Monday, August 31, 2009
Domains have been registered for $35 and then sold for millions! Flipping this real estate pays!
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Friday, August 28, 2009
The Commercial Real Estate Market is headed over a cliff and it will drag another industry over with it!
Image by Thomas Hawk via Flickr
If you think investing in Commercial Real Estate in the form of a REIT (Real Estate Investment Trust) is still a good investment, once again, you are not paying attention. This is the market that could and, most likely will, spark a stock market crash in 2010 (Maybe sooner). Here's why!
Commercial buildings, office buildings, Malls and the like, are the lifeblood of the REIT market. Even before the advent of REITs, investing in commercial real estate brought investors and speculators fortunes. Mostly those investors were already rich or well to do because the average retail investor could not afford to be in this market. REIT's changed all that as they began to trade on the markets much like stocks. During the great depression, a number of distraught investors actually jumped from the same buildings they had invested in. Hopefully that won't happen next year, at least, not to you.
If you are invested in a REIT or similar commercial real estate company, there are some things you need to understand, and you need that information now, before things start to unravel even more than they did earlier this year. Yes, I know that, many pundits are very bullish on this market but as Warren Buffett has put it, "you pay a high price for a cheery consensus".
Now, don't take just my word, or anyone's word for it. Look around you! The last time you went to a mall, how many stores were closed, or closing? Indeed, how many malls are still surviving? Over 200 malls in the United States were abandoned this year alone. Now think back to the last few times you went into an office tower in your city for an appointment. Did you notice a number of empty offices or companies vacating the premises? As these properties financing comes due, where are they going to find new financing?
The banks have had a good run this summer. I know. I just sold much of my bank stock today. (when you have a good run you should not fall in love with the stock you own, even if it is a bank with strong earnings. In this case, TD). Banks, particularly those in the U.S., would be the "second" domino to fall if the commercial real estate crashes. It could even be a "death blow" for some banks as their exposure is over $2 Trillion dollars to the sector which could lose as much as $1 Trillion in value.
REITs trying to re-finance properties this fall and early next year, will run into a wall. No one will want to lend them the billions required to re-finance their operations, especially banks that have been propped up by government bailouts. This does not include the 80 banks that have failed this year, or the 200-500 expected to fail in the next 12 months. Yes, that many, and those are the conservative estimates. Some analysts believe the number is closer to 1,000. Even after all that has happened over the last 18 months, the banks are still holding their cash close. However, if your REIT has solid management, is flush with cash and is keeping their powder dry waiting for the downturn, you might wish to hold on to your shares. Only the strong will feast on the many carcasses that will be strewn across the landscape.
Trust has left this market place. It will leave behind it's offspring, pain and loss!
Update: Sept 10th 2009 from New York Times.
Corus Bancshares - First domino to fall.
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Saturday, August 22, 2009
Microsoft ordered to pay $490M in Patent infringement case.
Image via CrunchBase
The case is: i4i Limited Partnership and Infrastructures for Information Inc vs Microsoft Corp, U.S. District Court, Eastern District of Texas, Tyler Division, No. 6:07CV113.
This case is not unlike a similar Texas court case involving another small Canadian Company, Wilan Technology Inc , who has sued 20 major wireless companies including Apple and Intel, for infringing on it's many wireless patents for Wimax, Wifi and other applications.
Wilan , (WIN/TSX) traded yesterday at $2.18 per share. It has already won patent infringement lawsuits against other wireless companies and has signed licensing agreements with 180 Tech companies over the past two years. I happen to believe it is extremely undervalued. that is why I increased my position this spring by over tenfold.
Some legitimate bloggers (and some infringing companies disguised as bloggers) like to vilify such companies, calling them "patent trolls" etc. however in these two cases, they would be wrong. In both cases the companies were started up in the early 90's by serious techies with great ideas, who created great technology but didn't have the legal know how or resources to protect their intellectual property.
