Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM EST, Friday, February 23, 2007: Keep
looking. Keep reading. Neat ideas pop up. From Bloomberg:
Replace New York Lofts as Hottest Property (Update 1), by Jeff Wilson
Feb. 20 -- Farmland
from Iowa to Argentina is rising faster in price than apartments in Manhattan
and London for the first time in 30 years.
Demand for corn
used in ethanol increased the value of crop land 16 percent in Indiana
and 35 percent in Idaho in 2006, government figures show. The price
of a SOHO loft appreciated only 12 percent, while a pied-à-terre
in Islington near London's financial district gained 11 percent, according
"will take a quantum leap over the next 18 months,'' after corn prices
surged to a 10-year high in February, said Murray Wise, the 58-year-old chairman
and chief executive officer of Westchester Group Inc. in Champaign, Illinois,
who oversees $460 million of land investments.
Wise, who was
born on a Canadian farm and now manages 85,000 acres, said prices in the U.S.
Midwest may gain 12 percent a year through 2017. Farmland rose in value
in 34 of the last 37 years, according to data compiled by UBSAgriVest, a unit
of UBS AG, the world's biggest money manager. The returns are attracting hedge
funds and investment brokers.
Investment Group in Boston purchased $100 million of farmland in the past
year, increasing its holdings by 13 percent to $865 million. Macquarie Bank
Ltd., Australia's largest securities firm, plans to spend as much as A$1 billion
($775 million) on ranches in Australia for a new agricultural fund.
a Paris-based investment company with $1 billion in assets, two years ago
started Campos Orientales, a fund that buys farmland in Argentina and Uruguay.
The company formed a venture with Bellamar Estancias, owned by Argentina's
Hirsch family, that manages 120,000 hectares and plans to raise $70 million
for farmland acquisitions.
Australia's biggest cattle-grazing state, land rose by about 10 percent to
between A$500 ($394) and A$550 an acre in 2006, said Dick Allpass, a rural
property consultant at Adelaide-based Elders Australia Ltd.
Orders for food
and feedstock from China in the last five years helped boost prime Australian
farmland by as much as 300 percent, said Wayne Carlson, general manager for
agribusiness at Melbourne-based National Australia Bank Ltd., the nation's
largest lender. "That rise of the last few years is what has made some
of these fund managers and investment groups say, `Why hell, why aren't we
in this?''' Carlson said.
farm prices increased by 15 percent in 2006, Agriculture Department
data show. The cost of buying corn farms in Argentina, the world's second-largest
exporter of the grain, jumped 27 percent, according to Buenos Aires
industry newsletter Margenes Agropecuarios.
a Hong Kong-based investor who manages about $300 million, says one of his
favorite stocks is Cresud SA, a landowner in Argentina's Pampas region.
The shares jumped 63 percent last year. Farmland is ``very inexpensive
in a world of inflated asset prices,'' he said in an interview Feb. 4 from
The demand for
corn used in ethanol got a boost from U.S. President George W. Bush last month,
when he urged a fivefold increase in renewable fuels by 2017. To meet Bush's
goal, 12.5 billion bushels of corn would be needed, 19 percent more than was
harvested last year in the U.S., the world's biggest producer.
not the investor that is pushing up land prices, it is the surge in corn prices
from ethanol demand,'' said Jim Farrell, chief executive officer at Farmers
National Co. in Omaha, which manages almost 1.2 million acres of farmland
on 3,700 farms. "Midwest farmland is predicated by the strength or weakness
of corn prices.''
have jumped 82 percent on the Chicago Board of Trade in the past year. They
gained 0.6 percent to $4.32 a bushel in electronic trading as of 3:43 a.m.
The rally is
helped by a reduction in the number of acres available for planting. About
5 million to 8 million hectares of the world's total of 1.5 billion (3.7 billion
acres) of farmland goes fallow each year because of deteriorating quality,
according to the Worldwatch Institute in Washington, which does research on
food production. Crop land also is lost because of development and lack of
irrigation, the institute said.
is not the only story here -- it is just the one getting headlines,'' said
Jeff Conrad, 45, president and managing director for Hancock Agricultural,
a unit of Manulife Financial Corp. ``The supply side is the big unknown because
we know demand is rising.'' Conrad manages 126,000 acres in the U.S. and 7,000
acres of wine grapes and macadamia nuts in Australia.
declined by 9.6 million acres, or 2.8 percent, in the two decades ending in
2001, according to the most recent data available from the government.
the hedge fund manager who predicted the start of the commodity rally in 1999,
said global warming will hinder crops and has advised purchasing farmland
for at least a decade.
of the disruptions, agricultural prices will go through the roof,'' he told
reporters in Melbourne on Feb. 7. "I am extremely bullish on agriculture.''
