Agora Financial’s Rude Awakening

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Baltimore, Maryland

• How to find hidden value right under your favorite company,
• Two “land banker” companies to put on your radar,
• “First my guns are confiscated…now this!” Trouble in sunny Laguna…   

Eric Fry, reporting from the “Land that Responsibility Forgot”…

“Lucky doesn’t hurt cats; he plays with them,” your editor’s next-door neighbor explained in defense of her dog, “Lucky.”

“Umm…okay,” your editor replied, “but your dog broke my kitten’s leg.”

“Ohhh, I am soooo sorry,” the neighbor said. “That’s such a shame.”

“Yes, it is,” your editor replied, “Now my son’s kitten has a broken leg.”

“Ohhh, that’s terrible,” the neighbor continued. “But Lucky wouldn’t touch your cat.”

“Yes, Lucky would ‘touch’ my cat. In fact, Lucky did touch my cat. You and I were both there and we saw Lucky chase after her.”

“But Lucky just plays with cats,” the neighbor insisted, clinging to her delusion like a bad actress from a Twilight Zone episode.

“Whatever!” your editor responded in utter disgust, as he turned to leave. “I have to go to the vet now.”

One hour and $487 later, the veterinarian confirmed that your editor’s kitten had, indeed, broken one of its hind legs. The X-rays revealed a very obvious and serious break, leaving no doubt that Lucky does indeed hurt cats.

 

Later that afternoon, your editor spotted the neighbor’s son in the yard next door. (This young man had also witnessed the unfortunate event earlier that day).

“Hey Billy,” your editor called out. “I’m not sure if you heard, but your dog broke my cat’s leg. You were there. Did you happen to see exactly how it happened?”

“No, I didn’t see anything,” the young man answered, after which he volunteered, “but Lucky doesn’t hurt cats; he just plays with them.”

“Yeah, your Mom told me that already,” your editor answered. “Thanks Billy.”

As your editor turned away from this unexpected response, he turned toward his girlfriend and joked, “My rat poison isn’t for killing Lucky; it’s just for killing rats…What is wrong with these people? Is it me, or are they completely delusional?”

“They’re delusional,” came the response.

“Dogs chase cats! That’s what they do!” your editor railed. “Sometimes dogs hurt cats, even though they don’t intend it. Only a complete lunatic would deny this obvious truth.”

“Well,” your editor’s girlfriend answered, “dogs might hurt cats, but Lucky wouldn’t.”

“Yes, that’s right,” your editor smiled. “Lucky doesn’t hurt cats; he just plays with them.”

Lucky, as it turns out, is not so very different from the S&P 500. After all, the S&P 500 does not hurt investors; it just has fun with them. At least, that’s what all the Wall Street experts – armed with long-term performance data – tell us. But guess what; the facts tell a very different story. The S&P 500 is not quite as faithful and docile as a golden retriever. Sometimes, it is as vicious as a pit bull.

During the last eight and one half years, for example, the S&P 500 has delivered a total return – including dividends – of minus 1%! That’s right; if you bought stocks eight and one half years ago, you’re nursing a loss. And if, heaven forbid, you spent euros to buy the S&P 500, you’re nursing a loss of 35%. These are disastrous investment results, no matter how you slice it. The stock market doesn’t just play with investors; it sometimes hurts them…a lot.

But that’s only half the story. Investors also allow themselves to be hurt – over and over again – by nourishing delusions. Any investor who blindly trusts in “stocks for the long term” is inviting harm.

Dogs bite sometimes; they even bite their masters. Stocks do the same. To believe otherwise is to embrace delusion.

In recognition of this tendency, Chris Mayer seeks out the kinds of stocks that rarely turn on their masters – the stocks that possess significant real estate holdings on their balance sheets. During boom times, “hidden” land values can provide a big boost to earnings. And during the bad times, these real estate assets can provide a solid foundation under shareholder equity.

Sometimes, the land holdings on a company’s balance sheet can snooze longer than an overfed Basset Hound. But don’t be fooled, says Mayer, these dogs CAN hunt!

—- Royalty Doors Open Again – Limited Time —-

Closed to New Investors for the Last 6 Years — Now Open Again…The “Chaffee Royalty Program” That Turned Every $1 Into $50

In 2002, the same royalty “paycheck program” that paid out $50 for every $1 invested… decided to shut the door to new “members.”

In 2008, that door is open again…and it just got easier than ever to “make money while you sleep”…

But there’s no telling when it could close again…So you’d better collect your own “Chaffee Royalties” right NOW! Read On For The Full Report Here

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Banking on Land
By Chris Mayer

“All a man has to do to get rich in America is find out where people are going, get there first and buy land.” - Gen. Douglas MacArthur

Bob Hope, the great American comedian and Hollywood star, was actually born in England. He once quipped, “I left England at the age of 4 when I found out I couldn’t be king.”

He struggled early to make it in showbiz. “Before long, I was in debt. I had holes in my shoes, and I was eating doughnuts and coffee,” Hope recalled.

“And when I met a friend who bought me a meal, I had forgotten whether to cut a steak with a knife or drink it out of a spoon.”

Hope, as we all know, eventually made it big-time, becoming a cherished part of Hollywood’s roster of stars. Unlike many of his peers, though, Bob Hope was a savvy investor. His favorite investment was land.

“Every time I found a piece of land, it turned out Bob Hope owned it,” former Palm Springs Mayor Frank Bogert once joked. “He knew the value of every damn piece of land he owned. He was smart as a whip.”