It appears that i4i took a patient route in protecting their xml technology against the infringing company, Microsoft. Wilan's problem was that, because it owns so many of the underlying patents for current wireless technology, (over 550 patents) that many companies would not have the products they have (blackberry, ipod etc) had they not infringed on Wilan's patents. Because of this, two years ago, Wilan replaced it's tech centric CEO with a top U.S. patent lawyer, Jim Skippen, and from that moment on, a professional team was put into place to go after the infringing companies.
The first results have been many licensing agreements with the likes of RIM (Blackberry), Nokia, Westinghouse, Agilent, TigerDirect, Casio, Infinion, Samsung, Fujitsu and many more companies who were infringing on it's patents. 20 others, including some of the largest like Intel, Apple, Motorola, Broadcom, Acer, Marvell and Sony, are currently in a Texas court trying to fend off the inevitable.
The Patents number 550 and include: (from http://Wilan.com)
CDMA – A third generation wireless platform
DOCSIS – A standards-based technology to provide high speed internet and other data over coaxial cable networks
DSL – A standards-based access technology that provides broadband Internet access over twisted pair telecommunications wiring
Wi-Fi - The underlying technology of wireless local area networks and other products based on IEEE 802.11 specifications
WiMAX (4G) – Broadband wireless technology that provides longer-range wireless connectivity based on IEEE 802.16 specifications
V-Chip – The V-Chip patents allow the user of multimedia devices to filter out programming they consider inappropriate for their children to watch, whether that be from a Television broadcast, DVD/VCR/DVDR or Computers that have the ability to receive and process broadcast signals. The Federal Communications Commission has mandated that the V-Chip be included in all digital television receivers and digital reception devices offered for sale in the United States.
A number of followers, including this writer, believe that Wilan will be trading between $5 and $10 by the end of the year. Personally I think it is a $25 stock in waiting. that is why I have increased my holdings so much. It now pays dividends, albeit small, but the outlook for years to come is very bright. It owns great technology, has a dedicated hard working management team, has increased it's income solidly during the worst financial crisis since WW2 and it continues to sign dozens of new licensees every month.Caution, don't invest in this or "any" company based on what you read in blogs. Do your own research, and consult with an experienced investment adviser before you buy any stock or mutual fund and always remember:
"Look after the pennies, and dollars will look after themselves"!
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Tuesday, August 18, 2009
Turbulent Markets are like White Water Rafting! You need a professional guide with proven experience!
Image via Wikipedia
Article:
I was recently looking at some pictures of a white water rafting trip I took with my wife ten years ago. As I was remembering the excitement and fear I started to think it had a lot in common with financial Planning.
First there is a starting point and a destination you are heading towards, the journey contains a lot of emotions, it can be hard work, and a lot of fun.
We had three choices; the Dead River (pretty calm), the Kennebec (has a little excitement), and the Penobscot River which had several Class 5 rapids to navigate. Which one you choose reflects your appetite for risk and excitement and the speed in which you make it to your destination.
We chose the Penobscot River which had the most excitement of course. Now you can choose to take the trip on your own or with a guide. We chose the guide because we did not have the knowledge or the skill to make this trip on our own. Our guide was experienced, looked fit, and gave us a brief talk on what to expect before we headed down the river. His experience and
calmness inspired confidence in us and we were comfortable following his directions. He kept his instructions and strategy for getting down the river quite simple (kind of like a good financial planner).
Now there is more then one way to get down the river. You could swim it, which our guide did occasionally on his day off, you could canoe it, kayak it, or raft it as a group. We chose the raft (safety in numbers/diversification).
We started off in calm water for about an hour and then navigated a couple of class 2 rapids which were pretty easy and raised our excitement levels. The higher the number the more intense the rapids are. Class 6 is the highest. You could feel your pulse staring to accelerate and your senses heighten as we headed into a Class 4 Rapid known as guide killer hole. We were paddling hard taking direction from our guide and all of a sudden I was in the water wondering what happened. My life jacket (kind of like an Insurance policy ) kept me a float as I sucked in a couple of mouthfuls of water and decided to pick my feet up and enjoy the ride, knowing that eventually I would reach calmer waters (kind of like the Stock Market ).
