Market Perspective

Forces Impacting the American Economy – Part 2

Posted by on Feb 3, 2012 in Ned Massie, Perspective | 0 comments

From our perspective there are six strong forces, three negative and three positive, that in combination predict the American economy in 2012.  In this series we are looking at each of the forces individually, both negative and positive.  Here is negative force number 2: Negative Force II – Europe.  Although they are currently financially stronger than the European banks, anyone who believes that our American banks are not at risk to the potential contagion of European economic distress is not really paying attention.  Money today moves at the speed of a single global electronic market. It is our opinion that Chairman Ben Bernanke has been brilliant during this economic crisis, especially when compared to Mr. Trichet of the ECB (European Central Bank).  While the former ECB Chairman often lectured Dr. Bernanke, as a result of Trichet’s bad decisions, Europe is headed back into recession while the U.S. is in recovery. Wondering how deep a recession Europe will experience means Europe is an economic negative force.  In our global economy, the economic water is always trying to find its equilibrium point. The fact is that the European economy is or will be in recession in 2012.  The question is… will the European Recession of 2012 be deep enough to cause the U.S. to go into recession as well? We will give our answer at the end of this series. In the meantime, the recovery of the land market gives you the opportunity to reposition your investments for the next decade.  Since not all tracts of land are equal, let us help you determine your best land investment strategy.  Call us today....

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Forces Impacting the American Economy – Part 1

Posted by on Jan 27, 2012 in Ned Massie, Perspective | 0 comments

From our perspective there are six really strong forces, three negative and three positive, that in combination predict the American economy in 2012.  In this series, we will look at each of the forces individually, both negative and positive. Negative Force I – The Banking Industry Not just here in the United States, but around the world, banks are de-leveraging.  In some cases, such as here in the US, the pressure to do so is driven by bank regulators.  The bank regulators are insisting that banks get their capital in proper ratio to the amount of loans (which banks call assets) on their books. In Europe the pressure is also from the market because of recent negative impacts to the stock of banks that raised capital by selling additional stock.  Since banks cannot raise more capital by selling stock, one alternative is reducing the amount of their loans. Either way, banks are reducing the amount of loans on their books.  The bottom line for the American economy is that until banks INCREASE their lending, which expands the available amount of credit, the economy will continue to struggle. Therefore, this is the most negative force.  It will probably slowly shift as individual banks get healthy enough to begin to INCREASE their loans.  That slow shift means a slow recovery. We are happy to help you determine the best strategy for your land investments.  Call us...

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Land will be THE BEST Investment for the Next 40 Years – Part 3

Posted by on Jan 19, 2012 in Ned Massie, Perspective | 0 comments

As we discussed in the previous articles, in 1964 my father bought 80 acres in the country for approximately $65 per acre.  At the time he was convinced that he had made a bad decision. 47 years later, after the value declines experienced in the Great Recession, that 80 acre tract of land is worth 40 times what he paid for it.  Is there any other asset or investment he could have made that produced a higher rate of return over the 47 years? It is important that we examine some of the reasons why his investment rate of return was so impressive: Inflation – Certainly played an important part in the increase in value but is far from the whole story.  Good land is a phenomenal hedge against inflation and the land that he bought absolutely accomplished that investment objective. Increased Demand – Population growth means increased demand for food and fiber.  When the land was purchased by my father, its highest and best use was crop land and timber land.  Today, the land is mostly timber land but it has other potential uses as well.  As the population of metro Richmond has increased the edge of metro Richmond has gotten a lot closer to my father’s 80 acres.  Therefore, reflecting what land can provide, the demand for land has increased over the 47 years. Of the two components, the increase in demand for a variety of reasons far outweighs the inflation in terms of determining an increase in value of 40 times the original investment.  In today’s uncertain world, there is a lesson to all those who want to place their money where they can get the highest rate of return and be secure. We enjoy helping folks with their land investments because we understand that not all tracts of land are created equally.  Call us, we would like to help...