The exact amount of Hope’s real estate holdings is a matter of dispute. Depending on who’s doing the estimate, it ranged anywhere from $100-500 million. Whatever the exact amount, we know he owned plenty. His 1978 property tax bill was over $1 million.

Hope understood something that has made many people rich before and since. He understood the idea of land banking. You buy raw land ahead of development. As development moves to your land, you sell it and make a killing.

One example of land banking comes from Professional Land Corp. In 1967, you could have bought an acre of land in the San Fernando Valley in Los Angeles County for $38,000. Only 12 years later, as L.A. sprawled out, your acre of land would have fetched $380,000. If you held it another 12 years, that same acre would have gone for about $2.1 million. That’s some massive wealth creation from the revaluing of land over time.

Howard Hughes was another successful land banker. According to Professional Land Corp.: “Hughes was a visionary who bought and held land in Southern California and the Las Vegas Valley.” He bought his Las Vegas Valley land well outside of the city of Las Vegas at cheap prices. That land would eventually become Summerlin, one of the most desirable planned communities in Nevada. “Howard Hughes’ landholdings made him vast fortunes during his lifetime,” PLC notes.

One other intriguing example: Roy Sakioka arrived in the U.S. from Japan as a poor immigrant. Yet he had vision when it came to real estate development. He saw the potential of Orange County and began buying rural parcels shortly after World War II. He also seemed to have a sense for where future freeways and shopping centers would pop up next. He was, as PLC notes, “a master at buying land along development’s path, then waiting until the last possible moment before selling.”

He eventually amassed some $325 million in landholdings. In 1991, Forbes included Sakioka on its list of America’s 400 richest individuals.

In researching this story, I found many examples of successful land banking. It seems like one of those truly timeless ways to get rich over time.

Land Banking in the Stock Market

In the stock market, there are many examples of successful land banking. I have always had a soft spot for companies that own lots of land. Maybe it comes from my banking days. I loved those deals in which I made a company a loan and had the company on the hook for collateral in the form of land or real estate. That way, even if things didn’t work out with the business, the value in the land could still make us whole.

It doesn’t work quite the same way with stocks, but in broad outlines, it is awfully similar. If we can buy a company that owns a lot of land, that land can provide a ballast of value that gets us out of a deal gone bad. In the best-case scenario, it becomes a springboard to big gains.

Over the least couple of years, I’ve recommended several publicly traded land bankers to the subscribers of my investment services, Capital & Crisis and Mayer’s Special Situations. IRSA (IRS:nyse) is one of them. It is a land banker in the classic sense. This Argentinean company bought its Santa Maria del Plata land parcel in Buenos Aires years ago for a pittance. And today, this property is in the crosshairs of development. This idea has not paid off for us yet, but I believe it will eventually.

Then there are stocks such as Deltic Timber (DEL:nyse), the Murphy family has sat on old timberland since 1908. Today, parcels are being stripped out and developed as part of the suburbs of Little Rock, Ark.

I’ve also taken profits numerous times in companies that were successful land bankers. One that comes to mind is Intrawest, a ski resort developer with a lot of excess land. The stock was bought out about a year after I recommended it, handing a 70% gain to anyone who acted on my recommendation.

In Mayer’s Special Situations - where I tackle smaller-cap companies - I found a wonderful land banker in Texas Pacific Land Trust. This company owns nearly a million acres of old railroad property in Texas. Slowly over time, the trust sells parcels or leases to oil and gas companies… and may even
serve as the home for wind farms in the future.

As Mark Twain once wrote, “Buy land, they’re not making it anymore.”

Companies that bank land may not seem very sexy or exciting. But when the stock market is reeling from one financial disaster to the next, a little bit of boredom is not such a bad thing…especially when rock-solid land values are supporting that boredom.

[Joel's Note: Chris specializes in uncovering exactly this kind of “hidden” value in the companies he recommends for readers of his Mayer’s Special Situations research service. In fact, right now Chris has discovered one company with a “kicker” that he likens to being paid royalties. You know, the type that Wacko-Jacko collects every time a Beatles song is played.

In 2002, this same royalty “paycheck program” paid out $50 for every $1 invested. Now, in 2008, the doors are open again. You can find details in Chris’ latest report. Here’s a link if you’re interested.

—- Gold’s Discount Window Is Closing —-

Suddenly, everyone’s talking about GOLD again. But what they don’t know about are “Vancouver LEAPERS”

Here’s How To Use “Vancouver LEAPERS” To Make Huge Gains in this Blowoff Phase of the Gold Rally

The last time we saw a gold market like this, some investors made 971%, 2,464% and even 3,987% with little-known “LEAPER” stocks.

Today, you have a once-in-a-lifetime chance at similar gains for as little as $500… Details Here     

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[Rude Endnote: As you are no doubt aware, we like to have a little fun with our marketing here at Agora Financial. Recently, we sent out a time-sensitive report with the headline “Burn After Reading.” We had no idea that Hollywood would catch on and now we see that the Coen Brothers have directed a film by the same name.

As if that wasn’t confusing enough for your pop-culturally-challenged editor, we just came across this picture of Addison and Ian of your 5-Minute Forecast at the Venice Film Festival to promote the event.

We know Addison has been getting around the movie circles, promoting his new documentary, I.O.U.S.A., but, er…Please explain?

Be sure to catch today’s 5, en route soon.

Until tomorrow…

Cheers,

Joel Bowman
Rude Awakening

aussiejoel@the-rude-awakening.com