Eventually the raft caught up to me and they pulled me on board to find out that my wife had also gone into the water as well. She thought it was so romantic that I jumped in to save her. With both of us back in the boat we headed to land to enjoy a steak barbecue and look at the Class 5 rapids we would be heading into on a full stomach right after lunch.
Knowing what to expect at this point helped, however as I looked at the thundering rapids I did briefly entertain the thought of bailing and not going through with the rest of our plan for making it to the end of the river (goal). The final stretch of our journey to our destination was intense and exciting and we all made it while staying in the raft. At the end we turned the raft around and paddled back into the rapids and surfed the white water. What a blast!
As we approached our exit point and could see the opening in the trees and our bus to take us back to the cabin it was a feeling of relief and self satisfaction that we faced our fears and accomplished our goal.
There were a number of things that made it a successful trip. First you had to actually start it. As Nike says "Just do it". Second you had to overcome some fears and third you had to stick to the plan despite some obstacles and set backs. Finally in deciding to go for it you made yourself as aware of the risks as possible and then managed them. We did this by first checking out the company we used, selecting a confidence inspiring guide, and wearing a life jacket and a helmet. After doing all of this we were able to focus on enjoying the journey as well as the good feelings and personal growth that come with achieving your goal.
Rick Coyle is a Financial Advisor/Coach with Dundee Private Investors Inc. He has 30 years experience in Financial Services. The opinions expressed in this newsletter are the opinions of Rick Coyle and are not to be construed as the opinions of Dundee Private Investors Inc or any affiliated company. The statements in this newsletter should not be construed as specific advice and may not be appropriate for your unique situation. Rates of return indicate past performance and past performance is not necessarily indicative of future performance. Mutual funds are not guaranteed or insured.
Rick can be reached at 902-678-1727. Email rcoyle @ ns.sympatico.ca
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Sunday, August 16, 2009
How can you profit from the U.S. dollar decline! A Simple Stragegy.
Image via Wikipedia
Smart Canadians are ignoring the whining from their own Governments and businesses about a high Canadian dollar being bad for exports and they are taking advantage of a situation that Ottawa doesn't want to acknowledge. The Canadian buck will outstrip the U.S. buck over the next year. So how can you play this for the betterment of your Retirefund?
Back in January, when the Canada buck was trading for around .77 cents U.S. I traded my u.s. dollars into Canadian dollars. I have gained about 20% with this simple strategy, however there is another good market strategy that I, and many others, are making some money with. Commodities such as oil, gold, natural gas, are denominated in U.S. dollars. If you bought some of these commodities, with your Canadian dollars, back in March, you have no doubt made good money.
Now, many Americans, whose pride (and pocketbooks) have taken a big hit during this dramatic downturn in their economy, are championing the return of King Dollar. Can't blame them. If your house is losing value, and your dollar is losing value, and the Gluttons of Wall Street have swallowed a good portion of your retirement funds, you are definitely in jam. However, average Americans are once again being led down the garden path into believing their dollar will go higher over the next few years. Feeding those false hopes, every time the dollar goes up a bit (as it did on Monday) the talking bull heads on CNBC (Kudlow, Kneale etc) waive the flag and declare the return of King dollar. I believe they couldn't be more wrong.
In fact, I am so convinced of this that, when I see a rise in the U.S. dollar, and a corresponding drop in our commodities market, I see it as a great buying opportunity for those commodities, especially if you are paying for your shares in Canadian dollars. As I have pointed out before, we have had the best balance sheet of the G20 for the past 8 years (We've been in the black until the crisis hit this year) Our banks have stayed conservative, avoiding the toxic Derivatives debacle and have entered this summer rally strong. We have the second largest deposits of oil and natural gas in the world, the largest deposits of potash, lumber, gypsum, seafood, nickel, uranium and arguably, diamonds. We own 20% of the worlds entire supply of fresh water, with only .03% of it's population. We own the largest claim to the arctic, which is suspected to harbor 25% of the total world's oil supply, and finally, the largest consumer on the planet, is right next door.
