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>>> I Put Half Of My Net Worth Into These Hard Asset Investments
Seeking Alpha
Nov. 14, 2020
by Jussi Askola
https://seekingalpha.com/article/4388468-i-put-half-of-net-worth-hard-asset-investments
Summary
Most investors put their net worth in financial assets like stocks, bonds and cash.
I prefer to invest mine in hard assets.
You can get exposure to hard assets through publicly-traded vehicles.
Below I explain why I have 60% of my net worth in hard assets, and why you should do the same.
Most investors have the vast majority of their net worth in financial assets. Typically stocks, bonds and cash. These assets are extremely easy to invest in, which explains their popularity. But they come with a lot of downside too. From volatility to returns that barely beat inflation, they come with various disadvantages, depending on which asset class you’re talking about.
Let’s take each of the three most popular financial assets one by one.
Cash. This is like throwing money down the drain. The average savings account has only a 0.06% interest rate according to the FDIC. With inflation running at 2%, you’re losing purchasing power at that rate.
Bonds. They pay nothing or next to nothing after inflation and taxes. They’re better than cash, don’t get me wrong. But all you’re doing with bonds is maintaining your net worth, you’re not growing it. Long-term corporate bond ETFs (VCLT - BLV) yield just around 3%.
Stocks. Stocks tend to outperform cash and bonds over time. But they’re extraordinarily complex. To truly understand a stock, you need to understand all the moving pieces of a business that may have dozens of subsidiaries, subsidiaries with subsidiaries of their own, foreign operations, and more. And the risk is significant. Putting a large chunk of your net worth in the next Enron is a sure way to evaporate your savings. Finally, today's valuations are astronomically high with the S&P 500 (SPY) trading at 36x earnings, which is over 2x its historical average. Put differently, stocks are now priced at a 2.7% earnings yield even as we go trough a major crisis:
So, if all of the above assets have major problems with them, where do you put your net worth?
Hard Assets.
“Hard assets” is a term for tangible assets that have physical substance. Hard assets physically exist in the world and typically have some practical real-world use. The total list of hard assets would be far too long to reproduce here. But some good examples include:
Real estate.
Pipelines.
Farmland.
Timberland.
Airports.
Toll roads.
Other miscellaneous types of infrastructure.
All of these assets fulfill a real-world need and therefore often have stable, dependable cash flows. Not all hard assets are equal in terms of their income potential. Some are more dependable than others. But as a class, they offer high yield with relatively lower risk.
You might say: “sure, hard assets are good, but I can’t afford a second mortgage… so how do I get my exposure?”
The answer is simple: Through publicly-traded vehicles like REITs. REITs trade on exchanges like stocks but are built on portfolios of hard assets. They typically have mandates specifying that they pass a certain amount of their net income on to investors in the form of dividends. And they’re run by management teams, so you don’t need to worry about physically managing the properties yourself. By buying REITs and other REIT-like entities, you can get quick exposure to a diversified portfolio of hard assets. This is where I have over half of my net worth today, and I don’t plan on changing that any time soon.
Why Favor Hard Assets Over Stocks, Bonds, and Cash?
Reason #1: Yield
The cold hard truth is that there’s just not a lot of yield out there these days. The 10-year Treasury yields a minuscule 0.83%, while the SPDR S&P 500 ETF (SPY) yields 1.6%. The Nasdaq, meanwhile, is lagging both: The Invesco QQQ Trust ETF (QQQ) yields just 0.51%. In this market, the yield is hard to come by.
Unless that is, you look into REITs. REITs as measured by the Vanguard Real Estate ETF (VNQ) yield around 4%. That’s the market as a whole. Individual REITs can yield anywhere from 6% to 8%. If you’re really adventurous, you can find REITs yielding as much as 10%.
Our Core Portfolio is heavily invested in REITs and other hard assets. We target an ~8% yield a ~75% payout ratio. Generally, our actual portfolio yield and payout ratio are close to these targets.
