Monthly Archives: April 2016

In Pursuit Of Higher Yield

In Pursuit of Higher Yeild

The Bank of Japan, the European Central Bank, and several smaller European authorities have ventured into the once-uncharted territory of negative interest rates. But what are negative rates, and how do they come about?

These banking authorities have had historically low interest rates for the last decade or more in attempts to stimulate their weak economic growth.  The results have been anemic.

So what does a negative deposit rate at the central bank accomplish?

It pushes down short-term rates on other types of lending. In theory, that is supposed to provide an economic boost. And, also in theory, it weakens the country’s currency.

One home mortgage customer in the Netherlands reported that his mortgage company paid him interest each month if he paid his principal payment on time. A good deal for the borrower, but not the holders of that currency.

It may surprise you where this Pursuit of Higher Yield brought these European investors.  One U.S. municipal bond trader reported recently seven European insurance companies opened accounts.  Most American investor thinks of municipal bonds as a lower yield.

However, the European insurance companies were comparing a negative interest rate to a 5.2% rate plus the most likely depreciation of European currencies.  All of a sudden this makes the U.S. municipals attractive.

Where does an U.S. based person or entity go in Pursuit of Higher Yield?  A review of the last ten years is helpful even though it is not a guarantee of future result and this blog is for educational purposes only.

With that disclaimer out of the way, let’s review data collected from McGowan Asset Management Group’s April 2, 2016 radio broadcast.

We heard a lot of doomer gloomers telling us after the Great Recession that the U.S currency was going to collapse and you better buy as much gold as you can stand.  In fact, the U.S. currency has appreciated over that time as deflation hit the commodities market.  They saw only an 8/10th of a percent increase.

What did better than commodities? Keeping your money in cash.

Here is how the bottom third of the market segments performed:

  • Cash paid 1.8% with a current yield closer to 1% per year.
  • Large Cap Stocks yield 4.1%
  • S. Treasuries yielded 4.2% over that ten- year period.

Next we have the middle third of the market segments in the 5% range:

  • Hedge Funds returned a mere 5.2% and so investors pulled $15.3 billion out of those funds in the first two months of 2016
  • Municipal Bonds yield was 5.2%
  • A Grade Corporate Bonds yielded 5.4%

Finally, we have the top third market segments average annual yield:

  • Emerging market stocks were pegged at 6%
  • Small Cap stocks returned 6.8%.
  • Corporate B Grade High Yield bonds yielded 8.2%.

What was top of the list may surprise you even after the 40% decline in value in 2008.  The top of the yield list was Real Estate Investment Trusts at 10.6% average annual yield over ten years. These trusts are required to return 80% of their Funds From Operation each year to unit holders.

What is even more amazing is what performed the best in the REIT sector.  There are five self-storage Real Estate Investment Trusts with a capitalization of $31.8 billion. These companies own less than 10% of this fragmented market.  A fragmented market is an inefficient market that provides great opportunity for those willing to do the work. Experts say it will be at least the year 2020 before the industry meets the current demand.

The five Self-Storage Real Estate Investment Trusts had a ten-year average annual return of 20.38%.  Is there any wonder so many are excited about the Self-Storage industry?

One large high-end local hotel chain sold their marquee properties and invested in what you ask?

Self-Storage.

If some of the smartest property owners have made the switch to Self-Storage, would it not be wise for you to learn why? Get 9 Little Known Secrets For Steady Real Estate Income by adding you email to the pithy newsletter update list at self-storageinsider.com

Click here to watch In Pursuit Of Higher Yield.

 

 

 

 

 

 

 

(Updated) Need Storage? The Answer Is The Boom In Self-Storage

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Business is booming for companies that lease out storage units to consumers. Rents are rising, most units are occupied, and competition is tame of the financial crisis, storage executives analysts say.  Note: This article was has been updated as of April 11, 2016.

Investors are bidding up the shares of industry leaders such as Extra Space Storage Inc., whose stock is up 34% through Monday, April 11, 2016 in a year when many other commercial real-estate firms have been hit hard and the broader S&P 500 is down 2.7% for the same period. Evercore ISI last week boosted its price targets for Extra Space Storage stock and the shares of two rivals.

Consumers seek storage space because of life changes that occur in good times and bad. Some in the industry refer to the 4Ds—death, divorce, downsizing and dislocation, which can include people finding new jobs, getting married or moving away or back home from college.

Demand for storage space appears steady and supply remains tight. Extra Space, the second largest self-storage company based in Salt Lake City, said recently it is approaching Peak Occupancy.  Public Storage, the largest publicly traded firm in the industry, reported March 31, 2016 a 94% occupancy rate and a 6.1% increase in rental income the first quarter of 2016.

Part of the reason for the tight supply is that building new units can take years. In one extreme example, it took Extra Space more than a decade to build one facility in Southern California, said Spencer Kirk, the firm’s CEO. Some communities are unenthusiastic about hosting storage facilities.

In conclusion…Now would appear to be a great time to enter the industry.

Closely-Guarded Secrets To Becoming Carefree Investor

How To Become Care Free Investor

Why Those Who Discovered This Are So Happy

The meeting was held at ElFenix in Dallas, Texas on March 15, 2016. This was spring break week and attendance was unusually low.  However, the meeting was quite lively and those in attendance were very engaged and excited to be there.  The meeting had a warmth and supportive atmosphere not common to many business luncheons.  Many of those in attendance were owners & investors of this asset class.

I have never been around a group of owners & investors who were so:

  1. Care free
  2. Stress free
  3. Disconnected from current market conditions concerns
  4. Happy
  5. Joyful
  6. Supportive of one another

Why have you not heard of this before?  Several reasons:

  • Generally, this is not a asset class promoted by Wall Street
  • Insurance salesman do not sell this product
  • This is not a product promoted by most brokers – in fact very few understand this class
  • Few people even notice this product type when they drive by it or ask if they should have this their portfolio

Here is a true story.  I contacted a broker with a major brokerage firm that I’ve done business with previously.  He said, “Bill, we just don’t sell that product here.”  Later, I discovered that his company had a national group active in this area and one of the top Texas brokers was in his office right under his nose.

So, it is apparent that this is a closely-guarded secret.  In fact, in the state of Texas there are only a handful of brokers who sell it.

One of these brokers told me, “Bill, I discovered this asset class 17 years ago.  Once I understood it, this is all I wanted to sell.”  I heard those words by several people, “once I discovered this asset class this is all I want to invest in or purchase.”

There are many reasons these owners & investors mentioned above are so care free.  One reason is that it does well in both good times and bad economic times.  Also, the loan default rate is low single digits.

Click Here to watch the above video The Closely-Guarded Secret To Becoming A Care Free Investor.

You owe to yourself to find out what these happy, care free owners & investors have discovered.  To discover what they know and and “Get Little Known Secrets For Steady Income” FREE go to billmoist.us