Don't get me wrong though. The Canadian dollar and commodities market is by no means the only place with good value these days. They will go sideways for the next month or so, but by the end of the year the Loonie will approach parity. The BRIC countries , or at least two of them, are good investments. (Except China for the rest of this year) The Australian dollar, who's commodities feed into the Chinese economic realm may also be a good bet. We have some excellent, small Canadian companies that are basically overlooked south of the border, until they dominate a market (RIM). They are essentially, under the radar, so to speak. Find them, research them thoroughly, ensure they have good management, good science and technology , and then don't be afraid to invest. You could hit the RIM of 2010-2011!
If you are American, you should be in the stock market right now. Having cash, or cash equivalents sitting on the sidelines for any length of time is a recipe for losses, period! Sadly, the gluttons of wall street are the ones who will actually benefit from the dollar crisis they have caused. Stock Markets go up as currency devalues. It is actually that simple.
The Canadian Government and Canadian manufacturing don't want a strong Canada buck, but they won't have any choice in the matter. It is time our manufacturing and export companies grow because of innovation instead of a weak currency. Those days are gone.
A Canadian buck with a 5-8% premium over the U.S. dollar (a la the 1950's and 60's), is a Loonie I can live with. All of our retirement funds, and our travel budgets, have gone up over 20% this year because of it. The Loonie now buys 20% more than it did 6 months ago. It will go higher still. Here is a quote from Warren Buffett from his "The Greenback Effect"!
"The world "properly" worries about greenhouse emissions causing global warming", says Buffett. "Unchecked carbon emissions will likely cause icebergs to melt. Unchecked greenback emissions will certainly cause the purchasing power of currency to melt. The dollar's destiny lies with Congress."
Previous articles: U.S. Dollar dives - Pigs at the trough
Update - Aug 18th from Bloomberg .
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Friday, August 14, 2009
Dead people don't need retirement funds!
The food we eat and how it impacts our retirement!
Image by d70focus via Flickr
Why do we blindly accept that the major food companies, of which only a handful supply 70% of our food, are looking after our better interest? There is strong evidence they are not, and you should be paying attention so that your health doesn't suffer and you are free to enjoy your retirement in the best of health.
40 years ago, almost 20% of our paychecks went to buying food and only 5% went to health care. Today those numbers are reversed as we spend about 9% on food and 20% on health care. Very soon health care (if left unchanged) will cost 50% of our income. Fast food, food additives, growth hormones in food, have added significantly to the overall poor health of the population and Obesity, cancer, heart disease and other health problems are a direct result.
Emmy winning director, Robert Kenner , has recently produced a documentary exploring the food we eat called Food Inc. and it is an excellent expose on this subject. It also resembles in part, a horror film as he documents how chickens we buy from our supermarkets grow in windowless coops in 6 weeks grow so big so fast, they actually fall over as their legs cannot support their weight by the time they are harvested. Now, if you take that chicken, slather it with flour and spices and deep fry it in fat (Lard, which is mostly saturated and trans fat), you get what passes for food in our daily diets. Add to that some potatoes, grown with anti pesticides built in through trans generation experimentation, and deep fry those in the same fat, as a side dish. Then drink one full cup of pure, granulated sugar (which has absolutely "no" food value but lots of calories or "empty calories") dissolved into a flavored drink, and you have the typical North American meal. A meal that actually "exceeds" the total calories an adult male should have daily, and believe me, they are not good calories. I have not even mentioned the amount of salt in such a meal, that's before you shake raw salt on it.
Why would you pay so much attention to your Retirefund if this is the type of food you eat daily? Eating such foods daily will ensure you don't get to enjoy your retirement at all, that's if you make it to retirement. Why? I'm glad you asked. Obesity, Diabetes, heart disease, cancer and stroke, to name just the big five reasons. In a nutshell, dead people don't need retirement funds!
