 | | The Daily Reckoning | Wednesday, June 15, 2011 |
- The Reserve is open again...and what a few readers have to say about it,
- US housing still in the dumps...where to send your money on vacation,
- Plus, Bill Bonner on Greece's present, America's future and some advice for dealing with Belarus...
|  | | | Securing a Lifetime of Wealth | | A Few Words from Your Fellow Reckoners on the Benefits of The Reserve | |  | | Joel Bowman |
Reporting from Buenos Aires, Argentina...
Before we get into today's regular reckoning, a quick - though very important - reminder is in order. As you're probably aware, we recently made available again our Lifetime Package: The Agora Financial Reserve. We seldom open the doors on this one, as membership is strictly limited to 1% of our total readership.
Usually around now, we send out invitations to our "long suffering" Fellow Reckoners, letting them know there are spots available and regaling them with the many benefits Reserve membership affords. This time, however, we're going to do it a little differently. Rather than rant on about the program ourselves, we're going to turn the floor over to some actual members, so you can hear directly from them what Reserve membership means. And so...
"I see that you are promoting membership to the Reserve," says one member who wrote in just yesterday. "Having been a member for 6 years now, I can confidently say that it is the best investment I have ever made.
"The range of services it gives me access to are 'top shelf' and the personal and economic development insights you provide are some of the most powerful (and valuable) sources of ideas I have.
"Please use this testimonial in any way possible to help others benefit from your priceless membership."
Writes another satisfied member, "Your analysts have made me lots of money by bringing me out of my investment comfort zone.
"My formerly white bread portfolio now includes companies with operations in Australia, Namibia, Poland, Russia, Tanzania, Africa, Mexico, Albania, Canada, China and Brazil, to name a few of the sound investment locales I've been introduced to through my Reserve membership. Thanks for the great service and insightful research."
Says a third, "The first year of my membership I made enough money from only 2 of the services in the Reserve to recover all moneys spent on my membership, get myself up to Vancouver for the July conference (which was and still is free with my membership), and bought a couple of ounces of gold to stick away for a rainy day.
"If you read and understand and execute the recommended trades...you make money. The Reserve price is more than fair when you consider the lifetime of benefits."
We're accepting new Reserve membership applications until tomorrow night, at midnight, when we'll shut it down again. There's a one-time fee, with a relatively modest annual maintenance charge of $149 to secure those benefits. And as the reader points out, it's for life. You can even pass it on to your heirs.
If you've thought about Reserve membership in the past, but were unsure as to whether or not it was "worth it," we suggest you lock in a spot now (while you still can) and give it a test drive. Sign up is fast and easy and all the information can be found right here. We hope you can take advantage of this opportunity.
And now, back to our regular programming. In today's feature column, guest editor, Suzan Haskins, gives us a front row lowdown on the goings on from International Living's "International Real Estate Investment Forum" in Toronto, Canada. See below for details...
| | | | |
| | The Daily Reckoning Presents | | Your Best Real Estate Investment is a Moat | |  | | Suzan Haskins |
Reporting from International Living's "International Real Estate Investment Forum" in Toronto, Canada
During recent flooding in the Midwest, an enterprising Arkansas man built a moat around his home and property to protect it from the floodwaters.
It worked. His house, possessions, and family remained safe.
Like that guy in Arkansas, says Ronan McMahon, Director of Pathfinder Real Estate, when it comes to our personal financial well-being, we need to think about safety - especially in today's stormy economic environment.
Ronan - who borrowed the term from Warren Buffett - applies this concept of "moat economics" to every investment he makes. He told us all about it here at the Investment Forum in Toronto. When you're buying real estate for investment, he says, look for moats - barriers to entry that keep the competition low and boost your potential for profit.
Ronan, an international real estate investment advisor, spends most of his time traveling around the world looking for the best real estate investment deals out there. One of his strategies is to follow the emerging middle class. That's why, despite falling home prices, he's not investing in the US these days. The US middle class is struggling. And there are other, bigger problems, too - with no solutions in sight.
But there are many other markets - far more attractive markets, both economically and physically - where we should be investing. Markets with moats. Fortunately, Ronan and his team have done the hard work. He and his top lieutenant, Margaret Summerfield, find projects with huge profit potential at an early stage...when capital is critical and developers are willing to extend massive discounts to investors.
The developer knows that Pathfinder can bring in a number of investors. And this gives Pathfinder a big negotiating advantage. The strength of their group buying power allows them to negotiate price reductions and terms that usually aren't available to the general public.
But Pathfinder won't work with just any real estate developer. They only pick those with a solid track record and who are on a solid path to profit. Projects with economic moats... in markets or situations where it is difficult for competitors to gain entry...and sales and margins are protected.