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Land will be THE BEST Investment for the Next 40 Years – Part 2

Posted by on Jan 11, 2012 in Ned Massie, Perspective | 0 comments

Recently, I had the occasion to go through some records accumulated by my father.  In his financial records I found a file on his purchase of some land adjacent to his farm.  Reading those documents brought back a specific memory. One evening in December 1964 my father, having been unusually quiet during dinner, put his fork down on his plate, turned to my mother and said, “Jayne, I’m not sure why I agreed to buy that land we closed on today.  It will never be worth $65 an acre.” I recall that he had been teased by the men at church about his purchase because they felt he paid too much.  In 1964, $5,000 was a princely sum to pay for 80 acres out in the country. But look at the facts… 47 years later after the value declines of the Great Recession, that 80 acre tract of land is worth 40 times what he paid for it.  Is there any other asset or investment he could have made that produced a higher rate of return over the 47 years? We enjoy helping folks with their land investments because we understand that not all tracts of land are created equally.  Call us, we would like to help...

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Land will be THE BEST Investment for the Next 40 Years – Part 1

Posted by on Jan 6, 2012 in Ned Massie, Perspective | 0 comments

In an uncertain world it is easy to become confused by the cross currents in the current global economy.  The easiest illustration of that fact is the stock market in 2011. In 2011 the best one word description for the stock market is volatility.  We saw huge ups followed by severe downs and at the end of 2011 the stock market indices were remarkably close to where they started 12 months previous.  In other words, there was a lot of activity for very little result. No wonder investors are both confused and afraid about where they should put their money to work.  As a result, the vast majority of investors are putting their money in treasury bills, treasury notes, and bank CDs.  When you think about it, people are selecting financial instruments with rates of return less than the rate of inflation because they value access to their cash as more important than yield. In a normal American economy there is approximately $2 trillion sitting on the sideline.  The last number that I saw for the amount of cash on the sidelines is $9 trillion.  So the fear and uncertainty in the economy today is worth approximately $7 trillion, or three and a half times more than the norm. In the midst of all that confusion, let me give you facts that should guide your investment decisions: In 2011 demographers say that the world population reached 7 Billion; Those same demographers estimate that in 2050 the world population will be 9 Billion; In other words, over the next 40 years, world population will increase by 2 Billion people; Restated, in 40 years there will be 2 Billion more mouths that need to be fed, and those folks will need places to live, work, and play. Every product we humans consume originates in land.  As a result, the demand for land will increase significantly over the next 40 years because of the need to produce more food and fiber. We enjoy helping folks with their land investments because we understand that not all tracts of land are created equally.  Call us, we would like to help...

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Roller Coaster Economy

Posted by on Dec 30, 2011 in Ned Massie, Perspective | 0 comments

The last several years have seen more ups and downs in the economy than the best roller coaster ride at any theme park in the United States.  The fact is that if you are being buffeted by those trends, there is a long line of folks who feel the same way.  Economic whiplash seems to be a universal condition. In an economic storm of this magnitude, it is important to find a safe haven.  Traditionally, US Treasury bonds and notes have been considered a safe haven by investors around the world.  Likewise, gold has been a very popular safe haven.  However, both are suspect today. US Treasuries could easily end up being devalued by the amount of money that the Federal Reserve is printing.  That condition will be ameliorated somewhat by the fact that most other central banks are behaving similarly.  But my guess is that at some point the wheels will come off of that process as it is controlled by humans and humans have this ugly habit of making mistakes. Gold is another traditional safe haven.  However, the rules that were put in place in 1936 relative to the commodity markets began being changed under the first President Bush and continued through Clinton to allow investment banks to get into the commodity markets in a big way.  As a result, the commodity markets today have evolved into another form of gambling. As a result, we see huge swings in commodities and in the middle of those huge swings, people are trying to say that gold (another commodity) is a safe haven.  I do not believe it.  It is now just another lottery ticket. In Virginia, 50% of our land is wooded and timber production has many fine attributes that make it a “safe haven”.  Consider the following: Trees grow larger every year regardless of interest rates, commodity prices, the price of gold, or the value of other commodities; We Americans annually consume about four percent more wood fiber than we harvest which builds in a long-term bias towards higher wood fiber prices; Land is tangible; And on a really stressful day, you can go for a walk and enjoy the world God created…try that with a Treasury note or gold. Looking for stability in an uncertain world, your best investment is a great tract of timberland.  Call us, we welcome the opportunity to help you....

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