Building an empire on distressed assets

Posted July 19, 2011 at 3:55 am

by Anthony Effinge

Andy Beal’s road to becoming a billionaire, doing deals with the likes of Carl Icahn and Donald Trump, runs straight through the slums of Newark, New Jersey.

It was 1981, and Beal, then a 29-year-old vulture investor, was scoping out two 16-story apartment buildings owned by the U.S. Department of Housing and Urban Development. The bricks were chipped and bulging off the exterior of the buildings. Tenants had pried open the elevator doors and thrown furniture down the shafts.

Beal liked what he saw.

He and a partner bought the towers for $25,000 and a promise, backed by a $2.5 million letter of credit, to fix the bricks. They did the repairs — employing armed guards for protection when visiting the apartments — and never tapped the credit line before selling the buildings two years later to a New York doctor for $3.2 million, Bloomberg Markets magazine reports in its August issue.

In the past three decades, Beal has made a fortune buying distressed assets. He snapped up bonds of power companies during the California blackouts in 2001, debt backed by jetliners following the 9/11 terrorist attacks and billions worth of commercial and real estate loans after global credit markets froze in 2008.

In between, the investor with a restless mind started a company to build rockets and beat a rotating team of pros at Texas Hold ’em in the world’s richest poker game.

Beal’s focus on beaten-down loans makes him look like a hedge-fund manager. He’s not; he’s a banker [continue]…

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Why I Don’t Watch CNBC

Posted July 12, 2011 at 3:55 am

by Marc Lichtenfeld,
Investment U Senior Analyst

This week at a meeting in New York, Investment U’s Chief Investment Strategist, Alexander Green, told a crowd of investors that they shouldn’t watch CNBC.

I couldn’t agree more.

As Alex put it, “CNBC’s goal is not to make you money, but to sell advertising.” While I believe that most of the reporters are committed to doing their best on a story, the structure of CNBC is to keep you on the edge of your seat, depending on them for information on what to do next.

  • The jobless numbers were higher than expected – what do you need to know to keep your portfolio safe?
  • Inflation ticked higher – can your portfolio withstand a higher inflation environment?
  • How should you get your portfolio positioned before the Fed meeting next week?

It reminds me of an old bit by comedian Tom Kenny (who went on to fame and fortune as the voice of SpongeBob SquarePants). Kenny talked about how sensationalized the commercials are for your local news. No matter what the story was, the voice-over would say, “Would you survive? Would your family survive?”

And then the scenarios became even more ridiculous. “What if you were in an earthquake, trapped in a store that sold nothing but knives, propped up on flimsy shelves made of jagged glass? Would you survive? Would your family survive?”

CNBC Wants a Reaction to Every Market Hiccup

That’s essentially what CNBC is trying to do. They want you to live in fear and react to every little hiccup in the market so that you’re glued to their network in order to receive the investment advice from their guests and anchors.

But if you make just one move to improve your portfolio’s performance this year, it should be turning off CNBC.

In fact, you should tune out most of [continue]…

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A Decade of Discovery: My Investment Journey

Posted July 10, 2011 at 7:30 pm

by Andrew Nyquist

For many, the tech bubble was painful.  But in the larger scheme of things, it was all relative, part and parcel to the journey… 

It was the late 90’s and I was fresh out of college, hard at work (and play), and excited to make a buck or two in the tech fervor.  I remember coming home from a trip to Costa Rica to celebrate Y2K, and overhearing my parents talk about their Munder Tech Fund and how much it was up.  My mom said something to the effect of, “It’s just amazing!  We must be up 50-60 percent in a matter of months.”  And my dad followed, ” Yeah, it’s pretty awesome.” 

I was still [very] green, but wanted to sound cool, so I gave them a few crappy stock picks and told them to enjoy it while it lasts.  I’d heard my brother wax conservative on the market a couple months prior, and being that he had just received his JD/MBA, and was sharp as a knife, it felt like the right thing to say.  I didn’t know what it meant at the time, but the world would soon find out.  From 1999 to 2001 I honed my skills trading speculative tech names like Brightpoint, Inc. (CELL), Texas Biotechnology, and Cybercare. 

Yes, there we’re ups, there we’re downs, and there were lumps.  But, all the while I became more interested and fascinated by the markets, weaving my way from a passive investor to an interested investor (continue reading for more color).  In early 2001, I remember staying up all night exploring mutual funds one by one, attempting to land the best of the best.  And, even though this wasn’t going to get me rich, I broadened my investment terminology and learned a lot about asset allocation in the process.
 
The markets were structurally weak when 9-11 arrived, so a 10-15 percent flush came quickly upon the markets reopening.  I remember bracing for that moment, not realizing how fortunate I was to be early (i.e. young and dumb) in my investment career. 

I didn’t realize that the [continue]…

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Profit With the Purple Crayon

Posted July 7, 2011 at 3:55 am

by Barry Goss
an excerpt from our June 3rd WV member update:

There’s one big compelling reason — actually the only reason besides their music channel — for me (and maybe you) to be on Yahoo.com these days.