As Margaret explained, "We have great leverage - we don't work with every project out there, maybe only one in ten - in some projects we've sold 80% of their inventory so we have great leverage when it comes to pricing."
By my count, today at the International Real Estate Investment Forum we learned of a dozen opportunities with big ROI potential...some through capital appreciation, others through rental income, many with both.
Talk about building an economic moat - there's one around the entire country of Brazil. As Margaret explains:
We like the big picture in Brazil. Just look at these facts:
Brazil is energy-independent. Petrobras just announced another 350 million barrel find of high-quality crude, in a field that contains as much as 80 billion barrels of oil. Brazil is #12 in the world for oil production. Brazil is also one of the top ethanol producers, including sugarcane ethanol to fuel cars. Around 90% of new cars made in Brazil in 2010 were flex-fuel, able to run on any mix of gasoline or ethanol. Meanwhile, 80% of the country's electricity comes from renewable sources (mainly hydropower).
It's rich in mineral reserves...including iron ore, bauxite, tin and copper. It has huge reserves of fresh water...12% of the world's reserves, in fact. It has vast tracts of agricultural land...and 25% more untapped agricultural land than the entire crop acreage of the US. It produces 80% of the world's orange juice, and is the top soybean exporter.
Brazil's strong manufacturing sector produces cars, cement, electronics, steel, and petrochemicals, and commercial aircraft. Brazil even has a satellite-launching center.
Brazil's economy grew 7.5% in 2010. And that growing economy is growing the country's middle classes. An estimated 35 million people joined the middle class between 2003 and 2009. More than half the country's 190 million population now falls into the middle class bracket. By 2014, 20 million more Brazilians will become middle class.
Today, Brazil is the world's #5 market for computers, books and music...#4 for cars and refrigerators...#3 for cell phones, TVs, soft drinks and cosmetics...
In short, Brazil's new middle classes buy the same things we all buy when we have more money in our pockets. And that includes property...upgrading where we live to a better home in a nicer neighborhood, or buying a second home at the beach. Brazil's middle classes are driving Brazil's real estate market... So invest in the right projects in the right markets in Brazil and you could be sitting pretty indeed. Here is one to consider:
In a sweet little beach town with miles of white-sand beaches - just 30 minutes from Brazil's #1 domestic tourism destination - you can buy a beach lot in a residential community next to a new super-luxurious five-star resort. It's expected that lot prices will double in the next three years. Listen in to the conference recordings and learn how you can get a big discount (and a low price not available anywhere else) and become an owner here. And the terms Ronan and Margaret have negotiated: No money down and interest-free payments for just two years...
There were other deals in Brazil. I sat through two workshops this afternoon given by Brazilian real estate experts. They both brought four extraordinary deals with top-dollar profit potential.
Closer to home in Costa Rica, Margaret showcased three areas of the country that are overlooked and under-priced. One on the Pacific side, one on the Caribbean side and one in a lush, green tropical mountain lake area (think Lake Tahoe without the people). Lake- and jungle-view lots start at just $19,000 and can be financed over three years, interest-free.
Even if you're not quite ready to take the plunge into international real estate investing, the Hot Deals White Paper and the Forum Audio Kit provide an excellent means of sticking a toe in the water.
Details below...
Regards,
Suzan Haskins,
for The Daily Reckoning
P.S. As mentioned above, we're putting together a special Hot Deals White Paper with all the details of these two deals, as well as every special investment deal presented atInternational Living's "International Real Estate Investment Forum", including all the necessary contact info. Additionally, we are preparing an audio kit of the entire forum - and of course, you'll hear all the details of these deals and more when you listen in to your 2011 International Real Estate Investment Forum Audio Kit.
Reserve your Audio Kit today and you'll save $120 off the list price. We'll offer this low price until we have the recordings ready to deliver to you. At that point...we must charge the full price. Reserve your 2011 International Real Estate Investment Forum Audio Kit now. | | | | Bill Bonner | | The Likelihood of a US Default |  | | Bill Bonner |
Reckoning from Baltimore, Maryland...
After 6 straight weeks of losses, it looks like the US stock market is ready for a winning week. The Dow rose 123 points. Oil stayed below $100. But the yield on the 10-year T-note rose above 300 basis points.
And here's the latest from The Financial Times:
"S&P cuts Greece's rating one step closer to default."
Want to earn a nice yield on your money? Buy a Greek 10-year bond. It will pay you 17% interest. For a while.
But wait. You say you can't trust the Greeks? You say they're not good for the money?
"The Greek political landscape is ingrained with vested interests, endemic kleptocracy and bribery," writes John Sfakianakis, chief economist of Banque Saudi Fransi.
