Market Perspective

Six Important Trends to Watch – Week 4

Posted by on May 1, 2019 in Ned Massie, Perspective | 0 comments

Residential Mortgage Rates: Following The Fed’s announcement that they will keep interest rates steady, residential mortgage rates dropped by about 80 basis points. Whereas in November 30-year mortgage rates were almost at 5%, the current interest rate on 30-year mortgages is in the very low 4% range. That does not sound like a huge difference, and you may wonder why residential mortgage rates impact the land market. But there is a significant relationship. Lower mortgage rates revive new home construction thereby reviving demand for land that can be developed into residential communities and timber. The revival is most obvious in the housing market. But the same pattern holds for whether it is commercial real estate or agricultural land. Please do not be lulled to sleep by this stability. We are going through a transition and this is the peak of the real estate market for this cycle. It is critical to remember that land is the source of all wealth. Every product that we humans consume originates with land. Not all tracts of land are equal in quality and portfolio management requires every investor to hold some cash for liquidity. But historically, long term the best investment is...

read more

Six Important Trends to Watch – Week 3

Posted by on Apr 24, 2019 in Ned Massie, Perspective | 0 comments

The Federal Reserve: Earlier this year we expressed concern that The Fed had been too aggressive in their Quantitative Tightening (QT). Apparently, The Fed realized that fact and has announced that they are going to keep interest rates steady for a period of time. There were a variety of economic reasons given for doing so, an inverted yield curve, low inflation, etc. We believe that The Fed will be on hold from now until after November of 2020 because The Fed does not want to be seen as attempting to influence politics. The fact that The Fed has indicated that they are on hold for 2019 has allowed interest rates to decline, and that in turn has stimulated the real estate industry. This very positive economic force will probably last until the end of 2020. However, after the 2020 election and two years of stability, The Fed will probably once again start raising interest rates and attempt to reduce the assets on their balance sheet. It is critical for the future health of the United States economy that The Fed diminish their involvement in the financial markets by reducing the amount of financial assets on their balance sheet. But higher interest rates mean lower real estate values. Therefore, we believe the next 12 – 16 months is the peak of the real estate market for this economic cycle. Anyone interested in selling land should see this as an attractive time to sell it, not wait until The Fed again starts their QT. It is critical to remember that land is the source of all wealth. Every product that we humans consume originates with land. Not all tracts of land are equal in quality and portfolio management requires every investor to hold some cash for liquidity. But historically, long term the best investment is...

read more

Six Important Trends to Watch – Week 2

Posted by on Apr 17, 2019 in Ned Massie, Perspective | 0 comments

Timberland: Over the last few years, the stumpage value of timber has either been stable or declined. The reasons for this situation are the following: Imported timber is significantly less costly than timber grown here in the United States; The mills that use fiber have diminished in number and are now located so that they have much less competition between mills for the same fiber; There has been such aggressive planting of timber over the last two decades that there is now a surplus of timber compared to demand. Like any commodity, the demand for timber goes through peaks and valleys. The current combination of the three above-mentioned items is not a short-term situation, but rather has some long-term aspects. A stable price for timber means land prices are relatively stable. However, it may take some period of time before the supply versus demand shifts, and we once again see rising timber prices. It is critical to remember that land is the source of all wealth. Every product that we humans consume originates with land. Not all tracts of land are equal in quality and portfolio management requires every investor to hold some cash for liquidity. But historically, long term the best investment is...

read more

Six Important Trends to Watch – Week 1

Posted by on Apr 11, 2019 in Ned Massie, Perspective | 0 comments

Agricultural Land: A recent analysis I read examined agricultural market trends with cash grain farmers. In that report, the analyst stated that: Since 2010 farms have faced increased costs of about 35% In 2014 the value of the cash grains they grow diminished by about 50%. The increased cost is driven by the fact that two large companies control about 72% of the corn and soybean seed sales in the United States. Obviously, a lack of competition means they have exercised their pricing power. As a result, the number of bankruptcies of farmers in the Midwest is increasing and land values in the Midwest have declined. The good news for this segment of the agricultural industry is that there is a new company called Farmers Business Network Inc. It is a start-up that is selling a non-GMO but genetically enhanced seed, at prices that are significantly lower than the two major seed companies, Dow DuPont and Monsanto. The founders of the new company are techies so they are utilizing technology to allow farmers to see the yields other farmers are enjoying from these new seeds. One farmer interviewed indicated he was converting all of his land to seed from this new company because he could be paying less for his seed and getting a higher price for the non-GMO crop. It is critical to remember that land is the source of all wealth. Every product that we humans consume originates with land. Not all tracts of land are equal in quality and portfolio management requires every investor to hold some cash for liquidity. But historically, long term the best investment is...

read more

The Forces that Will Impact the American Economy and Therefore, the Land Market in 2019 – Week 13

Posted by on Apr 3, 2019 in Ned Massie, Perspective | 0 comments

The Biggest Medical Beta Test in Our History: An article by Alex Berenson in the Wall Street Journal on January 5th, 2019, discussed at length how shrewd lobbying and politicians seeking popularity has resulted in the acceptance of Marijuana (MJ) and MJ derivatives being used for medicinal purposes. I thought we had an Food and Drug Administration (FDA) to control that process. The FDA process is so severe as it strives to protect Americans that the cost of the process makes new drugs expensive. The statistics on the effects of using MJ are a huge source of concern. Studies discussed in the article highlighted significant increases in psychosis and violence. “Popular” does not always mean “safe”....

read more

The Forces that Will Impact the American Economy and Therefore, the Land Market in 2019 – Week 12

Posted by on Mar 27, 2019 in Ned Massie, Perspective | 0 comments

Energy Market: Electricity: Inexpensive electricity is a strong economic advantage for the USA. Most of the new electrical production has been via natural gas. The natural gas supplies in the United States are huge. What is lacking are the pipelines to move that natural gas to where it can be consumed to benefit our economy. The cost of electricity, however, is increasing because of government subsidies forcing companies to generate electricity using solar and wind power. One recent article highlighted how the cost of generating electricity by solar and wind can be as much as 10 times the cost of generating electricity via natural gas. Tax subsidies are not free, they are paid by the taxpayer. The country in this world that has made the greatest commitment to solar electrical generation is Germany. Germany’s electrical costs are the highest in the world by several times. That cost is now negatively impacting their economy. The question no one is asking is, “why are we Americans squandering our economic advantage of inexpensive electricity in a competitive global...

read more