Financial experts are shuddering as people call in to say that they are pulling their money out of their banks and putting it under their mattresses. The money media is now uttering the words “good investment” and “alpacas” in the same sentence. During the nine years that I have been raising alpacas, I have never felt so mainstream, so “normal”, so endorsed! I have always known alpacas were a great investment, but let’s face it, most people thought I was kinda nuts.

Within the last month, alpacas have been featured in the Wall Street Journal, on MSNBC, and in local media. These reporters are saying that alpacas are a sound investment, in part due to compounding. Investopedia describes compounding as the ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings. Alpacas reproduce most every year, with 1/2 of their cria being female. If one retains the female cria, those females will then produce offspring. This is considered “alpaca compounding”. Basically, your investment grows as your females have babies.

Why is investing in alpacas sound? First, they are insurable for full mortality and theft. So if your “investment” goes south (gets sick and dies), you don’t lose your investment. Second, prices on alpacas have remained steady for over twenty years, since alpacas first came into the U.S. in 1984. In October, one of the largest alpaca farms in the U.S., Magical Farms, held their annual auction. It was on a Saturday after one of the worst days the stock market has ever had. It was thought that if prices in the alpaca world were going to tank, this would be the time for them to do it. Interestingly, they did NOT. Yes, prices were down from last year. This reflects the economy as a whole. But prices still averaged around $24,000 per alpaca. See the results.

Even if prices were to drop, with alpaca compounding your investment is still growing.  Here’s a WORST case scenario from a potential price drop perspective: Let’s say you spent $20K on a female alpaca. Prices drop and she’s now worth $15K. She has a female cria that is worth $10K (in worst case lower priced scenario). Within a year, your investment of $20K has turned into $30K. And it’s insured.  Nice return.

Many alpaca industry experts predict that price dropping has hit a low, and now is a good time to take advantage of the lower prices and buy. Financial experts are advising alpaca breeders to hold their stock and not to sell at lower prices. And don’t forget those tax advantages for 2008.

November 5th, 2008 | Tags: Alpacas, economy, financial, investment, mainstream | Category: Business Matters, Farm Business | Subscribe to comments | Leave a comment | Trackback URL