Unemployment is around 20%. People dodge taxes. Government workers don't show up for work. Households spend too much. And the government is going into debt so deeply and so rapidly it can't possibly get out.
Hey... It's just like the US! No, the US is worse, says Bill Gross. CNBC:
When adding in all of the money owed to cover future liabilities in entitlement programs the US is actually in worse financial shape than Greece and other debt-laden European countries, Pimco's Bill Gross told CNBC Monday. Much of the public focus is on the nation's public debt, which is $14.3 trillion. But that doesn't include money guaranteed for Medicare, Medicaid and Social Security, which comes to close to $50 trillion, according to government figures.
The government also is on the hook for other debts such as the programs related to the bailout of the financial system following the crisis of 2008 and 2009, government figures show.
Taken together, Gross puts the total at "nearly $100 trillion," that while perhaps a bit on the high side, places the country in a highly unenviable fiscal position that he said won't find a solution overnight.
"To think that we can reduce that within the space of a year or two is not a realistic assumption," Gross said in a live interview. "That's much more than Greece, that's much more than almost any other developed country. We've got a problem and we have to get after it quickly." How do you like that? He didn't even mention the fact that Americans can't sell their houses to Germans or turn their country into a retirement home for sun-deprived Scandinavians.
But wait, if the US debt situation is as bad or worse than Greece's, how come the yield on US 10-year notes isn't 17% too?
Therein may lay an even bigger opportunity. What if Mr. Market were making a mistake?
Everybody knows that Greece always defaults on its debt. It's been in default, one way or another, for about half of its life - ever since it gained independence in 1828.
But the USA? If you can't trust the US to pay up, who can you trust?
So, investors may feel secure lending money to the US...even though the fundamentals are little different from those of Greece. They may think: "the US never defaults."
And yet, if there's one thing we can learn from financial history it is that nobody is immune from financial errors. Everyone gets greedy and stupid from time to time. And no paper currency lives forever.
Right now, you can earn 17% on Greek debt or 3% or US debt. We'll make a prediction that you can take to the bank: that spread will narrow.
The inflation rate in America is a matter of debate. But even the US government's own number crunchers put it at about 5% for the first quarter of this year. That makes the real return on US 10-year notes a MINUS 2%.
How long will investors content themselves with a negative return? Maybe for a while. But not forever. They usually want a real return of about 3%, with no threat of default. A safe return, in other words.
And when they realize that the inflation rate in the US is really 5%...and that the return on US debt is NOT safe...they're going to want a higher interest yield.
Say 5%. Or 7%. Or 10%.
Then, all hell is going to break loose.
And more thoughts...
TIME Magazine has finally realized that the economy is not performing as advertised. "What Recovery?" asks its cover story.
Word's getting around. It's not a recovery. It's a Great Correction.
*** The government of Belarus wants the IMF to lend it some money.
We have a suggestion.
Your editor is actually a certified economic advisor to Belarus. He went there with a small group of economists in the early '90s, after being invited to give advice.
What a dreary and depressing country! We stayed at the best hotel in Minsk, a tattered high rise that looked like a welfare tenement in the Baltimore. But there was no running water in our room. So the manager moved us to a lower floor.
"The water sometimes has trouble getting to the 6th floor," he explained.
In our meeting with Belarus officials we found a language barrier that no interpreter could get over. We sat around a huge table. We looked at each other.
And what could we say? They were just coming out of the Soviet era. They had no idea what to do or how to do it. They didn't understand us. We didn't understand them.
"Liberalize and privatize," was our only advice. And, oh yes, get yourself a real currency. And some decent pumps.
"Forget it," was their response. Led by Mr. Lukashenko, the ex-Soviets stole everything they could get their hands on, cheated on elections, and put their opponents in jail...or killed them.
Of course, this is not a smart way to run an economy. So, the country remains as much a disaster area as it was before we got there.
Belarus got a $3.5 billion loan in 2009-2010. Now, they're back for more.
Our advice? Tell them to 'drop dead.'
*** What's that? You say the US will never default? Sooner or later, everybody defaults. Here's another news item:
Federal Reserve Chairman Ben Bernanke on Tuesday urged Republicans to support raising the nation's borrowing limit. He said threatening to block the increase to gain deeper federal spending cuts could backfire and worsen the economy.
The nation reached its $14.3 trillion borrowing limit in May. Treasury Secretary Timothy Geithner has said that the US could default on its debt if it doesn't raise the limit by Aug. 2. The debt limit is the amount the government can borrow to help finance its operations. Regards,
Bill Bonner
for The Daily Reckoning |
|
|
|
The Daily Reckoning U.S. Edition
Posts
