The Stock Market Is Crazy, and Crazy Means Opportunity

Another story about big institutional investors (smart money) flowing out of equities while the gullible retail investor keeps “pouring it in” through retirement accounts.  YOU CAN AND MUST  time the market at a macro level to make any real money in equities, especially if you invest in mutual and indexed funds (yes, your broker or financial advisor is wrong.)  All the indicators are telling you it’s time to sell, especially for the 50+ folks who don’t have 10 to 20 years to wait for a market recovery.  Once the market cycles down, 20%, 30%, 40%, it’s opportunity time!  You can read the full article here and some excerpts below.

Bank of America Merrill Lynch reports that its clients (institutions, hedge funds and private clients) who have sold stock for all but two to three weeks during 2016, have once again sold $1.9 billion of U.S. stocks while the SPX was hitting new highs. Institutional clients led sales due to poor performance. It has been the retail investors who have been flooding the market while anticipating a massive breakout and rally.

The big and smart money continues to build up massive short positions. George Soros has become more bearish on equity markets, nearly doubling his short bet against the SPX, following similar moves by Jeffrey Gundlach, Carl Icahn and David Tepper. According to his 13F filing, Soros now owns roughly four million put options on shares of the SPDR S&P 500.
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Investors Stockpiling Cash Like It’s 1999

How many times have you asked yourself one or more of these questions?

  • Why didn’t I see the crash coming and sell my stocks?
  • Why didn’t my financial advisor increase our cash position when the market was at its all time high?
  • How does the “smart money” always knows these things are going to happen and they sell early?

Here’s a link to an article that explains just how much money is already on the sidelines and why.  Are you 50+ and can’t afford to lose 30%, 40% or more of your retirement savings, give this a read and increase your cash position, soon!

 

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Wealth Bubble In ‘Scary Graph’ Flashes Warning About Future U.S. Downturn

Does the graph bellow set off any alarm bells in your head?   You should hear a little ringing, especially if you are heavily invested in stocks or up to your eyeballs in real estate debt!    Check out the link below to read the full article.

Wealth Bubble

http://www.bloomberg.com/news/articles/2016-07-22/ex-fed-official-worried-about-bubbles-warns-of-u-s-downturn

 

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The Federal Reserve is rethinking everything

Here’s an excerpt and link to an excellent article about Fed policy and long term interest rates…

“Since then, however, the Fed has been stuck. Instead of raising projections for economic growth, officials have lowered them. And instead of hiking rates this year, they repeatedly have delayed another hike. Officials are widely expected to remain on hold when they meet today in Washington, and many analysts believe the central bank will only increase rates once this year, if at all.”

http://www.tampabay.com/news/business/banking/the-federal-reserve-is-rethinking-everything/2286978

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BlackRock CEO Says We Have a Problem!

When the CEO, Chairman and Founder of the largest asset management company in the world says “Houston, we have a problem!” everyone should cup their ear and listen.  BlackRock, Inc. is an American multinational investment management corporation based in New York City. Founded in 1988, initially as a risk management and fixed income institutional asset manager, BlackRock is the world’s largest asset manager with over $4.59 trillion in assets under management.  I find several things about this interview pretty amazing, let me explain!

Too Few Have Saved Too Little

Yes, we have a problem and it’s much larger than any of us realize.  Too few Americans have saved enough to live “with dignity” in retirement.  From the interview:

  • Perhaps an even scarier number is the 80 percent of people aged 30-54 believe they will not have enough money put away from retirement, according Census Bureau data.
  • According the U.S. Census Bureau, 35 percent of Americans over age 65 rely entirely on Social Security’s monthly benefit, and 36 percent of the general population don’t save anything at all for retirement. That number rises to over 50 percent for workers under age 30.

Social Security: Welfare for Baby Boomers

If you saved money and have other assets to draw upon during your retirement, good for you.  The bad news, you are going to receive a lot less from the government than you might have anticipated.  The feds will reduce your benefits in 3 ways: flat-out benefit reductions, CPI adjustments that don’t keep pace with inflation and all benefits (Social Security, Medicare, etc…) will be taxed for those with other sources of income.  Net/net, the Social Security system will be recast as welfare for Baby Boomers.   Finks says:

  • “Too many Americans are too dependent on Social Security,” Fink told CNBC, contending the federal program was designed to be a backdrop to other private savings.
  • Fink believes not enough Americans have prepared for their sunset years, and it will eventually cost them and the government.

Fink Says, “Double Down!”

This is the part of the article that kills me, Larry says the solution, guess what, buy more stocks!

  • “One of the fundamental problems with individuals is they watch the news—whether it’s Ebola, whether it’s the volatility in the world, whether it’s ISIS—they become frightened, and they pull back their investments to, maybe, more in cash,” Fink said.
  • That conservatism, combined with large swaths of the public that don’t invest in the first place, may mean missing out on long-term earnings for a nest egg.
  • “If you believe that the U.S. is the best place to invest over 40 years,” Fink said. “You’re probably going to be able to assume 6 to 8 percent compounding rate over a long time, owning equities.”

