Jeff Saut loves stuff. Chief investment strategist for Raymond James, Saut looks out over the coming years and he sees stuff getting expensive. Oil, land, water, crops ? you name it. If you can touch it, Saut likes it, and he probably has a good idea of how you can make money by investing in it.

The iconoclastic Saut spoke recently with HAI editors about the future of "stuff," and how investors can benefit from a stuff-driven portfolio.

HardAssetsInvestor.com (HAI): You've spoken at length about the strength of agricultural commodities. Is agriculture the only space that will perform well?

Jeff Saut (Saut): No, not at all. I think it's across the board. I think it's in everything [in the commodities space].

HAI: What could derail the commodities bull market?

Saut: Worldwide depression. Severe depression. That's about it as far as I am concerned.

HAI: What about valuations? Prices are up. Is there more run to run?

Saut: I'm not as concerned with the day-to-day: Whether soy beans are up or down today. I think the long-term trend is toward either stable or higher prices. I don't think wheat is going back to $1.50/bushel.

HAI: What about inflation? Inflation still registers very low on the CPI.

Saut: I think it's a joke. I've lived inside the Beltway [in Washington, D.C.], and I've got a great network on Capitol Hill. But when they report the CPI and the PPI, they don't even wink. We exclude food and energy from the core CPI. The Europeans think we're nuts. Energy has averaged over $50/barrel for three years. Isn't that long enough to include it?

Also, they rejiggered the entire way we figure the CPI reading. A few years back, they changed the weighting of the basket of good from arithmetic to geometric. If you go back to arithmetic, the CPI is notionally a lot higher.

HAI: So we are understating inflation?

Saut: The dollar index is down 30% over the past six years. Just on a right-brain basis, that implies inflation is probably running at 5% a year. My guess is that it is 5-6% a year.

One thing my dad taught me to do was to get the Wall Street Journal, turn to the commodities section and look at the stuff you use every day: eggs, butter, etc. These things are up 130, 150, 170 percent year-over-year. Anybody that goes to the supermarket knows that inflation is up more than one or two percent a year. It's just a matter of time until that bleeds over into the real economy, even if the government doesn't believe it.

HAI: And that doesn't even start with healthcare costs, college tuition?

Saut: Right. People that live in the real world know that inflation isn't 2% or 3% a year. It's higher. [With health care], what the government figures is what you pay out of pocket for insurance. But 90% of insurance pay is third-party pay, and they don't include that in the CPI. Academically, you can argue for that. But in the real world? Come on.

HAI: Where does that leave investors?

Saut: I think inflation is on the rise ? [and] interest rates are on the rise, and I think that puts the wind at the back of "stuff." And I have called it "stuff" and "stuff stocks" since October 2001, and it has been one hell of an investment theme.

HAI: Let's talk about different sectors of the market. You've been very vocal on the agricultural bull market. Is that still the case?

Saut: Manifestly, I believe that we are in the early stages of the greatest agricultural bull market in history. Even the government's understated inflation figures suggest this could be the case, as food inflation is rising at its fastest pace in 15 years. As these increased cash flows accrue to the farming complex, spending on farming equipment, irrigation gear, fertilizer, etc. should continue to rise.

I think it's the same thing driving crude oil. A lot of pundits think crude is going back down to $20/barrel, because the dynamics have been that way in the past. But it's always been a supply situation, not a demand situation. This time, I think it's different. This time, the backup in crude oil is driven by demand, not by supply constraints.

I think you'll see the same thing in agricultural commodities. As per capita incomes rise, not just in the U.S. but in countries like India and Pakistan, people consume more stuff. Not just oil and gas, but timber, water, base metals, etc. So as per capita incomes continue to rise, the demand for more meat and grains will rise as well.

HAI: How does a smart investor play this theme?

Saut: Well, China is not going to be able to produce enough food for their populace. Even if they had enough arable land, they don't have enough clean water. They're going to have to use their potable water for human consumption; you lose a huge amount of water when you grow crops. So I think production of that food will migrate to areas of the world with arable land with adequate water supplies, which is one of the reasons I'm un-relentingly bullish on areas like Brazil. If you have a long-enough timeframe, smart money is buying arable land in Brazil

The other point I often make is a question: Are the prices going up or is the measuring stick going down.

HAI: By which you mean?

Saut: Is the price of crude oil going up, or is the measuring stock ? the dollar ? going down. Are stocks going up, or is the measuring stick going down?

I'm a dollar bear, and have been for five years. I think we may get a throw-back rally on the dollar, but in the long-term, I think the dollar's going lower, because that's the only way we get out of the debt box this country has gotten itself into.