Trailers for Sale or Rent
One of my favorite investments this year is Sun Communities. The Michigan-based company owns and operates 136 mobile home parks in eighteen states around the country. Not a glamorous business, but a good cash generator, and appropriate real estate for these times. Next month I plan to see their corporate headquarters and tour some of their properties.
Of course, most of these developments are for 'manufactured homes', not trailers, although the company also operates four RV parks. Sun rents spaces and sells homes, with over 47,000 sites under management.
For years I made offers to buy mobile home parks, and even had plans to develop a 300-home park, but the development costs seemed excessive. Buying shares of Sun is a good way to participate in this type of investment, with more diversifiation than one could achieve as an individual investor, and from what my park-owning friends tell me, a similar yield on capital in this low-interest era. Sun's stock price is up +33% in the first part of the year, so one should excercise caution initiating new positions. The price has consolidtaed since April. Now is an appropriate entry point. Sun will announce quarterly earnings late in July.
An under-the-radar trend we're in
Last month I discovered an up-trend no-one was talking about, in which we have participated, completely under the media radar: the rise of the Swiss Franc. Here was my deduction: The Euro has lost value most of this year, down -15.5%. Picture yourself a wealthy European watching your currency dwindle. You already have bought your bullion, the headlines from the US are scary, so what’s left? You drive across the border to your friendly Cantonal banker in Zurich, Geneva or Lugano and buy Swiss Francs, that’s what. This demand makes the Swiss Franc go up. So we have owned Swiss Francs for about a month, about +3% during this time. Now in July, I see this article about billions of Swiss Francs short, which will add fuel to the ascending trend.
Better than the market
The market looked so hopeful at the beginning of the year. Early on, because of our active management, we lagged a bit, but then, using our disciplined risk algorithm, at half-time we are well ahead with significant alpha, even though Mr. Rothman at Barclay's thinks alpha is dead.
20% savings
On another note, after a year of negotiation, one of our asset custodial brokers, TD Ameritrade Institutional, has agreed to a 20% savings in commission costs going forward.
In Buffet We Trust
With growth slowing worldwide, we have moved more into Berkshire, as it owwns basic bread-and-butter businesses. Bond traders, known to be very smart folk, are pricing Warren Buffet's bonds as less risky than US Treasury debt. Now that's a first. Read article
A Few Words about Income
The past few weeks I've received questions about income portfolios in 2010.
For those depending on their savings for income, now is the worst of times. T-bill interest is zero. CD rates are at an all-time low. Bond interest is low. High-yielding CDs don't exist. Most now are under 2% per year. Many of the old, tried-and-true investment maxims don't work anymore.
Not too many years ago we used to get 9% from a US treasury bond, and all was happy for income investors. Those days are gone. That's reality. There are too many dollars seeking a return, and their competition drives rates down.
So, as clients know, my solution is to invest in income stocks when they are trending up, and move to cash when they are trending down. Generally, January and February are weak months in the market, so I increased cash, and March often recovers, so I invested again in income stocks. The market looks more stable this year than during the past two years. This approach, of course, is more risky than CDs, but the choice is (1) earn almost zero and spend principal each month; or (2) risk some capital value fluctuation with the goal of higher returns.
This method requires constant daily vigilance monitoring price trends, and hours screening thousands of stocks, researching the ever-changing world of income payers.
This approach has two benefits: First, of course, collecting income from high-dividend stocks. As you may know, stock dividends are not like bond interest. When one owns a bond, one is paid interest pro-rata for the days one owns the bond. For dividend-paying stocks, one only needs to own the shares on the record date of the dividend. For example, with a stock paying quarterly, one technically only needs to own the shares four days out of the year. Practically speaking, it's a bit more complex, because the capital value often drops the approximate amount of the dividend on the ex-dividend date. So, in times like these, the arduous management work is to buy right, ramp into the dividend, and move to cash when a stock stops trending up.
Second, applying this trend analysis to our accounts moves us to cash before big moves downward take too much, thereby tending to protecting capital, as we did in 2008, though there is principal fluctuation, and the occasional market-moving surprise. It is not glamorous, but so far has worked well. This is how I invest for current income.
Because of a gap in the estate tax law, 2010 is a good year for billionaires to make their final departure. Click here to read about someone who did.
That's not a typo. Click here to read the WSJ analysis of unrealistic assumptions, deception, and conflicts of interest which ruined the biggest pension plan in America.
Our watchdog, the SEC, with a $1 billion annual budget, can find no cause for the plunge in May. Click here to read the amazing tale of cluelessness.
Ever wonder why China continues to buy US debt? This brief, clever video explains it all. Watch video.
Thanks to Frederick O. Johnson for this find.
India and Canada avoided the 2008 deflationary collapse due to their sound banking practices. Who in India made those good decisions? Read the answer here. By the way, that's one reason I keep accounts at TD Ameritrade. They are backed by TD Bank, one of the best banks in the world.
Thanks to J. Mark Nemmers for the article.
This week one of the most liquid securities, SPY, the exchange-traded fund for the S&P 500, is on the "hard to borrow" list at several major brokerages. A few weeks ago we witnessed the biggest short position capitulation in history as $19 billion of S&P shorts covered. The surprise March rally is causing a short squeeze of mammoth proportions in the hedge fund world. Read more.
The author bought an actual tranche of toxic debt for $1,000, and completely analyzese with a helpful timeline. For those who understand through example, here is the the debt crisis explained. Read more.
We love Berkshire. We own Berkshire. The media has created many myths about Mr. Buffet though, so here's a dose of reality. Read more.
The world's biggest bond manager believes junk bonds will do well again. Read more.
Deflation is with us. Not such bad news for savers who live on income. Read more.
In Greece it is now illegal to consummate a cash transaction for more than &euro 1,500. Read more.
Swiss minister says UBS could collapse if talks fail and US license is revoked. Read more.
FASB proposes to adopt an accouting rule which could restate banks' net worth. At issue: should banks account for mortgages at current lower values? If one buys a car and crashes it, is it still worth as much? Read more.
Today is the first day of the rest of your money. Read more.
Some mutual funds haven't recovered from the tech crash. Read more.
History tells us that after a wide-ranging year like 2009, the succeeding year is often much calmer, even range-bound. With many challenges and opportunities ahead, we look forward to participating as the trends unfold.
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