Live Blog: New Orleans Investment Conference

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  • Thu, Oct 26, 2017 - 03:34pm

    #1

    Adam Taggart

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    Live Blog: New Orleans Investment Conference

While Chris and I are waiting to present later tonight at the New Orleans Investment Conference, I’m sharing my notes from listening to the other speakers assembled here.

I’ll update this periodically as I can as the presentations continue over the next few days:

Russell Grey

  • land is the ‘original resource’ (won’t be replaced by technology)
  • land use driven by
    • agriculture
    • commodities
    • energy
    • housing
    • heathcare
    • industry
    • recreation
    • takeaway: all kinds of ways to generate a return with land…
  • housing/land speculation dangerous now given the money printing and debt bubbles
  • own things that are “real” and “essential” (energy, water, shelter, etc)
  • look for assets that generate returns (if it doesn’t, it’s not really an asset)
    • dividends on equity
    • interest on debt
    • rents on property
  • find an advantage
    • public markets are so efficient this is hard to do
    • in private deals, you’re allowed to exploit insider info (unlike public markets)
  • RE helps hedge against both inflation and deflation
  • invest with long-term sustainable mega-trends (e.g., aging population), not hot trends
  • key to profit = exploit inefficiencies

Robert Helms

  • doesn’t see RE as an asset class — it’s not discretionary, you HAVE play in the market in some way (home, office, etc)
  • “Live where you want to live, but invest where the numbers make sense”
  • 2 primary ways to invest in RE
    • buy a structure and hold it over time to collect rents (individual ownership)
    • participate in a private placement/syndication (group ownership)
  • Affordable residential
    • Single family homes — look for sustainable income over time, in this market there are market inefficiencies you can find (buy a good deal)
    • Apartments (multi-family)
    • Millennials — more likely to rent than own
  • Mobile Home Parks
    • growing demand for affordable housing
    • individual tenant owns the home, but leases the land it’s on (makes them much more reliable renters)
    • good way to “land bank” (i.e., buy/own land but get rents from it, then sell at later date to a developer once surrounding area has gentrified)
  • Residential assisted living 
    • priority rents from affluent & insurance
    • growing demographic (“silver tsunami”)
    • augments long term care insurance
    • high rent from “A” property
  • Farmland
    • tangible asset with yield
    • take an essential need and generate income from it (everyone needs to eat)
    • crops are a global commodity (can be sold anywhere)
    • renewable resource
    • relentless value growth
  • Resort Properity
    • rents from affluent
    • global appeal
    • deductible travel
    • personal enjoyment
    • partner with professionals
  • Off-shore Properity
    • wealth protection
    • privacy
    • off-shore income
    • portfolio diversification
    • “Plan B” international option
  • Keys to success in RE investing
    • knowlege
    • network
    • team

Robert Meier

  • Conference host on his departure — he’s been covering macro trends since 1976. Has never seen economy/markets and political environment as we have today (“collection of hot messes”). We will be tested greatly. A quickening convergence of instabilities.

