Investor Michael Burry is long farm land, according to an interview Burry did with Bloomberg television on September 7, 2010. Burry is one of several protagonists featured in best seller, The Big Short by Michael Lewis (published in March of this year) who had  the foresight to “short” the housing market prior to the onset of the subprime crisis by trading credit default swaps  in the bond market.

Simply put, a credit default swap is a proxy (or that is, a derivative play) for an insurance policy on a bundle of loans. Burry’s hedge fund, Scion Capital Group LLC, which he has since shut down, didn’t hold any loans or mortgages  but through certain complex financial credit default swap instruments, the fund could nevertheless purchase insurance on such loans and become a beneficiary for payout should such loans go bad. Needless to say, the value of such derivatives soared when loan defaults became systemic.

Because he had the foresight to spot what was perhaps the most lucrative investment vehicle of the decade, Burry has become an investment hero of sorts.  And apparently he has turned his keen investment eye to acquiring agricultural land. In the Bloomberg interview, Burry says, “I believe that agricultural land, productive agricultural land with water on site will be very valuable in the future, and I’ve put a good amount of money into that.”

When asked how much of his portfolio is in land, he said he did not want to disclose a figure but stated that “it’s a significant amount at this point.” Burry is still bearish on the housing market but thinks there are values out there. When asked if he would go long some housing stocks that have been crushed in the last couple of years, he replied, “I’d rather go long housing itself, real estate itself.” And he goes on to say that in the real market there are some pretty good deals.

Burry is not the only one to flag the investment potential in farmland. An Los Angeles Times article by P.J. Huffstutter dated September 19, 2010,“Investors seeing farmland as safer bet than stocks” says that more wealthy Americans, private funds,  and foreigners are putting money into agricultural producing land in California and throughout the U.S.  This sentiment was echoed by several real estate agents from  the California Central Valley area who say that sales of ag land offerings have picked up significantly.

It would stand to reason if farmland were to become the flagship investment in the real estate market recovery. Land with water sufficient to produce crops or orchards, or with grasses and habitat sufficient to support livestock has demonstrable value. On the other hand, taking a broader world view, increasing demand from emerging markets for agricultural products can result in large scale farmland acquisitions that can be exploitative as well as environmentally ruinous. But that will be the subject of another blog posting.