During this recession, there has been a marked increase in people growing their own vegetables in back yard gardens, even raising their own, "free range" chickens. Now I know that, if you live in a city, this may not be possible, however such products can be found in your grocery store if you look for them.
Certainly, there are companies producing such food and this niche market is growing fast, so look for one of these companies that may fit your retirefund. Your body, mind and spirit will thank you for it, as well as your wallet. Sadly, many refuse to change their diets and refuse to exercise. Your retirefund can actually benefit from this. Look for companies utilizing good science, that are tackling the obesity epidemic, heart disease, cancer, stroke and diabetes. Small companies with great science are the best as they are either destined to grow substantially, or be taken over by one of the industry giants.
Now, for your own health benefit, here is a great resource site where you can get great advice for free, on keeping a healthy diet, without doing the Hollywood shuffle. Go to the Canada Food Guide now.
Get healthy, stay healthy, exercise, eat right, love, laugh and enjoy your life and your retirement. After all, you deserve nothing less.
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Saturday, August 8, 2009
From Piggy Bank to Albatross - housing Market will get worse by 2011
Image by Getty Images via Daylife
Over the past 40 years, whole neighborhoods were built almost over night in suburbs from California to Florida across the south and Midwest. Houses got bigger, more extravagant and much more expensive. From the 1970's through 2006, investors small and large either built or bought up surplus houses as stores of value. To a lesser extent, it occurred in Canada as well from Ontario to BC. For many boomers, it was their "piggy bank" where one could go, year after year, and re-mortgage to obtain more and more goods, cars, computers, college tuition, you name it. Some made fortunes in real estate. Those days are gone and they are not coming back any time soon. Almost no one expected such a spectacular housing crash.
Deutsche Bank reported Wednesday that the number of U.S. homeowners who's mortgages will be more than the value of their homes, will double to 48% in 2011 from 26% in March this year. The number of homes is a staggering 25 million!
If you bought a house in the past 4 years, it was equivalent to settling down on the beach when the tide is out. When the tide came in, these homes (read mortgages) were under water. So much for the piggy bank. It has been smashed to smithereens by the gluttons of wall street who have, for the most part, been saved by your tax dollars.
"Homeowners with the riskiest mortgages taken out during the housing boom have seen the greatest erosion in equity, in part because they were "affordability products" originated at the housing peak", Deutsche said. "They include sub prime loans, of which 69 percent will be underwater in 2011, up from 50 percent in March".
This also from the Bank: "Regions suffering the worst negative equity are areas in California, Florida, Arizona, Nevada, Ohio, Michigan, Illinois, Wisconsin, Massachusetts and West Virginia". "Las Vegas and parts of Florida and California will see 90 percent or more of their loans underwater by 2011", it added. This is in direct contrast to some of the more hopeful opinions coming out in the past few weeks but those are mostly from the housing industry trying to put some lipstick on this pig. Deutsche Bank hasn't pulled any punches in it's analysis. It is a complete knock out blow to many homeowners. There is one group, however, who stand to benefit from this catastrophe. It is generation Y.
in 2007, my son and his wife were planning their wedding for Sept 2008 and asked me what my opinion was for buying a home. I told them that they should wait until "at least" 2010 or 2011 before they should even start to look. I felt at that time, and I told them, that housing prices would come down from 30-50%, maybe more. They were astounded at this advice as they, like so many others, were of the opinion that you should get into the housing market as soon as possible as housing prices (they assumed) never fell. They argued that, if they wait, it will cost that much more to get into the market and they will have to save up a greater down payment. I asked them if "If you could reduce the cost of purchasing by 30-50%, isn't that a great down payment on your house? This generation is in the housing market drivers seat, and most don't even know it.