Rick Rule

  • has witnessed 4 full market cycles in his career
  • been a hard bear market for commodities. As a result, folks are likely too pessimistic about the prospects of the next bull market. That creates opportunity (prices unfairly depressed)
  • too many people hold onto bad investments because they don’t want to admit the poor performance — can be very detrimental
  • general rule of thumb — devote an hour per month to each investment you own. Don’t own so many you can devote the time to each
  • if you merged every junior mining company into one, it would lose $2bil in a good year, $5bil in a bad one. But the masks the fact that the few good ones in this space do phenomenally well. So you need to do your homework. It really, really matters how you orgainize your senior and junior portfolios
  • In the early stages of a resources/PM bull market (which is where RR thinks we are), you can get great returns from owning the obviously best companies — because they are so cheap. You don’t need to speculate, you can go with quality. Put a substantial % of your allocation in these. Franco-Nevada, Wheaton Precious Metals, etc. Sell your losers from the past few years and roll it into the quality players.
  • The miner market is increasingly distorted by the ETF GDXJ. So much money is in them that, instead of being driven by the market, they now drive the market. Take advantage of this. Companies that are in the ETF, especially if they’ve been upweighted as the ETF rebalances, have a lower cost of capital. So own these guys as they are likely to be more attractive acquisition candidates by the majors.
  • We are in the 3rd inning of a 9-inning game in PM mining shares. 2015 was the bottom. 2016 saw a 100% return in the sector. 2017 is a ‘cooling off’ year. RR thinks better times are ahead but that greed has not entered the pricing yet, so now is a very attractive time to buy in. Given our early timing in this bull market, you will have lots of time to buy and add to your portfolio before prices rise “too high”
  • RR sees fundamentals usually take 3-4 years to play out. Those with a 3-month focus are going to be disappointed. These markets are very volatile and emotionally-driven. Pick a fundamental thesis you think is ‘inevitable’ then hang on to see it out — don’t let your emotions get whipsawed by all the volatility and sell prematurely.
  • RR sees a return to a true discovery/exploration market. We haven’t had a big one since the early 1990s. The sector has underinvested in exploration for the past 20 years. A boom is coming — because the current pipeline is so lean. The odds of a massive, violent, fortune-making up-pricing of the junior sector are better than they’ve been in decades. Of course, to benefit from this, you have to be positioned in advance.
  • Parting thoughts
    • get ready to have fun. You’ve been through 5 years of pain, get ready for 4 years of gain
    • get ready for bull market in exploration/discovery

Peter Schiff

  • Student debt, corporate debt and auto debt are at record highs. Mortgage debt is not only because home ownership has dropped (which is not a good sign). And of course, rents are at record highs.
  • Household balance sheets are bad and worsening.
  • As interest rates go up, that’s going to crush everyone. And rates *will* go up, as deficits are huge and increasing.
  • And of course, this will pressure the biggest debtor, the US government.
  • PS sees tax cuts as simply “down payments on future tax hikes”. Why? Because tax shortfall will be met with deficit spending, which will put upward pressure on interest rates. And the cheapest way to deal with those higher interest payments will be by raising taxes vs issuing more debt.
  • Yuuge difference between candidate Trump and President Trump. His positions are 180-degrees apart from his campaign statements. Pretty much everything he criticized about the economy and the DC swamp is now “Great!”.
  • The US situation is very different that from Reagan’s era, whom Trump is trying to emulate. Back then, the debt was tiny relatively, and the US was a creditor nation. Very far from that case today.
  • PS thinks Trump will be much more like Carter than Reagan. Cater was an outisder as the voters swung away from the party of NIxon. Carter served during a down economy that was the result of the Kennedy/Johnson “guns & butter” spending era (which ultimately caused Nixon to go off the gold standard). Carter couldn’t deliver any real change in his first 4 years, so the country swung hard to the right and Reagan was elected.
  • The problems created by the Greenspan/Bernanke/Yellen Fed are coming home to roost in force now. Trump is going to be overwhelmed by them. The bursting of this worldwide “everything bubble” is going to take everything down with it. Regardless of whatever he attempts to do, he’s going to be the fall guy for this.
  • If the voters swing away from Trump, they’ll likely elect a socialist like Sanders (or even more extreme). In PS’ opinion, that will make a horrible mess even worse. 

CEO of Wellgreen Platinum

  • this is one of the companies that has paid to talk here, so take her optimism with a grain of salt
  • the company is a Canadian miner of platinum and nickel
  • she states that the electric battery boom (electric cars, etc) is driving huge demand for nickel and copper — particularly nickel. She quoted Elon Musk as saying that Tesla’s batteries should not be called lithium-ion based but nickel-graphite based instead. (I found the quote).
  • She says she’s so bullish on the company’s prospects that she bought 1 million shares upon taking the CEO role, and then recently purchased another 800,000 shares on the open market a few weeks ago.