First, the 6 to 8% number is just flat-out wrong.  If you adjust for inflation since the early 1900’s the average annual return rates is around 2% (including dividends.)  2nd, timing matters and if you are 50+, now is definitely time to back yourself down and out of stocks. You’ll “lock in” a majority of the gains and avoid the big losses which ALWAYS follow a market that’s close to all-time highs.  My 50+ friends, get some $ out of the market, ASAP!

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Looking to Purchase a MHP in 2015?

Are you looking for a MHP to purchase in 2015?  We are planning to sell at least one mobile home park next year and use the proceeds to complete an exchange into a new park.  Here’s what we look for in a buyer, our buyer
criteria so to speak:

  • A buyer who is sold on MHPs as an asset class they want to invest in and operate
  • Previous real estate experience, likely owned and managed a single family home, small apartment building, etc…
  • Has the means to complete the transaction including the down payment and good credit
  • A buyer who will work with us to time the close to align with our goal of finding a

If this sounds like you, please visit the buyer’s page of our website  to learn more about our plans for buying and selling over the next several years.  Of course, you can email me directly or give a call at (925) 640-7121.

 

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MHP Due Diligence Checklist

Due diligence done right can be the difference between a great investment and a loser that sucks an investor’s time, cash and enthusiasm.   The checklist below provides a new Mobile Home Park investor a comprehensive starting point or an experienced investor the opportunity to expand and improve their current due diligence process.  First, let’s cover the basics!

Due Diligence Basics

  • The purpose of due diligence is to lower risk and increase the probability of achieving the target ROI over the hold period of the investment.   The process starts when a buyer asks that first question and ends when a commitment is made to purchase, close of escrow or cancellation of the purchase agreement.
  • The process is something like a solving a puzzle with the goal of building a complete and accurate profile of the property.  This is accomplished by gathering, validating and analyzing data in the following 3 areas:
    • Financial
    • Physical
    • Locale
  • Each due diligence process is different based on the unique elements of the deal and features of the property.  The “key” elements of the transaction are explored first and usually, the most intensively.
  • The buyer should provide the seller a comprehensive disclosure statement and include a term in the purchase agreement that obligates the seller to return the document within 5 days of acceptance.
  • Professionals are hired to complete Phase 1, 2 & 3 reports that identify potential or existing environmental contamination and all other elements of elements that are difficult for the buyer to effectively evaluate.

Financial Checklist

  • 3 years profit & loss statements
  • Rent roll with space number, name of resident, move-in date, renter or owner occupied, number of occupants, monthly rent, additional charges, current balance due and any relevant notes about the resident
  • List of capital expenditures for the last 3 years
  • 3 years of tax returns
  • 12 months of bank statements
  • Current accounts receivable statement
  • List of park owned home including copies of “rent to own” or sales contracts
  • Copy of all current insurance policies, binders and premiums
  • Spreadsheet detailing who pays all utilities including water, sewer, gas, electric, trash, cable, etc…
  • For all utilities and charge backs, formulas, calculations and meter readings for the past 12 months
  • 3 years of utility bills
  • Property tax bills for the last 2-3 years
  • Current staffing list including position, wages, job descriptions
  • Copies of any contracts that will transfer to buyer including laundry, trash, phone, equipment, etc…
  • Dates and amounts of the last 3 rent increases
  • Signed rules and leases for each resident
  • Names and contact information of professional service providers including lawyers, accountants, engineers, insurance brokers, inspectors, appraisers, realtors/brokers, etc…

Physical Checklist

  • Spreadsheet for utilities that details age, composition, capacity, physical locations, etc…
  • Any drawings or maps of the park and infrastructure including lot sizes
  • Sewer plant or septic system repair and maintenance records
  • Water well tests and compliance records
  • Disclosure from seller of current or recent problems with infrastructure including buildings, water, sewer/septic, gas, electric, etc…
  • Names and contact information of contractors  including plumbers, tree surgeons, electricians, gas inspectors, septic companies, roto-rooter services, etc…

Locale Checklist

  • Profile local housing market:
    • “Stick-built” – current foreclosure rate, months of available inventory, median home price, average rent per month, vacancy rate
    • Apartments – average rent per month, vacancy rate, prevalence of move-in specials…
    • MHPs Comps –  average monthly charges (rent, utilities, etc…), vacancy rate, # of homes for sale, etc…
  • Profile local economy including population, major employers, unemployment rate and trends
  • Copies of city, county and state permits, licenses or certificates of occupancy
  • Check zoning for recent or pending changes to target property and adjacent parcels
  • Check for known environmental issues with target  property, adjacent parcels or in the community
  • Check for major development or construction projects in the community
  • Review existing surveys or environmental reports
  • Consider geographic factors including elevation, annual snow fall, rain fall, proximity to bodies of water, etc…
  • Disclosure from seller of current or recent lawsuits, regulatory or compliance issues, fines, fees, etc…

If you have comments or questions please reply!  If this post could be of value to someone you know, please email or repost to Facebook, LinkedIn or your favorite social network!

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