It’s because of an ex-hedge fund manager (a successful trader for the past 12 years) who made headline news spewing out some choice words to a fellow CNBC contributor back in 2009.

The details on what he said aren’t important (you can look it up). But, while being part of a network who operates under a pre-defined agenda, Jeff Macke just got too politically incorrect.

Like the boy who said the Emporer had no clothes, Jeff, while being part of CNBC’s Fast Money, got hung out to dry for saying what most of us were/are thinking about how the news is reported.

He, as a guy never afraid to be a straight-shooter and take a contrarian trade, got strung up by his thumbs for saying the obvious at the time.

Now he’s back, more outspoken and funnier than ever, as part of Yahoo! Finance’s new daily all-out, roll-up-your-sleeves, dive-in investment show called Breakout.

My favorite segment is his Purple Crayon (latest episode, How To Save The World)

In his words:

“In emotional markets, it’s often best to take a step back and view the situation as dispassionately as possible. For some, that means a stiff drink. For others, it’s a long walk or time with the kids. For me, the best way to remove the emotion of the market is by drawing pictures with a purple crayon. It’s a habit that works out particularly well for me since I can actually call coloring ‘work.’” – Jeff Macke

Jeff, never the one to let himself drive himself to paralysis by analysis, is one of the most non-technical technical / macro-charting commentators you’ll see these days.

Most importantly, he tells you how to think in grounded, common-sense ways about what the market is giving you, instead of trying to be in and out of certain investments because of what you think it should be doing.

In tandem with what I just gave you above, about not judging the market for what you wish, or think, it should do, Jeff cautions like this:

“If you’re looking for someone to decry this trend as a chilling portent of a stock market Armageddon to come, you’re in the wrong place. The market is neither good nor bad. It just is. Specifically, the market is a no-holds-barred exercise in Darwinian survival of the fastest, smartest, coolest and best-informed.

“The stock market is also rigged in favor of those who have some sort of ‘in.’ Markets are and always have been tilted in favor of the most obsessed and capable players.” – Jeff Macke

So, it’s that obsession… that sustained superior know-how, amongst select traders and investors, that Brad and I are after.

Our WV mission: To vet out people and programs. Not analyze or pat down the market or tell you what you should do with your money.

Sure, the market is probably rigged NOT in your favor, as the small fish in the pond. So, that means, you can win by NOT trying to predict it. That’s the job for institutional money managers and investment bankers.

Your job: to simply pay attention to what the wealthiest investors and entrepreneurs in the world are doing with their time and money.

We’ll continue to find you investment vehicles that relate to that quest…

 

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Eric Sprott on Why “Paper Markets Are a Joke”

Posted July 7, 2011 at 12:55 am

by Adam, from ChrisMartenson.com

Chris spoke to Eric Sprott, founder of Sprott Asset Management and famed investor. In this wide-ranging interview, he shares his insights on the precious metals markets — specifically what investors need to be aware of in terms of the way the markets are currently managed (maniuplated), the macro outlook for the economy (grim) and the true value of gold and silver (very underpriced; particularly silver). 

Eric sees the current “extend and pretend” intervention by world governments and central banks to prop of a fundamentally flawed banking system, particualrly the vast money printing efforts of the past few years, as a ruse that is losing it’s influence.

Once enough people ask “Why have your money in a bank earning nothing? Why not have it in something that might at least maintain its purchasing power?”, the captial flows into the precious metals will dwarf current levels, sending bullion prices much higher.

By reading the interivew transcript, you’ll learn about Eric’s insights on:

  • why we’re in a global secular bear market for most assets classes
  • what the safest investment options are
  • how much precious metals exposure investors should have
  • the key factors that will drive PM prices much higher
  • the mindboggling supply shortage and manipulation within the silver market
  • why there may eventually be two prices for bullion: one for paper and (a much higher one) for physical & how high Eric thinks prices could go

Continue Reading…

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The Two Types of Coin Collectors

Posted July 5, 2011 at 3:55 am

by Doug Winter

In my day-to-day dealings with collectors, I note at least two distinct typologies. First, there is the collector who has either been buying coins since he was a child, or who was a collector as a kid and has since rekindled his early romance with numismatics. And then there is the newcomer who is generally introduced to coins through precious metals/bullion/modern coins.

The lifetime collector versus the precious metals advocate. Which is “better?”

My answer to this question is simple: neither is “better.” And I think both schools can learn a little something about coins and the coin hobby from each other.

Whether you choose to admit it or not, financial considerations should enter into every transaction that you the collector makes.

A true collector might not worry about paying an irrational amount of money for a much-coveted coin, but every purchase should be considered for its long-term implications. I’ve seen dealers write comments to the effect that “it doesn’t matter what you pay for a great coin; the market always takes care of high-quality purchases.”

I think this is a self-serving comment and I think that price considerations are, in virtually all cases, important.

In other words, the dyed-in-the-wool collector sometimes needs to think more like an investor and consider what the upside and downside is for his purchases.

Full article…

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How To Start Dividend Investing With Little Money

Posted June 28, 2011 at 3:11 am

via The Passive Income Earner

One of the most challenging aspects of starting with dividend investing may be to not know how much money we need to get started. I started investing in mutual funds back in my 20′s and I was focused on building my RRSP (Registered Retirement Savings Plan) and maximizing my contributions.

That’s what you were suppose to do … Well, the reality is that the benefits of RRSP when your income is low is not all that great from a tax saving perspective.

It’s great that you start early since you will leverage the years of growth but wouldn’t it be nice to also get the benefits of compound growth with dividends? Let’s cover the options when you are young to put dividend investing in perspective.

Investing Options In Your 20′s

You just got your first job and you want to save some money or build a nest egg for early retirement :) Chances are that you don’t have thousands of dollars available for investing. Between paying for the rent, food and transportation, you’ll probably have a few hundreds of dollars available per month to possibly invest.

With such small amounts, the options are usually the following…

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“Gold is not an investment. It is money,” says James Turk

Posted June 23, 2011 at 1:14 am

James Turk of the GoldMoney Foundation speaks about currency devaluation and the rising gold price. He also explains why gold should be considered money and not an investment.

“When you’re looking at gold, it goes into the bottom part of your portfolio, the liquidity part of your portfolio. And when you’re evaluating whether you want to own gold, you evaluate it against other currencies of the world, other monies of the world,” he said.

Watch the 14-minute presentation here…

 

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What I’m Doing with My Silver Now

Posted June 22, 2011 at 2:53 pm

By Chris Weber, editor, The Weber Global Opportunities Report

Since last September, silver has been the winner, up about 100%. But lately, it has been correcting.

We don’t know how long and how far this correction will last. But based on past performance, we have to safely assume it will be longer, with more damage to come.

My approach has been simple. I have kept all my silver, and at current prices it is the single most valuable asset that I have. Gold comes second. However, I am prepared mentally to have silver continue to languish; it may well drop below gold, in terms of my holdings.

Gold itself has been a slow and steady gainer. This is not only the case for the past year, but since the entire bull market began a decade ago. Even when everything else fell apart during 2008, gold rose 5% in U.S. dollar terms over that year. Silver is the highflier, but gold is the steady winner, year in and year out.

For nearly everyone, if I was given a choice of recommending holding gold and not silver, or holding silver and not gold, I would without hesitation advise holding gold without silver.

In a period of uncertainty like ours, when there is danger both from possible high inflation as well as economic stagnation and even possible deflation, gold is the single greatest winner. It really should be at the center of every investor’s holdings.

For years, it was the center of my own. I owned silver as well, and it was only in the last few months since September where the monetary amount of the silver advanced to more than the monetary amount of the gold. I have been expecting this to happen, since I long ago forecast that the ratio of silver to gold would rise in silver’s favor: that silver would rise over time relative to gold. Both would rise, I thought, but silver would skyrocket compared to gold.

This was when 70 ounces of silver equaled one ounce of gold. My ultimate forecast is that the ratio will go to 16 silver ounces to one gold ounce. Back 10 years ago, this forecast may have been seen as a bit crazy. But silver has soared faster than gold. Earlier this year, it rocketed to 31-to-one. That’s a long way from 70-to-one, and not that far any longer to 16-to-one, the ultimate target.

However, silver went up too far, too fast. It does this, during bull markets. The flip side is that silver can fall much farther than gold during corrections. So far, gold has hardly had any correction, but silver fell 33% in one week.

My expectation is for silver to…

[ Editor's Note: some of the most respected silver industry experts got together for a 4-part pow-wow. Click here to learn what is going on with the silver market... ]

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Market pros offer their investment advice for the back half of 2011.

Posted June 19, 2011 at 11:55 pm

by Lauren R. Rublin

Rarely has the backdrop been so lousy. The U.S. is printing money to pay its bills. Europe is coughing up change to pay the neighbors’ bills. Oil prices are climbing as the Middle East burns, and gold, that reliable barometer of fear, is rising almost by the day. And yet. American companies are flush with cash. Corporate revenue is growing, profit margins are widening, and stocks — especially big ones with juicy dividends — are relatively cheap.

That delicious irony hasn’t been lost on the members of the Barron’s Roundtable, whose opinions we rounded up by telephone in the past week or so. In view of the alternatives, chiefly negligible bond yields, U.S. stocks just might be “the best house in a decent neighborhood,” as Oscar Schafer observed.

The Roundtable crew is unanimous in seeing slower economic growth in the year’s second half. As a result, these money managers and market savants have turned notably more defensive since our annual get-together in January at the Harvard Club of New York. These days they are far fonder of consumer-staples, health-care and utility stocks than the shares of companies that make things that rust in the rain.

Our panelists have their eye on the near term, when we’ll inevitably muddle along, and on the long term, when economic calamity could befall us if the nation doesn’t first mend its profligate ways. How to do so is apt to be the subject of increasingly urgent discourse as 2011 rolls into 2012 and the presidential election.

The discussions that follow should help to explain why the best investors worry so much about the big picture, even as they take their dividend checks to the bank.

For the whole picture, please read on…

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