You get a piece of the crop and the expenses. In good years, you both win.

Hybrid: A base rent supplemented by a bonus if the farm is more profitable.

These deals spell out who pays for what — say seed, fertilizer or repairing irrigation. Long leases can also come with payback plans if someone invests in a major improvement.

You Don’t Need Millions

This used to be only for the high rollers. Now anyone can join in.

REITs allow you to invest through the stock market.

You can own a slice through private funds and crowdfunding platforms.

Or, if you are of a mind to exert full control (and don’t object to a bit of work), you can buy a farm all to yourself.

What Could Go Wrong?

Sure, there are risks:

Bad weather or bad markets.

A farmer who doesn’t perform.

That’s why it’s so useful to spread your bets — across regions, crops and people.

For many investors, it’s simply a matter of using REITs or a fund and asking the pros to take care of it all.

What I Told James

I pointed out to him, ‘You don’t buy farmland to get rich quick. You are buying it to protect what you have earned.”

It’s steady. It’s useful. It’s a need, always, for people.

And that’s why the richest people are discreetly stacking acres as everybody else scrolls Twitter.

If that is the kind of move you would make, then you are ahead of the curve already.

Talk soon,

The Shrewd Investor Team

P.S. If you’d like us to break down your portfolio or ask a question, submit yours here: https://shrewdinvestor.com/roastme

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The content provided in this newsletter is for informational purposes only and should not be considered as specific advice for any specific individual. The information is prepared by knowledgeable individuals and is not written by certified tax professionals or investment advisors. For personalized advice tailored to your unique financial situation, consult with a qualified tax professional, financial advisor, or attorney.

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