To be sure, farmland has seen rallies before that were halted by surging interest
rates or plunging commodity prices.
In the three
years ending in 1975, prices rose more than 30 percent annually in Iowa, when
the cost of fuel surged during the 1973 Arab oil embargo and the former Soviet
Union bought record amounts of U.S. corn and wheat to make up for domestic
crop losses. U.S. farmers bought more land with borrowed money.
more than tripled from $482 an acre in 1972 to $2,147 in 1981. After the Federal
Reserve boosted interest to 20 percent in 1980 and again in 1981 to curb inflation,
farmland prices plunged more than 60 percent from 1981 to 1986.
interest-rate increases are a risk to farmland appreciation'' by boosting
the value of the dollar and hurting U.S. crop exports, Conrad said. "A
sustained drop in crude-oil prices would take the shine off the ethanol market,''
prices are dependent on commodity prices, which are incredibly volatile,''
said Liam Bailey, head of research at Knight Frank LLP, a real estate agent
in London that handles about 25 percent of U.K. farmland sales. "You
have to be prepared to ride the ups and downs. You could see a massive reversal
farmland have averaged 10.9 percent annually the last 15 years, the
National Council of Real Estate Investment Fiduciaries in Chicago said. The
Standard & Poor's 500 Index of stocks has risen 10.7 percent each
year, while the return from the Lehman Government Bond Index was 6.3 percent.
fell in half of the cities in the U.S. last quarter, the National Association
of Realtors said last week. Prices in 70 U.S. cities including Las Vegas and
Washington may drop 10 percent or more between now and 2009 on higher borrowing
costs, according to a study by Economy.com, a unit of Moody's Corp.
Land in Iowa,
the biggest U.S. producer of corn and home to the most ethanol plants, surpassed
$5,000 an acre from a high of $4,200 a year ago, said Monty Meusch, 55, a
vice president for Farmers National Co., a property broker and farmland manager
in Omaha, Nebraska. A 200-acre Iowa farm increased 14 percent in a month when
it sold for $5,700 an acre in October, he said.
the average apartment increased by 3.2 percent last year, the smallest gain
in a decade, to $1.22 million, estimates Miller Samuel Inc., the borough's
prices soared 62 percent in London's Kensington and Chelsea neighborhoods,
the rise in actual sales prices was 16 percent last year to £677,318
pounds ($1.32 million), according to Land Registry and realtor data.
years ago people were skeptical about investing in farmland,'' said Olivier
Combastet, founder of Pergam. "It's become much more sexy.'' He anticipates
annual returns of 15 percent in the next five years from his South American
makes increasing sense:
From Jim Kingsdale: "I would consider geothermal heat/cooling
if I were building a new house. It's going to be a huge trend. Here's an article:"
begins somewhere. My friend has retired, but
doesn't really want to play golf all day. He wants to consult for free to charities
and businesses. It's a beautiful fantasy. My experience is that few listen.
This makes free consulting frustrating, harder than working for a living. Entrepreneurs
and CEOs think they know everything. Charity CEOs have a different agenda --
typically having a pleasant life for themselves. This is cynical. Your experience
may be different to mine. Being an ex-entrepreneur means my mindset is different.
I favor speed over excessive thinking, spending frugally over lavishness, growing
organically as against acquisitions, marketing and selling over planning, etc.
I drew this little continuum. It's a way to think about your likely frustration.
and Houses: "If
your marriage survives building a house, you've got something." Frank
Derfler, friend and reader, writes:
Harry -- Marlene
and I enjoy deep chuckles when we read about your home building adventures.