I am glad they took my advice, even though I wish I was wrong. The days of storing value in your home are gone for the foreseeable future. Housing, instead of being an investment, has been brought back to where it originated. It is simply shelter! If you or your children are going to invest in a house in the near future, then shop, shop, shop! shop for location (always the most important issue) shop for value, shop for price and shop for mortgage rates. Above all, don't expect any quick return. It may take 10 years to see stored value in any home bought this year.
Remember, "Look after the pennies, and the dollars will look after themselves"!
Jan 23/2010: New York Times-Underwater but will they leave the pool?
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Saturday, August 1, 2009
As the Chinese Money Monster begins to growl, Uncle Sam reaches for a bone!
Image via Wikipedia
Consequently, the worlds number one engine of growth, the good ole U.S.A. is in more debt than any country in history has ever been. (There may be an exception: Germany after WW1 when the allies demanded war reparations. During the 1920's and 30's, during the resulting hyper inflation, the average German would literally bring a wheel barrell full of German marks just to get groceries. The result was the rise of Hitler and world war 2)
Before last weeks massive sale of United States Debt in the form of Treasury Bills, China had accumulated foreign reserves of $2 Trillion. Of that, $1.6 Trillion was in U.S. Debt for which they made a return (direct payments from the U.S. Treasury) of over $40 Billion dollars last year. I repeat, that was before Tiny Tim went to China to sell another boat load of dollars in June, before last weeks summit (No not the beer summit, the "Chinese Money Monster summit") and it was before this weeks record breaking sale of U.S. Treasury Notes.
There is a saying that, if you borrow some money from the bank, it is your problem, but if you borrow a lot of money, it is the banks problem. In this case, the "bank" is the People's republic of China" which has been buying U.S. Government debt at an alarming rate. The borrower is the average American, their children, and their grandchildren, because it will take at least three generations to pay it back (expect a number of tax increases). The bank (read China) is getting nervous. They are demanding the U.S. provide insurance against a falling dollar to protect their investment. On top of that, there are rumblings that China has a debt problem of it's own as it's many local Governments are utilizing a loophole in their own banking system to siphon off equity from their own banks to pay for services (and graft which is rampant). Those banks will never see that money again.
This summer, as the rally picks up on North American Markets on the back of a sinking dollar, and another Trillion or so in Government largess, Newbie Chinese investors are diving into their own stock markets, driving up stock prices to dizzying heights, and that bubble can only end badly too.
Why would anyone think the Chinese might save the worlds economy? It will be hard pressed to save it's own. They do, however, have some padding. 1.6 Trillion in U.S. dollar denominated debt and the interest on that debt has to be paid from the U.S. Treasury. The Chinese fear they may end up with 50 cent dollars and they could be right. What a mess. The toxic Derivatives debacle perpetrated by the gluttons of Wall Street , is still the 10,000 pound gorilla in the room and no one wants to deal with it.
In this summer of 2009, the pigs at the trough are once again feasting on the unwary. In the mean time, we mere mortals have to decide what to do with our meager retirefunds. I can't tell you what to do, but I am in this summer rally and will remain so for now. September and October may be different. Certainly, 2010 is not looking anywhere near as good as the pundits in government or on CNBC would have you believe. Mr. Kneale of CNBC is calling this "The Great Recovery"! I sure wish he was right, but I fear a handle like "The Great Denial" would be more appropriate. A false economy led by taxpayer dollars, borrowed from friends who arn't friends, doesn't bode well for next year, or for that matter, the next 4-5 years. It may be that, hyper inflation will save America's bacon (heaven forbid)
Meanwhile, there are some great companies doing what they do best, no matter what the circumstances and you should be seeking them out during this rally. But don't take your eye off this bouncing ball. If it bounces too high, It may go right through the floor in 2010. Sorry I can't be more cheerful except to say, enjoy the ride this summer. This roller coaster may be the last good ride for a long time. Remember, when everyone else begins laughing hysterically, and pointing up, it may be time to jump to safety once again. But cheer up, 2015 isn't looking too bad.
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