Market Perspective

Twelve Reasons to Buy Land Now – Reason Number 3

Posted by on May 23, 2012 in Ned Massie, Perspective | 0 comments

China China is a major force in the world economy.  It has grown to be the second largest economy in the world, second only to the United States. However, China has some real economic issues it is facing.  Consider the following: For probably the third time in the last 20 years, China’s banks are basically bankrupt and the Chinese government is going to have to recapitalize them; Because it is a centralized economy, they have distorted markets by purchasing far too much of the various commodities, as illustrated by a recent article in the Wall Street Journal that estimated that China now is carrying an inventory of copper 50% higher than normal because they continued to buy last year, even though their demand was actually declining… can you spell BUBBLE? They are seriously overbuilt with various real estate products that don’t match their population, and speculation in real estate is rampant. In the financial markets there is a lot of debate as to whether China’s correction will be a “soft landing” or a “hard landing”.  While there is a difference, it is almost a difference without distinction.  The fact is China’s economy will decline, which will reduce prices of commodities. How does that affect land values in Virginia? We believe that as a result of China’s coming economic dislocation, commodity prices will decline which will boost the economy in the United States.  Economic growth will increase the demand for land and the products come from land.  As a result, land prices will go up. This virtuous economic cycle in the USA will benefit those who buy land today.  You want to be one of them.  But not all tracts of land are created equal. We believe that those investors who buy good tracts of land today will look exceptionally brilliant in five years.  Let us help you.  We enjoy making our clients look...

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Twelve Reasons to Buy Land Now – Reason Number 2

Posted by on May 15, 2012 in Ned Massie, Perspective | 0 comments

Have Your Cake and Eat it Too Since 2008, in order to revive the American and world economy, the Federal Reserve (the Fed) has undertaken a variety of actions: They dropped interest rates from the more historically typical 6% per annum down to 0.25% per annum; They have made huge purchases of financial assets approximately tripling the size of their portfolio; They most recently have undertaken an exercise specifically to lower interest rates in 10-year Treasuries to historic lows in order to reduce mortgage interest rates to the 3.5% to 4% range in order to revive the housing market. We are a fan of Dr. Bernanke and his efforts because we believe that he and the Fed have done exactly what they are supposed to do: be the buyer of last resort and use monetary policy in order to revive the USA economy. By design an investor today has no incentive to save their money in a money market or similar account.  And yet cash sits in money market accounts earning 0.5% per annum and 10 year treasuries earn perhaps 2% per annum.  In fact, investors/savers appear to prefer money market accounts at banks over Treasuries. We believe that preference is based on two factors: (1) They can more quickly get their cash from a money market account and (2) The risk in the Treasuries or corporate bonds is that the next move in interest rates is going to be up which means that the value of those assets will come down. With land, that is not the case.  You literally can have your cake and eat it too.  In particular I call your attention to timberland.  Since America historically consumes 4% more fiber than we produce each and every year, there is an upward bias over a long period of time that timber prices will go up.  Yes, timber prices are currently down, but that reflects the current low level of construction. As construction revives we expect timber values will rise.  Land with growing timber currently offers an annual rate of return in excess of money market accounts or Treasuries while providing you with an inflation hedge and an asset (timber) that increases in volume and value annually.  Another benefit, when it rains the roof doesn’t leak and the plumbing never gets stopped up. We believe that those investors who buy good tracts of land today will look exceptionally brilliant in five years.  Let us help you.  We enjoy making our clients look...

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Twelve Reasons to Buy Land Now – Reason Number 1

Posted by on May 9, 2012 in Ned Massie, Perspective | 0 comments

The Economic Significance of Land The first reason is to understand the historical economic significance of land.  Simply put, land is the source of all wealth and the greatest store of wealth in the world. Every product that we Americans, along with every person in the world, consumes originates in land.  Even more importantly, although land is not a liquid asset, it is a store-house of value when viewed over a long term. In addition to the financial benefits of owning land there are certain emotional benefits.  We have had many clients over the years who have found that they could decompress from the stress of their lives by walking over a good piece of timber-land, riding over and looking at their crop land, the cattle in their pasture land, or fishing in the lake they own. Most important, good land tracts are the source of all wealth and the most secure store-house of wealth.  While land should not be the only asset in your portfolio – a portfolio of investments without land is a portfolio that is at risk. We believe that those investors who buy good tracts of land today will look exceptionally brilliant in five years.  Let us help you.  We enjoy making our clients look...