Reason #2: Higher Total Returns
It’s possible to generate very high total returns with hard assets. If you buy real estate with a 6%-7% cap rate and finance half at 3%-4%, you get a 10% yield. That’s a strong return even with no price appreciation in the equation. Throw in a modest 2%-3% annual gain in there, and you’ve got a 15% a year investment.
You can do the same by buying hard assets through REITs and other publicly traded hard asset companies. Case in point: Brookfield Asset Management (BAM). Over the past 30 years, it has earned a 16% annualized return, compared to just 7% for the S&P 500.
Another example: Realty Income (O) has nearly quadrupled the returns of the S&P500 since its IPO in 1994:
On average, REITs have outperformed nearly every other asset class over the past 20 years leading up the COVID-19 crisis. When you earn high dividends, not much growth is needed to earn double-digit total returns:
Reason #3: Valuation
Finally, we get to valuation. The sad truth about the markets these days is that steep valuations are starting to become the norm. The vast majority of tech stocks trade at more than 10 times book value. Big players like Netflix (NFLX) and Amazon (AMZN) trade at anywhere from 70 to 120 times earnings. These kinds of valuations can’t persist forever. Even with strong earnings growth, it’s hard to justify a 120X multiple. And with tech making up an ever-larger percentage of the S&P 500’s market cap, we’re really talking about “stocks” as a whole here.
Hard assets, by contrast, are cheap relative to cash flow at the moment, particularly if you get your exposure through REITs. In many cases, REITs are down for the year in 2020, and priced at up to 50% discounts to the underlying value of their assets. To be sure, REITs ran into some collections problems that dampened earnings early in the pandemic. But they’re beginning to turn that around even as valuations remain opportunistic.
Smart Money is Rushing into Hard Assets
If you want to know where to invest, you need to look at where institutional investors are putting their money. Institutional investors own about 80% of the public equity market, and a growing share of investments in hard assets.
That institutional investors are increasing in clout is obvious. From 2008 to 2018, institutional capital nearly tripled. It’s expected to rise to $100 trillion by 2030.
That a large share of this capital is going into hard assets also is evident. Many pension funds and other big institutions favor yield in their portfolios as income is paramount for institutions with regular cash expenses. As mentioned above, there’s barely any yield these days in stocks and Treasuries. So yield-hungry institutions will likely move into hard assets in the years ahead. That may include direct investments as well as positions in REITs.
How to Profit from Hard Assets
Once you’ve decided you want exposure to hard assets, there are several asset classes you can look into. In no particular order:
Commercial real estate. Investments in apartment communities, e-commerce warehouses, data centers, or even casinos. AvalonBay Communities (AVB) and Digital Realty (NYSE:DLR.PK) would be classic examples.
Airports. Believe it or not, there are publicly-listed airports you can buy today on equity markets. Grupo Aeroportuario del Pacifico (PAC) is an example of one.
Timberland and farmland. You can invest directly in Timberland and Farmland through LPs and REITs like Gladstone Land (LAND) and Catchmark Timber (CTT).
Energy pipelines. Companies that transport oil and gas by pipe systems. Examples include the 10%-yielding Enterprise Product Partners (EPD) and Energy Transfer (ET).
Windmills. You can invest in alternative energy projects through partnerships like Brookfield Renewable Partners (BEP).
All of the hard assets listed above have high-income potential and have delivered steady growth over time. With a diversified portfolio consisting of these types of assets, you could outperform the markets.
That’s not to say there aren’t risks with hard assets. On the contrary, there are several you need to look out for. Retail REITs are vulnerable to industry trends like e-commerce, which has wreaked havoc on lower quality mall REITs CBL (CBL) and Washington Prime Group (WPG). Pipelines are subject to regulatory scrutiny and often find their projects delayed for long periods. Airports see revenue dip during recessions. The value of windmills decreases over time.