Mining Panel

  • Members:
    • Rick Rule: moderator
    • Brent Cook
    • Nick Hodge
    • Brien Lundin
    • Gwen Preston
  • How will 2018 be for the mining shares?
    • GP: soft for rest of year, 2018 will be ‘quite good’. Doesn’t see Fed tightening as much as it’s threatening
    • BL: agrees with Gwen. Thinks gold will weaken into Fed’s Dec meeting. Predicts 2018 will be good for PM. Sees economy weakening. 
    • NH: depends on the metal. Lithium and cobalt should go higher from battery demand. Not sure what will happen with PMs. Likes the rising demand for the base metals. 2017 tax-loss selling may result in early 2108 buying of miner shares.
    • BC: 2018 will be strong. Will see more money going into the juniors from the majors. More acquisitions coming.
  • What sector(s) will lead in 2018?

    • BC: Discovery will be in high demand next year. Zinc — a real shortage of zinc deposits out there. Copper is same.
    • NH: the under-recognized junior producers
    • BL: Watch optionality (companies with resources that can be re-valued upwards). Exploration is getting more exciting.
    • GP: Exploration is getting crazy. Clearly there’s appetite for discovery and expects that to continue. Bull market is young, so expect Development companies to start flourishing. Until the generalist investors return, the producers won’t skyrocket — but they’re poised to once that money enters
  • Pick 2 commodities: 1 for next year, 1 for 2020
    • GP
      • 2018: zinc
      • 2020: uranium
    • BL

      • 2018: gold, silver and zinc

      • 202: uranium

    • NH

      • 2018: copper — has broken out and will be driven by electic infrastructure demand

      • 202: uranium — going to boom huge once the ramp happens (RR agrees with this)

    • BC

      • 2018: zinc

        202: gold (thinks uranium will take a lot longer to boom)

  • What big risks are we overlooking?
    • BC: Retail investors focus on the drill results. They need to look at bigger picture (i.e., total cost burden on company)
    • NH: people don’t look at share structure enough — i.e., how diluted is/will be the company?
    • BL: need to dedicate a few $grand per year to subscribe to newsletters to know what the experts know (especially the mining sector). Thinks there’s a real potential for an economic slowdown in the US next year.
    • GP: don’t just buy the story. Need to know the specifics, fundamentally, for why you’re buying a miner.

 

  • Thu, Oct 26, 2017 - 09:18pm

    #2

    CleanEnergyFan

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    Great Cliff Notes of the Conference

Thanks for being such a great notetaker Adam.  While I am at the same conference (as you know) I didnt get to hear some of the speakers you did so this really helps to distill down what the other speakers have been saying.  Its great to also not have to take any notes knowing that you have already done so (and done a much better job than I would have anyway).  Looking forward to your and Chris' talk tonight and again tomorrow.  Its interesting that here again (as with Freedom Fest previously) there are no other speakers really talking about the 3E message so your talk should be quite differentiated from all the other speakers here.  Most are focused mostly on the Economy and a few have talked about Energy (without really linking those 2) and nobody has yet mentioned the Environment that I have heard.

  • Fri, Oct 27, 2017 - 12:49am

    #3

    AKGrannyWGrit

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    Thanks Adam

Great job on providing detailed notes!

 

  • Fri, Oct 27, 2017 - 06:59am

    #4
    agitating prop

    agitating prop

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    Mobile home parks

Thanks for the notes Adam,

Always like hearing what Schiff has to say and the metals and most of the real estate notes are of value.  

I do have a problem with some of Robert Helm's real estate advice. He suggests buying land for mobile home parks and squeezing every last dime out of residents living in what amounts to stranded assets parked on someone else's land. "Makes them much more reliable renters," is code for.  "You have them where you want them."  This is incredibly mealy mouthed.  

He advises that the land owner has the option of flipping the mobile home park to developers when the area starts to gentrify?  How many tenants might that render broke and homeless? 

 

 

  • Fri, Oct 27, 2017 - 01:31pm

    #5
    Chris Martenson

    Chris Martenson

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    Danielle DiMartino Booth

Here's what I picked up from DiMartino this morning:

DiMartino Booth

Fed is not some evil cabal, but a disappointingly normal group of mild academics…and therein lies the problem.