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Twelve Reasons to Buy Land Now – Introduction

Posted by on May 1, 2012 in Ned Massie, Perspective | 0 comments

Grant Massie Land Company has identified 12 reasons why this is the right time to buy good tracts of land.  In the American economy, there is normally $2Trillion (Tn) worth of cash sitting on the sidelines of the financial markets in money market accounts, etc.  Today, there is approximately $9Tn sitting on the sidelines, an extra $7Tn sitting idle earning probably a half a percentage point per year in a money market account or something similar.  That is especially odd when inflation is at least 2% or more per year. Uncertainty about the business environment, government regulations, and fear as to the “change” we are experiencing are valid reasons but there are others.  However, the fact remains that in the $15Tn GDP USA economy, there is an extra $7Tn earning basically nothing. Over the next three months, we are going to be talking about the 12 reasons why now is the time to buy land.  We feel strongly that this is the case and we are seeing some investors begin to move their money into land tracts.  But we would be remiss if we did not share with you the 12 reasons why you want to purchase a good piece of land now. We believe that those investors who buy good tracts of land today will look exceptionally brilliant in five years.  Let us help you.  We enjoy making our clients look brilliant....

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Forces Impacting the American Economy – Part 7

Posted by on Mar 8, 2012 in Ned Massie, Perspective | 0 comments

Having now reviewed what we believe are the six strongest forces impacting the American economy, it seems to us that we owe you our economic forecast for 2012.  Obviously, it is worth every cent you are paying for it and since you are paying nothing for it, that may well mean my forecast is worthless. However, combining the forces we have discussed over the previous six installments, our economic forecast for 2012 is: Continue to ignore the Case Shiller Index unless you are concerned with California, Florida, Arizona, and Las Vegas…housing prices in central Virginia will increase in 2012; New housing construction will rebound in 2012 to one million units nationwide and since the new housing industry is 27% of the American economy our economy will improve…BUT THIS RECOVERY WILL BE TEPID because the banks are on the sideline; The Fed will continue to be an active player in our financial markets because they will need to buffer us against the ECB miscues, past and future, so interest rates will end 2012 close to where they are today; Inflation is coming but the downdrafts of Europe and possibly China will keep it at bay for another year; Both Europe and China will muddle through 2012; Because of the disincentives and confusion from the Obama administration issuing over 4,000 regulations that they cannot legislate, small companies will minimize hiring and the incentives are for global companies to hire overseas not here in the U.S., hence even with “on shoring” job growth will increase but not significantly enough to reduce unemployment… probably 8% at the end of 2012; The commercial real estate market recovery will lag the residential market; Some land market segments will do well and others will suffer as each of the market segments is in a different cycle. What does all of this mean to a land seller in 2012? The recovery of the land market gives you the opportunity to reposition your investments for the next decade.  Not all tracts will accelerate in value at the same pace and some may not increase in value at all. What does all of this mean to a land investor in 2012? The best investments are made at the bottom of an economic cycle…not at the cycle’s peak…so your window of opportunity to make the best buy is passing now. Therefore, buy one high quality tract of land as an investment now – in five years you will appear Brilliant. Since not all tracts of land are equal, we are happy to help you determine the best strategy for your land investments.  We enjoy helping our clients look Brilliant.  Call us...

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Forces Impacting the American Economy – Part 6

Posted by on Mar 2, 2012 in Ned Massie, Perspective | 0 comments

We have been reviewing the three strongest negative and three strongest positive forces impacting the American economy.  After looking at the three strongest negative forces, we have previously looked at two of the strongest positive forces.  Now we will examine the third positive force: The New Housing Market: Since 27% of the American economy is based upon the construction of new housing units, both multi-family and single family, the American economy will not heal until new housing construction increases. Last year we forecast that in 2011 the construction starts for new housing units would reach 1 million units.  While the increase in activity at the end of 2011 moved us in the correct direction, we did not hit the 1 million unit figure. In the fourth quarter of 2011, multi-family construction began to kick in.  Additionally, the construction of new single family housing began to increase.  We expect both trends to continue to increase and that new housing construction will hit the level of 1 million units in 2012. That is still substantially below the 1.5 million to 2 million units that should be produced annually in the USA.  However, it is a vast improvement over the number of units produced annually during 2009 – 2011. When 27% of the American economy begins to grow, it commences a virtuous cycle that is as strong as the negative cycle that began in the fall of 2005 when the new home market began to collapse.  But this segment is still fettered. Therefore, the improvement in the American economy will be more tepid than we have seen in previous economic recoveries.  Remember, the first negative force we reviewed was that the American banks are reducing their loan portfolios which contracts the capital available, leading to a slower economy. While the land market recovery continues, let us help you find the right opportunity to reposition your land investments.  Call us...

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