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Don’t Let Your Investments Burn – Wildfire Prevents Wildfire

May 2, 2017


Don’t Let Your Investments Burn – Wildfire Prevents Wildfire

Wildfire itself is the most effective treatment for reducing larger wildfires.

-Jan Van Wagtendonk, biologist, Yellowstone Field Station.

The sequoiadendron giganteum is the largest tree in the world.

Better known as a ‘giant sequoia’ these redwood trees can grow over 300 feet tall and can live for thousands of years. In fact, the oldest living sequoia sprouted in about 1,500 B.C.

Wildfire Prevents Wildfire - Don't Let Your Investments Burn

Source: NGM


One of the most amazing things about sequoias is how they start their life.

Just like any other tree, a seed must take hold in the earth. However, for the sequoia, seeds are released from a cone usually during exposures to fire.

Yes, you read that correctly. Fire helps these trees grow.

Wildfire Prevents Wildfire - Don't Let Your Investments Burn

Source: KVPR


If you think about it, this actually makes sense. A wildfire will burn away all of the competition, which will then give the sequoia seed less competition when it starts to grow. Additionally, the fire will clear out dead debris and provide new nutrients for the soil.

Now, that’s what’s supposed to happen in a natural setting…

Wildfires naturally occur from lightning strikes and they’ll usually burn as a ‘ground fire’ or ‘surface fire.’ That means that they burn relatively slowly with small flame lengths.

These types of fire are fueled by dead branches, pine needles, and other natural materials that cover the floor of a forest.

For giant sequoia trees, these fires are slow moving and don’t harm them at all.

Wildfire Prevents Wildfire - Don't Let Your Investments Burn

Source: Purch


But… there’s a problem…

We humans think we’re smarter than nature and for the last one hundred years we’ve actually been preventing these smaller fires.

This has been particularly true in the US, where wildfires have been quickly extinguished to protect homes due to urban sprawl and to ‘preserve’ natural habitats.

This results in a large buildup of natural material on the forest floor, which creates a disproportionate amount of fuel waiting to be consumed.

When you have a large amount of fuel on the ground, those ‘ground fires’ begin to produce huge flame lengths. Eventually, these flames reach the tops of trees.

This is called ‘crowning’ and that leads to an ‘aerial fire’ or ‘canopy fire.’

Wildfire Prevents Wildfire - Don't Let Your Investments Burn

Source: LA Times

You can see a ground fire on the lower right-hand side, then you can see what happens when the fire starts to crown in the center of the photo.


Essentially, instead of just the ground burning, you now have the entire forest burning top to bottom.

Once the entire forest begins to burn top to bottom, the heat being produced overwhelms everything. Even those sequoia trees that don’t mind the ground fire can’t stand up to a full on wall of destruction.

At this point, the situation is completely out of control.

Wildfire Prevents Wildfire - Don't Let Your Investments Burn

Source: PBC

The resulting damages from these types of fires are devastating. Not only are thousand-year-old trees burned, but an entire ecosystem can be flipped upside down.

And that’s not including the millions of taxpayer dollars used to fight these fires, the destruction of peoples’ homes, and the loss of life from those who can’t get out of the way.

This scenario is EXACTLY what is happening in our financial system.

Governments have imposed all kinds of policies to stimulate our economies.

For the short term, we may see times of prosperity and success, but we are just kicking the can down the road towards an enormous day of reckoning.

We are in the second longest bull market in modern financial history. Artificially suppressed interest rates, wealth creation through quantitative easing (QE), and a whole list of other ‘unnatural’ economic policies are just like preventing those small wildfires… eventually everything will backFIRE and get BURNED.

Now, I’m not suggesting that you crawl into your underground bunker and wait for the apocalypse… quite the opposite, actually.

The reality is that there are lots of locations throughout our world that have actually had these small ‘ground fires’ which has cleaned out a lot of the risk.

Take Latin America for example. I’m not going to tell you that all the countries South of the US are perfect… because they’ve got plenty of problems. But, when it comes to real estate, here is something to think about:

The average mortgage rates in Latin America are just over 1%… PER MONTH. That means that if you borrow money to buy real estate, you are paying well over 12% per year.

Because it’s so expensive to borrow money, most home buyers don’t leverage their purchases – they just buy real estate with cash.

And guess what that does to a real estate market?

#1 It makes real estate a lot CHEAPER, because buyers aren’t borrowing money at artificially suppressed rates.

#2 It makes the overall real estate market a lot SAFER in value terms because prices can’t be driven up from speculative buyers using borrowed money.

That’s why we’re going to Colombia in early June. To take advantage of under-valued real estate that yields real returns (well over 10%) and to check out agricultural investments that offer returns I can’t talk about here… you probably wouldn’t believe me.

If you missed out on signing up for the Colombia trip (or that part of the world just doesn’t interest you), don’t worry. I’m already working on several more investing adventures.