Because of these risk factors, you need to be careful about which hard assets you invest in. It’s not a simple matter of buying any hard asset and hoping it will deliver a good return. Nor is it as simple as buying a REIT ETF (VNQ) — with VNQ, you won’t get the 6%-8% yields mentioned earlier. Instead, you need to be selective and build a reasonably diversified portfolio of hard assets with the desired characteristics.
Our Hard Asset Portfolio
Over the years, we have built a portfolio of REITs and REIT-like entities that delivers on three key metrics:
High Yield
Low Payout Ratio
Substantial Discount to NAV
With this portfolio, we generate approximately $10,000 in annual income on just $160,000. You can see how this breaks down in the table below.
These are the characteristics of our Core Portfolio in November 2020. In today’s market, this is quite achievable. However, you may struggle to build a portfolio with these characteristics if you wait too long. With ultra-low interest rates, capital will flood into hard assets. Valuations will surge and yields will compress. Put simply, the smart money is getting into hard assets today — not waiting for tomorrow.
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Kay so why have Commodities been so robust and what's their future be ?
1yr
20yr.....LOOK !.....* At how the 1.46 Top began the whole thing !
Boy.....Why, the 1.24 Level just gave away.........* See 1st chart above
Lumber / Wheat / Copper / Rice / Nails and other stuff
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=163219851
>>> Counterfeit Battles Continued in May
Numismatic News
June 7, 2020
https://www.numismaticnews.net/article/counterfeit-battles-continued-in-may
One of the 10 fake silver American Eagles sold to an unsuspecting victim who responded to an unsolicited advertisement on Facebook. (Image courtesy of fraud victim.)
A fraudulent advertisement for bullion coins on Facebook, fake encapsulation holders, and requests for expert help from federal agencies kept the non-profit Anti-Counterfeiting Educational Foundation busy during May 2020.
“Among the cases, we’re investigating is the sale of 10 fake one-ounce silver American Eagles,” said Doug Davis, director of the ACEF Anti-Counterfeiting Task Force. “They were unsuspectingly purchased by someone who responded to an advertisement that popped up while he was checking his Facebook account. All 10 coins he received in response to his order were counterfeit.
“The victim provided us pictures showing one coin being cut in half to reveal it was composed of base metal, not silver,” explained Davis, a former Texas police chief. “We have provided information about the seller and the potential manufacturer to the U.S. Treasury Office of Inspector General, Customs and Border Protection (CBP), and to the Secret Service.”
Another case ACEF officials received in May involved counterfeit coins housed in fake Numismatic Guaranty Corporation (NGC) and Professional Coin Grading Service (PCGS) encapsulation holders. The victim spent $8,000 responding to an offer made on Mercari, an e-commerce platform. ACEF contacted NGC and PCGS to verify the holders were not genuine, and the information has been provided to federal law enforcement.
ACEF, which operates solely on donations from the public, cautions that the number of websites offering counterfeits for sale continues to grow.
“Analysis indicates that many of the websites are staying operational for only a few days and then shutting down, making it difficult to trace,” said Davis. “However, we have been able to determine they just turn around and open a new website under a different name. We have also been able to identify other third-party platforms that are being used to distribute counterfeit coins.
“We have been requested by CBP to send a list of websites selling counterfeit coins and precious metals so their investigators can use this intelligence information to identify manufacturers and importers,” he explained. “CBP and Secret Service have several cases being worked in the Los Angeles/ Long Beach area, and volunteers from the ACEF Anti-Counterfeiting Task Force have provided expert assistance there.”
ACEF volunteers also are providing expert help to Secret Service agents in San Francisco who are working on counterfeiting cases there and to CBP agents investigating seized numismatic fakes in the El Paso, Texas, area.
“Remember, if you don’t know precious metals, you’d better know a reputable seller, such as experts affiliated with the Accredited Precious Metals Dealer program,” said Davis.
More information on the program is available at www.APMDdealers.org.
Collectors, dealers, and the general public are encouraged to report any counterfeits or counterfeit fraud activity by email to Davis at the Anti-Counterfeiting Educational Foundation at Doug@ACEFonline.org.