We’ve been trading ‘in the dark’ since 1987.  Greenspan broke the markets by inviting the Big Boyz to front run the Fed.  20th Oct 1987 was the actual date.  The 'put' was born and price discovery has been destroyed ever since, and only gotten worse.

Household wealth stands at a record 7x income, where the long run average is 5x.  This is astounding.

Commercial RE has never been more expensive.  Global credit markets at $226 T dwarfs that of the equity markets.

DB looked back to 1800 and has no example where the bond market is this over-valued.  Ever.

It’s time for central bankers to take a hard look in the mirror.  …and what they’ve done to retirees…$10M in savings to generate enough income to stay above the poverty line.

The citizens of the US will ultimately pay the price for the Fed’s mistakes. (Politicians love the Fed due to enabling deficit spending, of course.)

Price discovery has been destroyed by the Fed.

DiMartino is offering some tweaks to the Fed system, including re-drawing the Fed districts to deconcentrate the power, and change the governance structure to give voting power to regions appropriately, undo the dual mandate so that the Fed is charged only with safeguarding the purchasing power of the dollar, and leave employment to the private sector.  Hire the best regulators ever, and don’t allow the Wall Street sharks to run the system ever again.

The day the Fed crossed the line.  Dec 2008, who spoke up for the cautious investor, the pension funds?  One man only, Richard Fisher.  But the battle was lost to the PhD eggheads.  And here we are.

  • Fri, Oct 27, 2017 - 02:22pm

    #6

    lambertad

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    RE investing books

Chris or anyone esle, do you guys/gals have any recommended books on RE investing – single/multi-family homes? 

TIA 

  • Fri, Oct 27, 2017 - 03:26pm

    #7

    dcm

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    evil cabbage

"Fed Is Not Some Evil cabal"

…. just look at Goldman Sachs

"a disappointingly normal group of mild academics"

…..whose ivory tower is more rhino hairy than mere library 

"but the battle was lost to Phd eggheads"

….who could be harmless if they didn't work for criminals.

  • Fri, Oct 27, 2017 - 06:07pm

    #8

    thc0655

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    Solution to the Fed

DiMartino is offering some tweaks to the Fed system, including re-drawing the Fed districts to deconcentrate the power, and change the governance structure to give voting power to regions appropriately, undo the dual mandate so that the Fed is charged only with safeguarding the purchasing power of the dollar, and leave employment to the private sector.  Hire the best regulators ever, and don’t allow the Wall Street sharks to run the system ever again.

Half measures, at best.  Money is still created the same way. A private banking cabal is still in control of our money and therefore us, our country and our economy.

Abolish the Fed!  Or, let it compete for us and our money with any other form of money we want to use to pay all our debts public and private.  If having a private central bank is such a good idea for US (as opposed to THEM), then they should be able to induce me to use their FRN's for some or all of my savings and transactions.  I've never seen such a proposal and I'm sure the reason is that the benefits for the owners of the Fed and the Banks in this system is so lopsided in THEIR favor, that once there was some choice most people most of the time would choose to save and transact in something other than FRN's.  

https://www.youtube.com/watch?v=11e8XyUBqRQ

  • Fri, Oct 27, 2017 - 07:21pm

    #9
    richcabot

    richcabot

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    Overvalued

Real Estate seems grossly overvalued now.  It's hard to imagine how it's going to maintain current prices when a major recession hits.  Invest with caution.

  • Mon, Oct 30, 2017 - 05:16pm

    #10

    CleanEnergyFan

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    Very Nice Job on the Future of Money Panel

n

Enjoyed this panel discussion alot.  Took awhile to post due to the small size limitations for photos makes uploading hard to do without access to computer and Paint program.  Glad Danielie DiMartina Booth gave you the softball opportunity to bring Energy (and Primary Wealth) into the money discussion.  Hope you are able to make more conferences like this…it was obvious to me the audience really enjoyed the new angles that you presented at both of your speaking slots.

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