We've been building this one for 3 years. We recently bid farewell to the
last carpenter (NOT Jesus of Nazareth.. but pretty close). Now, all the "little
projects" (defined as less than a few thousand dollars worth of materials)
Every truck load of cement cost more than the one before. Why? Well obviously,
Because they can. The market still will shoulder the cost. So, we basically
side with your wife on the economic argument. Right now our residential real
estate investments are down 20% from a run-up of 300%. Okay,
I'll accept that. Besides WHAT other thing can you "invest in" that
you can USE? (Okay, a marijuana smuggling boat that you use for water skiing
on the weekends, but that's a South Florida thing.)
And you are absolutely right about all of the "active" forms of
energy gathering, etc. They could pay for themselves in eight years, but you
have to replace all of the pumps and accumulators in six.
We haven't heard you complain about inspectors yet. Are you not there for
the inspections? We figure that silly, petty, bureaucratic inspectors added
10% to the overall cost.
Since Marlene is an accountant, we can tell you to the penny how much we spent
to acquire, maintain, and improve every one of the 20+ houses we've
acquired, maintained, and improved. There are some that we didn't really "make
money" on (despite a positive difference between purchase price and selling
price), but even then we "lived for free" in some darn nice places.
your phone system: My Panasonic multi-line
cordless went crazy. One line wouldn't un-busy, half the speed dial numbers
disappeared, etc. Easiest solution -- unplug from the AC, remove the battery,
count to ten and plug all back in again. Bingo, works like charm. Sadly, I have
to put the speed dials, time and date, in again. What happened? Probably got
hit by an electricity surge.
on energy savings in your home: Kent Kjellgren writes:
#5 yesterday on few energy savings (except foam) while building your new home
prompted me to send this bit of info. You are right about foam vs. fiberglass
(aka filterglass) but there is more you can do while building to save energy.
I assume from your comments about where your new house is that it is New York
State. If so, there is a program called BPI or Building Performance Institute
sponsored by New York State and it involves contractors building and/or fixing
homes to make them perform better. It involves a lot of principles, most of
which are energy saving. Something as simple as fixing air infiltration can
save a lot and can also make the home perform better. www.bpi.org
is the link to their website. You should also check out the energy star program
I got interested
in this last year and actually got my Energy Star rating as a home inspector.
I have no idea what I am doing yet but this may be a fun retirement activity.
BPI and Energy Star go beyond just energy efficiency. They make homes perform
better and are thus more comfortable. Most peoples eyes glaze over when
I talk about this because they want the dramatic stuff, solar energy, wind
power etc etc. some of which are actually a part of Energy Star. You have
found out that most of those dramatic things are not viable. Making the home
perform works, I have seen the results.
is he right:
Keeping a fortune is even more difficult than making one.
-- Jeff Tibbs
neat new Symptom Search. The successful online medical resource site
Heathline has added a new search function that is definitely worth a look. Symptom
search lets you enter one or multiple symptoms youre experiencing and
displays licensed articles from medical professionals about conditions that
could be causing those symptoms. Its an elegant tool. Click
Hindu, a Rabbi, and a Lawyer . Contrived, but
A Hindu, Rabbi, and a lawyer are driving through farm land when their
car breaks down.
They go to the
nearest farm house and the farmer tells them that they can stay till morning
but there is only room for two in the house, and one of them will have to stay
in the barn.
The Hindu says
" I'll sleep in the barn." And they all start to settle in for the
A little later
on there is a knock on the door . It's the Hindu, and he complains that there
is a cow in the barn, and in his land cows are holy, and it makes him uncomfortable
to sleep there... So the Rabbi decides to sleep in the barn.
A little while
later the rabbi is back complaining that there is a pig in the barn, and they
aren't kosher, and he just can't sleep near it...So the Lawyer goes out to sleep
in the barn.
A little while
later there's a knock on the door,,,
It's the pig and
This column is about my personal search
for the perfect investment. I don't give investment advice. For that you have
to be registered with regulatory authorities, which I am not. I am a reporter
and an investor. I make my daily column -- Monday through Friday -- freely available
for three reasons: Writing is good for sorting things out in my brain. Second,
the column is research for a book I'm writing called "In Search of the
Perfect Investment." Third, I encourage my readers to send me their
ideas, concerns and experiences. That way we can all learn together. My email
address is .
You can't click on my email address. You have to re-type it . This protects
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role in choosing the Google ads. Thus I cannot endorse any, though some look
mighty interesting. If you click on a link, Google may send me money. Please
note I'm not suggesting you do. That money, if there is any, may help pay Claire's
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here and here.