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>>> Rare coin of Britain’s King Edward VIII fetches record $1.3M
today
AP
1-18-20
https://apnews.com/c641502744b24170f138ad3f789d7f9e
LONDON (AP) — One of the world’s rarest coins, a gold piece bearing the image of Britain’s King Edward VIII before his abdication, has sold for 1 million pounds ($1.3 million), setting a new record for a British coin.
The historical oddity shows Edward, the uncle of Queen Elizabeth II, before he relinquished the throne in 1936 to marry American divorcee Wallis Simpson.
The buyer was a private collector who wanted his identity kept secret. He told the BBC it was a “once-in-a-lifetime” opportunity.
Rebecca Morgan, head of collector services at the Royal Mint, said the record price was not surprising.
“The Edward VIII sovereign is one of the rarest and most collectible coins in the world,” Morgan said Friday.
The 22-carat gold coins were never released to the public. The Royal Mint says only a handful are known to exist.
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Gold coin ideas -
A few new silver coin ideas -
>>> A 125-year-old dime just sold for $1.32 million
19th August 2019
by David Williams
CNN
https://edition.cnn.com/style/article/rare-dime-auction-trnd/index.html
A Utah businessman paid $1.32 million for a dime last week at a Chicago coin auction.
It wasn't just any 10-cent piece; the 1894-S Barber Dime is one of only 24 that were ever made, according to Stack's Bowers Galleries, which held the auction Thursday night.
Only nine of the coins are confirmed to still exist.
The coin was purchased by Dell Loy Hansen, who also owns the Real Salt Lake MLS team.
Hansen is an avid coin collector and is working toward a collection that includes an example of every coin ever made by the US Mint from 1792 to the present, said John Brush, president of David Lawrence Rare Coins, who is helping Hansen curate his collection and was in Chicago to bid on the dime.
"When you're bidding a million dollars on a coin, it's nerve-wracking," Brush said. "You kind of get the sweaty palms, because that's a lot of money."
Brush said Hansen needs only six coins to complete his collection, but they are not available for sale.
PCGS
@PCGScoin
One of the most rare & popular branch mint coins this #PCGS PR63BM graded 1894-S Dime once resided in the collection of #LosAngeles icon, Dr. Jerry Buss, and will be offered for the first time in 31 years at the ANA World’s Fair of Money via @StacksBowershttps://bit.ly/2JanJKz
The 1894-S is known as a Barber Dime because it was designed by engraver Charles E. Barber, who designed many coins for US Mints.
The coins were struck at the San Francisco Mint on June 9, 1894, the Professional Coin Grading Service said in a statement. The service certified the coin's condition and authenticity.
Another 1894-S dime sold in 2016 to an anonymous buyer for almost $2 million.
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'Germania / Allegories' silver coins are now up to $41.99 on Apmex, and should climb considerably more. I got some a few weeks ago for $28.95, so not bad for such a short holding period.
I figure they'll be up to $75 or so once they sell out. The previous coin in the series is up to $120 on Apmex (!), which is pretty ridiculous, but it was the first in the series, so latecomers are forced to pay up.
Here's the third in the series (see below), due in Sept, which also looks like a winner. Folks on You Tube have called this series the 'Germania Mania'.
Mythology has been a big theme for some time with bullion series coins, and a lot of historical themes.
| Name | Symbol | % Assets |
|---|---|---|
| BHP Group Ltd | 4.96% | |
| Nutrien Ltd | 4.78% | |
| Exxon Mobil Corp | 4.59% | |
| Archer-Daniels Midland Co | 4.18% | |
| Shell PLC | 4.00% | |
| Corteva Inc | 3.46% | |
| Chevron Corp | 3.32% | |
| Glencore PLC | 2.76% | |
| TotalEnergies SE | 2.64% | |
| Rio Tinto PLC Registered Shares | 2.62% |
