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What I'm Buying With My Own Money

By Dr. Steve Sjuggerud
Monday, June 2, 2014

Last month, I bought another property in Florida... 70 acres, full of trees, with a lot of beautiful waterfront views.
 
Waterfront views are nice. And I know they'll prove valuable when I sell the property. But the trees are the hidden benefit I'm excited about with this property...
 
As longtime readers know, I've been buying Florida real estate for four years now. I'm incredibly optimistic about the housing market in the southeast. But so far, the houses haven't been built, so wood prices haven't really gone up. And the "land rush" hasn't fully happened yet.
 
The thing is, people keep having babies. And those families need roofs over their heads. But those roofs aren't being built yet, especially in the South.
 
The story is the same, to a lesser extent, across the nation. Take a look...
 
U.S. housing chart
 
Looking at the national chart, it's not a stretch to imagine housing starts going back up to their trend line of 1.5 million homes built a year.
 
In short, I expect more homes to be built. Those homes will need land and wood. I have both. Plus, I bought them cheap. As I wait for the housing recovery, I'll get some solid, tax-advantaged income along the way.
 
And you might not be aware of it, but timberland, itself, is an incredibly attractive asset...
 
Timberland might sound boring... but it has smoked just about any other asset class – including stocks – over the years.
 
In the 1970s, when inflation took hold and stocks did poorly, timberland performed unbelievably well – without a losing year and with many years of high double-digit returns.
 
The 1970s are of particular importance here... Because we will face a time when stocks will do really poorly, like they did back then.
 
The total compound annual return on timberland in the 1970s was in excess of 19%. Take a look at total returns on timberland in the U.S. in the 1970s:
 
Year
Percent
1971
4.1%
1972
10.8%
1973
54.7%
1974
20.7%
1975
1.1%
1976
16%
1977
47.1%
1978
29.4%
1979
30.8%
Source: HTRG.com

It wasn't just the 1970s. Take a look at the longer term:
 
timberland annual total return graph
 
Timberland is a fantastic asset to own at the right time... and now is the right time.
 
Why now? In short, we have three things going for us, particularly in the southeast... Land values are going up. Wood prices are going up. AND don't forget, the trees themselves are growing fast, compounding at about 6% per year "on the stump."
 
On top of all of this, timberland is a "real" asset – not a paper asset. While your paper money in the bank may lose value, your timberland should hold up. The 1970s are our shining example.
 
This is as good as it gets... And it's what I am doing with my own money today. I recommend you do the same.
 
Good investing,
 
Steve




Further Reading:

Learn everything you need to know about investing in timberland – including how to get started – in this classic interview with Steve.
 
Legendary resource trader Rick Rule says there's another commodity you should consider putting your money in today. It's one of the best "low-downside, high-upside bets in the world right now." If you want to learn how you could make triple-digit gains, with little downside, click here.

Market Notes


NEW HIGHS OF NOTE LAST WEEK
 
Apple (AAPL)... Big Cheap Tech
Oracle (ORCL)... Big Cheap Tech
Intel (INTC)... Big Cheap Tech
Union Pacific (UNP)... railroads
Norfolk Southern (NSC)... railroads
FedEx (FDX)... shipping
Southwest Airlines (LUV)... airline
Delta Air Lines (DAL)... airline
Walt Disney (DIS)... entertainment
Time Warner (TWX)... media and entertainment
Hyatt (H)... hotels
Marriott (MAR)... hotels
ConocoPhillips (COP)... Big Oil
Schlumberger (SLB)... oil services
Altria Group (MO)... cigarettes
CVS Caremark (CVS)... drug stores
Walgreen (WAG)... drug stores
McKesson (MCK)... medical distributor
Tiffany & Co. (TIF)... jewelry
Pepsico (PEP)... beverages
Kellogg (K)... Big Food
General Dynamics (GD)... "offense" contractor
Royal Bank of Canada (RY)... Canadian bank
Bank of Montreal (BMO)... Canadian bank
Wells Fargo (WFC)... bank
Moody's (MCO)... credit ratings
Monsanto (MON)... "GMO" seeds

NEW LOWS OF NOTE LAST WEEK
 
Kinross Gold (KGC)... gold miner
Yamana Gold (AUY)... gold miner
IAMGOLD (IAG)... gold miner
First Majestic Silver (AG)... silver miner
Alpha Natural Resources (ANR)... coal miner
Walter Energy (WLT)... coal miner
Dick's Sporting Goods (DKS)... sporting goods
Coach Inc. (COH)... expensive handbags
PetSmart (PETM)... pet supplies

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