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Thursday, July 13, 2006
Living in Florida, I pack my lawnmower away around the end of November, and don't get it cranking again until May. My grass simply doesn't grow at all during that time.
The same thing happens with the trees around here. They stop growing for about five months every year. That's the main reason why Florida pines take 25 years to reach maturity — they're only growing about half the time. For the other half, they're waiting out the cold weather in a state of hibernation.
As True Wealth readers already know, I love timber as an investment. It’s why I pay attention to growth rates. They make a big difference to the returns you can make with timberland investments.
Most people don’t realize this, but timber has been one of the best performing American asset classes of the last 50 years, easily beating stocks, bonds and real estate. Between 1972 and 2001, an investor in timber saw average annual returns of 14.5%.
In other words, if you’d invested $10,000 in timber in 1972, you’d be sitting on over half a million dollars right now.
Now imagine how those returns would look if your trees matured every ten years instead of twenty-five?
I’ve spent a lot of time learning the best ways to invest in timber... and I’ve been across the world several times to find the best places for our money here. My True Wealth readers made over 60% in timber REIT Rayonier in just over two years.
Today, we’re going to try something a little different than a conventional timber stock... I’m going to show you how to buy your own timberland – with trees that grow all year round.
The trick is, you have to buy in Argentina.
Fantastic growing conditions and cheap land make Argentina one of the most lucrative areas in the world for timber production... and investment. Over the past few years, I've taken several trips to Argentina to investigate this opportunity. Here's what I've found:
One quarter of the entire country is covered in native forests. That equals about 14.5 million acres. Roughly 440,000 acres are estimated to be plantation forests - tree farms.
Over half of these plantations are concentrated in a relatively small area called Mesopotamia, which includes the regions of Misiones (which means, missions), Corrientes (currents), and Entre Rios (between rivers).
I actually visited a sawmill in Misiones, run by a company called Alto Paiana. I've also visited seedling nurseries. And let me tell you, timber isn't just big business here... it's literally the ONLY business.
In the southern United States, an acre of timberland costs between $750 and $1,000. In the northwest states, an acre costs between $1,500 and $2,000. In Corrientes, you can buy timber for less than $500 an acre.
Over 14 million acres of native forests (and another 8 million acres of land suitable for timber production), extremely low land prices, and a large population that lives and dies by the timber trade make Mesopotamia one of the most supportive climates (if not the most supportive climate) for direct investment in timberlands.
Of course, buying the land is one thing. Managing that investment from planting to harvest is another.
If you think this is the kind of investment you'd like to make, I strongly encourage you to do as much research as possible — including taking a few trips down there, and talking to people with experience in the business. You really won't know what you're getting into until you've seen it yourself.
Also, if you decide to invest directly in Argentine timberlands, you should remember that you're dealing with a foreign country, with a foreign government, and foreign laws. The risks are certainly higher than buying stocks on the NYSE.
I realize an investment in Argentine timberland may not be right for everyone. But for those of us with an adventurous spirit and a drive to get rich, it’s a great opportunity.
THE REAL JUDGE OF CONSUMER SPENDING
What do Home Depot, Lowe’s, Pier 1 Imports, and Williams-Sonoma all have in common?
They’re all huge brand name companies where we spend money to decorate and fix up our homes. They all thrive on brisk consumer spending. And all of them have stock prices in the basement.
We don’t see a housing crash in the future… far from it. But a look at Home Depot’s stock chart says something… that interest rates north of 5% have finally dampened America’s tendency to drop a few thousand bucks on new lamps and concrete reindeer.
Consumer spending gets soggy: the past year in Home Depot: