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>>> Reliance, Inc. Agrees to Acquire Tolling Assets from FerrouSouth
Reliance, Inc.
Jul 15, 2024
https://finance.yahoo.com/news/reliance-inc-agrees-acquire-tolling-105000717.html
SCOTTSDALE, Ariz., July 15, 2024 (GLOBE NEWSWIRE) -- Reliance, Inc. (NYSE: RS) announced that it has reached an agreement to purchase certain assets of the FerrouSouth division of Ferragon Corporation (“FerrouSouth”), a premier toll processing operation headquartered in Iuka, Mississippi. In addition to offering high quality flat-rolled steel processing, FerrouSouth provides logistics services including shipping and warehousing solutions within the rapidly growing Southeastern market. The FerrouSouth operations will operate as a division of Feralloy Corporation, a wholly owned subsidiary of Reliance. For the twelve months ended December 31, 2023, annual net sales for the select tolling operation were approximately $15 million. The terms of the transaction were not disclosed. The transaction is expected to close within the next 30 days, subject to customary closing conditions.
“The addition of FerrouSouth’s tolling operations helps expand our toll processing capabilities and provides additional capacity to Feralloy through its existing operations in the Southeastern United States,” commented Karla Lewis, President and Chief Executive Officer of Reliance. “FerrouSouth’s tolling operation is expected to grow as part of Feralloy and will benefit from being a part of Reliance due to our scale, strong customer relationships, deep knowledge base and breadth of expertise throughout our extensive family of companies.”
About Reliance, Inc.
Founded in 1939, Reliance, Inc. (NYSE: RS) is a leading global diversified metal solutions provider and the largest metals service center company in North America. Through a network of more than 320 locations in 40 states and 12 countries outside of the United States, Reliance provides value-added metals processing services and distributes a full-line of over 100,000 metal products to more than 125,000 customers in a broad range of industries. Reliance focuses on small orders with quick turnaround and value-added processing services. In 2023, Reliance’s average order size was $3,210, approximately 51% of orders included value-added processing and approximately 40% of orders were delivered within 24 hours. Reliance, Inc.’s press releases and additional information are available on the Company’s website at reliance.com.
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Texas Pacific Land (TPL) - >>> A passive company packed with passive income potential
https://finance.yahoo.com/news/think-crude-oil-going-100-094500311.html
Daniel Foelber (Texas Pacific Land): Formed out of the bankruptcy of Pacific Railroad in the 19th century, Texas Pacific Land owns around 880,000 acres of land in West Texas. If you've ever been to West Texas, you know the terrain can be inhospitable to human settlement. But it is gushing with oil reserves.
Texas Pacific makes money from its land through royalties, water sales, and other factors. It typically makes more money when oil and gas prices are higher, but it isn't as correlated to the price of fossil fuels as an exploration and production company.
For example, it reported significantly lower realized oil, natural gas, and natural gas liquids (NGLs) prices in 2023 compared to 2022. The price per barrel of oil equivalent, which is basically a weighted average for oil, natural gas, and NGLs, was 30% lower in 2023 than in 2022. Yet overall revenue was down less than 6%, and net income was down a little over 9% thanks to higher water royalties.
Category
2022
2023
Oil and gas royalties
$452.43 million
$357.39 million
Water sales
$84.73 million
$112.20 million
Produced water royalties
$72.23 million
$84.26 million
Easements and other surface-related income
$48.06 million
$70.93 million
Land sales and other operating revenue
$9.97 million
$6.81 million
Total Revenue
$667.42 million
$631.6 million
In the following chart, you can see that Texas Pacific Land consistently makes a profit no matter the cycle due to its low cost and passive business model. It also converts a majority of revenue to net income.
Texas Pacific rewards its shareholders with quarterly dividends, which vary in size based on its earnings. For example, the company paid $32 per share in 2022 dividends but just $13 per share in 2023.
Texas Pacific isn't the ideal company if you're looking for predictable passive income or to supplement income in retirement. Still, it is a good choice if you want to invest in oil and gas but avoid the volatility that comes with severe downturns.
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>>> BlackRock Launches Copper Miners ETF in Amsterdam
ETF.com
The issuer aims to benefit from the metal’s role in the energy transition.
by Theo Andrew, Jamie Gordon
|
Jun 26, 2023
https://www.etf.com/sections/news/blackrock-launches-copper-miners-etf-amsterdam
LONDON - BlackRock has extended its thematics range with the launch of a copper miners ETF, ETF Stream can reveal.
The iShares Copper Miners UCITS ETF (COPM) listed on the Euronext Amsterdam on 21 June with a total expense ratio (TER) of 0.55%.
It tracks the Stoxx Global Copper Miners index, providing exposure to companies globally with significant exposure to the copper mining industry via revenue percentage or market share.
Companies in the top 50% of market share of the copper ore mining industry will be selected.
BlackRock said the industry typically offers an attractive dividend yield and high sensitivity to the copper price, making a “liquid and tradable proxy candidate” for direct copper commodity exposure.
It added the industry is set to benefit from the net zero transition, given the commodity’s role in electronification across renewable energy, electric vehicles and broader infrastructure.
Copper’s role in the transition has fueled huge demand over the past few years, while limited supply and mining challenges have opened up investment opportunities, the asset manager said.
Demand Set to Outstrip Supply
According to JP Morgan, the world will need a 54% larger supply of copper by 2030 on the current net-zero path, with demand set to outstrip supply by six million tons per year by the end of the decade.
Omar Moufti, thematic and sector product specialist at BlackRock, said: “Clients are becoming more intentional in their climate transition investment ambitions and exposure to copper miners allows them to tap into themes in electrification, such as electric vehicles, renewable power, and infrastructure expansion.
“Clean technology costs continue to decline with increased deployment. And our analysis of the pathways for a transition to a low-carbon economy shows a need for increased investment in new copper mine capacity to accommodate continued growth.”
Despite this, the copper price has remained volatile this year reflecting concerns that China’s rebound was not materialising. Copper exchange-traded products recorded a stellar start to the year on the China re-opening story.
COPM is the second copper miners ETF in Europe, following the launch of the Global X Copper Miners UCITS ETF (COPX) in November 2021. The ETF has since amassed $58m in assets under management (AUM).
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>>> Chinese Billionaire Is Second-Biggest Foreign Owner of US Land
Bloomberg
by Devon Pendleton
January 8, 2024
https://finance.yahoo.com/news/chinese-billionaire-second-biggest-foreign-172504581.html
(Bloomberg) -- A Chinese national who made his fortune from online gaming has emerged as one of the most significant non-American holders of land in the US.
Chen Tianqiao owns 198,000 acres (80,127 hectares) of Oregon timberland, making him the country’s 82nd-largest property owner, according to the Land Report’s latest ranking.
Chen, 50, acquired the acreage from Fidelity National Financial Ventures for $85 million in 2015. Oregon tax records last month disclosed the name of the beneficial owner as Shanda Asset Management, the same moniker as Chen’s Singapore-based holding group.
His Oregon property makes him one of the biggest individual owners of American land by a non-US citizen. Only the Irving family of Canada — No. 6 on the Land Report’s list with over 1.2 million acres of Maine timberland — owns more.
Foreign ownership of US land — particularly land used for farming — has become a sensitive political issue in recent years. About 40 million acres of American agricultural land was owned by non-US interests as of 2021, according to the most recent Department of Agriculture data, with entities from China owning the equivalent of .03% of all US farmland.
Some lawmakers have pushed for national rules restricting foreign investment in American agricultural property. The Senate voted in July to ban the sale of farmland beyond a certain acreage or value to people or businesses from China, Russia, Iran and North Korea, but the measure wasn’t ultimately signed into law. Almost half of all states have some sort of restrictions on foreign ownership.
A native of Zhejiang Province, Chen started an online gaming company, Shanda Interactive, in 1999. Within five years it had become one of China’s largest internet companies and was listed on the Nasdaq in the US. Chen took the company private in 2012 and moved his holding group’s headquarters from China to Singapore.
His investments span public and private equities, venture capital and real estate, according to Shanda’s website. He and his wife Chrissy Luo made an initial $115 million donation to found the Tianqiao and Chrissy Chen Institute for Neuroscience at the California Institute of Technology in 2016 with the mission of advancing understanding of the brain.
Ultra-wealthy investors seeking an inflation hedge and uncorrelated assets have increasingly flocked to farmland and other rural properties in recent years. The average value of US cropland jumped 8.1% last year and has risen by more than a third since 2020, according to the USDA.
The gains are driven by food demand and high inflation but also by interest in rarefied properties, like classic western ranches, that offer recreation as well as investment return potential.
The country’s biggest landowner is the Emmerson family, owners of timberland empire Sierra Pacific Industries, followed by billionaires John Malone, Ted Turner and Stan Kroenke.
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>>> Reliance Steel & Aluminum Co. (RS) operates as a diversified metal solutions provider and the metals service center company in the United States, Canada, and internationally. The company distributes a line of approximately 100,000 metal products, including alloy, aluminum, brass, copper, carbon steel, stainless steel, titanium, and specialty steel products; and provides metals processing services to general manufacturing, non-residential construction, transportation, aerospace, energy, electronics and semiconductor fabrication, and heavy industries. It sells its products directly to original equipment manufacturers, which primarily include small machine shops and fabricators. The company was founded in 1939 and is based in Scottsdale, Arizona.
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>>> Reliance Steel (RS) Gains on Demand Strength, Acquisitions
Zacks Equity Research
June 5, 2023
https://finance.yahoo.com/news/reliance-steel-rs-gains-demand-122700030.html
Reliance Steel & Aluminum Co. RS is gaining from strong demand across key end-use markets, a diversified product base and strategic acquisitions.
Shares of Reliance Steel have gained 23% in the past year compared with 12.8% decline of the industry.
Reliance Steel, a Zacks Rank #3 (Hold) stock, is benefiting from strong underlying demand in its major markets. It envisions healthy demand to continue in the second quarter of 2023.
Demand in non-residential construction, the company’s biggest market, improved in the first quarter. The company is optimistic that demand for non-residential construction activity in the areas in which it operates will remain at healthy levels in the second quarter.
Reliance Steel also witnessed higher year over year demand in the semiconductors market in the first quarter. RS expects the semiconductor market to remain strong and its long-term outlook for semiconductor demand remains favorable.
Demand across the broader manufacturing sectors that it serves improved modestly and the company sees stable demand in the second quarter. Demand in energy (oil and natural gas) improved year over year in the first quarter and the company is cautiously optimistic that demand will remain steady in the second quarter.
The company also witnessed higher demand for the toll processing services that it provides to the automotive market and expects demand to increase in the second quarter. Additionally, demand in commercial aerospace improved during the first quarter and the company is cautiously optimistic that demand will continue to improve in the second quarter.
Reliance Steel has also been following an aggressive acquisition strategy for a while as part of its core business policy to drive operating results. The acquisitions of Rotax Metals, Admiral Metals and Nu-Tech Precision Metals are in sync with its strategy of investing in high-quality businesses.
However, Reliance Steel faces headwinds from cost inflation. It is witnessing higher fuel, freight and labor costs. Its selling, general and administrative expenses went up around 6.4% year over year in the first quarter. The company is expected to continue to face headwinds from inflationary pressure in the second quarter.
The company also continued to face pricing pressure in the first quarter. The first-quarter average selling price per ton sold declined 6.3% from the fourth quarter of 2022, mainly due to shifts in product mix. It also fell 17.7% year over year. RS anticipates its average selling price per ton sold to be flat to up 2% sequentially in the second quarter. However, lower year-over-year selling prices are expected to affect its second-quarter performance.
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>>> Nucor Corporation (NYSE:NUE)
https://www.insidermonkey.com/blog/5-best-steel-stocks-to-invest-in-1169473/5/
Number of Hedge Fund Holders: 39
Based in Charlotte, North Carolina, Nucor Corporation (NYSE:NUE) is a leading steel producer with more than 300 operating facilities primarily in North America. It operates 24 scrap-based steel mills that have an annual production capacity of more than 27 million tons per year. The company also processes nearly 20 million tons of ferrous scrap per year to produce new steel.
On June 15, Nucor Corporation (NYSE:NUE) provided guidance for its Q2 2023 financial results. The company expects earnings per share to be in the range of $5.45 to $5.55 per diluted share, as compared to the consensus estimate of $5.43 per share.
On July 5, Exane BNP Paribas analyst Seth Rosenfeld upgraded the rating on Nucor Corporation (NYSE:NUE) shares to ‘Outperform’ from ‘Neutral’ with a price target of $191. The target price represents a potential upside of 14.53% based on the share price on July 14.
Nucor Corporation (NYSE:NUE) is the best steel stock to invest in according to the number of hedge funds that held its shares as of March 31, 2023. The stock was owned by 39 prominent hedge funds out of the 943 tracked by Insider Monkey, with a total value of $440 million. Citadel Investment Group, Marshall Wace LLP, and AQR Capital Management were the top 3 hedge fund shareholders of the stock.
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>>> Cleveland-Cliffs Inc. (NYSE:CLF)
https://www.insidermonkey.com/blog/5-best-steel-stocks-to-invest-in-1169473/4/
Number of Hedge Fund Holders: 34
Founded in 1847 as a mine operator, Cleveland-Cliffs Inc. (NYSE:CLF) is the largest flat-rolled steel producer and also the largest manufacturer of iron ore pellets in North America. The company is vertically integrated from mined raw materials, direct reduced iron, and ferrous scrap to primary steelmaking and downstream finishing, stamping, tooling, and tubing.
The management Cleveland-Cliffs Inc. (NYSE:CLF) has been making efforts to improve the financial position of the company as well as increase profitability. The company has managed to reduce its net debt and post-retirement liabilities by nearly 45% in the last 2 years.
On the profitability front, the steelmaking COGS has been reduced by $140 per ton while fixed-price auto contracts, which account for a significant portion of the company’s revenue, have been revised up by $115 per ton.
Cleveland-Cliffs Inc. (NYSE:CLF) is the second best steel stock to invest in based on hedge fund sentiment as 34 hedge funds held its shares with a total value of $379 million, as of Q1 2023. Ken Fisher’s Fisher Asset Management was the largest hedge fund shareholder with ownership of 8.2 million shares valued at $149 million.
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>>> Steel Dynamics, Inc. (NASDAQ:STLD)
https://www.insidermonkey.com/blog/5-best-steel-stocks-to-invest-in-1169473/3/
Number of Hedge Fund Holders: 33
Steel Dynamics, Inc. (NASDAQ:STLD) is one of the largest domestic steel producers and metals recyclers in the United States with facilities located throughout the United States, and in Mexico. It produces steel products, including hot roll, cold roll, and coated sheet steel, structural steel beams and shapes, rail, engineered special-bar-quality steel, and cold finished steel, among others.
Steel Dynamics, Inc. (NASDAQ:STLD) has paid regular quarterly cash dividends for more than a decade. During the last 10 years, its dividend payouts have grown at a CAGR of 14.47% and the company currently pays a quarterly cash dividend of $0.425 per common share.
As of Q1 2023, Steel Dynamics, Inc. (NASDAQ:STLD) shares were held by 33 hedge funds with a total value of $304 million. Cliff Asness’ AQR Capital Management was its largest hedge fund shareholder with ownership of 1.3 million shares valued at $142 million.
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>>> Reliance Steel & Aluminum Co. (NYSE:RS)
https://www.insidermonkey.com/blog/5-best-steel-stocks-to-invest-in-1169473/2/
Number of Hedge Fund Holders: 31
Scottsdale, Arizona-based Reliance Steel & Aluminum Co. (NYSE:RS) is a leading diversified metals solutions provider with a network of more than 300 locations across 40 states and 12 countries outside United States. It offers a full range of value-added metals products including galvanized, hot-rolled and cold-finished steel, stainless steel, aluminum, brass, copper, titanium and alloy steel, among others.
Reliance Steel & Aluminum Co. (NYSE:RS) has grown rapidly with intermittent acquisitions to bolster its product offerings and to expand its network. On May 1, the company announced that it had acquired Southern Steel Supply, LLC, a metals service center that supplies customers throughout Tennessee, Mississippi, Arkansas, Alabama, and Missouri. The target company generated FY 2022 net sales of $63 million.
On April 27, Reliance Steel & Aluminum Co. (NYSE:RS) released its financial results for Q1 2023. It generated a revenue of $4.0 billion and net income of $383 million. Its EPS for the quarter was $6.43, which exceeded consensus estimates by $0.81.
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>>> Commercial Metals Company (NYSE:CMC)
https://finance.yahoo.com/news/10-best-steel-stocks-invest-195116483.html
Number of Hedge Fund Holders: 22
Commercial Metals Company (NYSE:CMC), based in Irving, Texas, is a steel company that manufactures, recycles, and fabricate steel and metal products and provides related materials and services. Its network comprises of 7 electric arc furnace (EAF) mini mills, 3 EAF micro mills, one rerolling mill, steel fabrication and processing plants, and metal recycling facilities in the United States and Poland.
On July 13, Commercial Metals Company (NYSE:CMC) announced the acquisition of EDSCO Fasteners LLC, a leading provider of anchoring solutions for the electrical transmission market, without disclosing the financial terms of the transaction. The acquisition is expected to support the company’s position in the construction reinforcement market.
On July 11, UBS analyst Cleve Rueckert initiated coverage of Commercial Metals Company (NYSE:CMC) shares with a ‘Buy’ rating and a price target of $63.00. This represents a potential upside of 14% based on the share price on July 14.
As of Q1 2023, Bruce Berkowitz’s Fairholme (FAIRX) was the largest hedge fund shareholder of Commercial Metals Company (NYSE:CMC) with ownership of 1.3 million shares valued at $62 million.
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Steel sector - >>> Cleveland-Cliffs' bid to keep US blast furnaces smelting
Reuters
by Isla Binnie and Bianca Flowers
September 5, 2023
https://finance.yahoo.com/news/focus-inside-cleveland-cliffs-bid-100000026.html
High costs and environmental opposition have prevented the construction of blast furnaces at steel mills in the United States since 1980. Cleveland-Cliffs Inc CEO Lourenco Goncalves is on a mission to snap up all that are left.
Since joining the U.S. steelmaker in 2014 as part of an activist hedge fund's board takeover, Goncalves has made blast furnaces a hallmark of his strategy, positioning Cliffs as an outlier in an industry shifting towards cheaper and more environmentally friendly electric arc furnaces.
A 65-year-old Brazilian metallurgical engineer, Goncalves transformed Cliffs from an iron ore and coal miner into the largest supplier of steel to the automotive industry in North America by acquiring companies that own blast furnaces to smelt the pig iron it produces.
Now, he has his sights on acquiring U.S. Steel Corp, the other remaining U.S. blast furnace operator, which has been gradually moving into electric arc furnaces, known as mini-mills. Should his $7.3 billion cash-and-stock bid prevail, Cliffs would break into the world's top 10 steel producers, which are mostly from Asia.
Interviews with six people close to the companies and industry insiders, as well a review of regulatory filings, show Goncalves' bet on blast furnaces has yet to pay off, and its success hinges on pulling off the deal with U.S. Steel.
This is because blast furnaces operate around the clock and need more workers. They are more expensive to run when they have to be stopped and restarted to account for changes in demand, as often happens with the automotive sector.
To compensate for that cost, they need a dominant market share so they can charge more for their steel. To build a market position, Cliffs acquired AK Steel for $3 billion and ArcelorMittal's U.S. operations for $3.3 billion in 2020. Cliffs focused on dominating production of U.S.-made steel used in the external panels of cars, which require quality that electric arc furnaces currently cannot achieve.
"By increasing market share, Goncalves has a much more commanding position where he can charge more," said Josh Spoores, principal analyst at CRU Group, a business intelligence firm that provides analysis on global metals and mining.
Goncalves is also betting that producing iron ore in-house for blast furnaces, rather than sourcing scrap steel for electric arc furnaces, will give Cliffs a competitive edge. So far, the nimbler electric arc furnaces have remained cheaper to run, amid fluctuations in demand for steel.
Cliffs' gross margin was 11% last year, down from 35% in 2018, when it focused on iron ore production, according to LSEG data. This was well below Nucor Corp's and Steel Dynamics Inc's margins of 30% and 27.5%, respectively — two rivals that run exclusively on electric arc furnaces. It is also below U.S. Steel's 20.6% margin.
Goncalves has said profitability will improve as Cliffs gains scale, and projects $500 million in annual synergies from the potential U.S. Steel acquisition.
A Cliffs spokesperson said the company is innovating to meet clients' requirements and make U.S. steel competitive.
Focus on car makers
About two-thirds of U.S. steel comes from electric arc furnaces. While Nucor and Steel Dynamics also serve the car sector, they have mostly ceded the market for automotive bodies to Chinese competitors.
This has given Cliffs an opening to serve U.S. car makers that find importing overseas steel expensive, especially following tariffs that former President Donald Trump implemented in 2018. While a few carmakers use aluminum for automotive bodies, most prefer high-grade steel from blast furnaces.
"Materially switching content isn't something these automakers do lightly. I don't think they're going to move away," said KeyBanc equity analyst Phil Gibbs.
Cliffs' devotion to blast furnaces, which are unionized unlike some electric arc furnaces, won it the support of United Steelworkers. The union's international president Thomas Conway said it's backing Cliffs' bid for U.S. Steel because of Goncalves' commitment to blast furnaces. He pointed to Cliffs adding 1,700 new jobs following its last two acquisitions.
Carbon emissions
Goncalves has said in interviews and earnings calls that criticism of blast furnaces' emissions ignores that electric arc furnaces cannot make the steel many car makers want.
"Try to build a car all with steel, flat-rolled steel produced in flat-rolled mini-mills. It doesn't work," Goncalves said on Cliffs' latest quarterly earnings call.
Nucor's and Steel Dynamics' carbon footprints are more than two-thirds smaller than Cliffs' and U.S. Steel's, their sustainability disclosures show.
Cliffs points to having reduced its emissions by 32% since 2017, ahead of a target to achieve this by 2030, primarily by using hot briquetted iron (HBI) in its blast furnaces. HBI is made with natural gas rather than coke from coal, resulting in fewer emissions.
Cliffs is also testing the use of hydrogen to reduce emissions, though the technology's commercially viability remains uncertain.
Last year, President Joe Biden's administration pointed to Cliffs' direct reduction steel plant in Toledo, Ohio, which cost $1 billion and makes HBI, as an example of "clean" U.S. manufacturing.
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>>> Reliance Steel & Aluminum Co. (RS) operates as a diversified metal solutions provider and the metals service center company in the United States, Canada, and internationally. The company distributes a line of approximately 100,000 metal products, including alloy, aluminum, brass, copper, carbon steel, stainless steel, titanium, and specialty steel products; and provides metals processing services to general manufacturing, non-residential construction, transportation, aerospace, energy, electronics and semiconductor fabrication, and heavy industries. It sells its products directly to original equipment manufacturers, which primarily include small machine shops and fabricators. The company was founded in 1939 and is based in Scottsdale, Arizona. <<<
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>>> Commercial Metals Company (CMC) manufactures, recycles, and fabricates steel and metal products, and related materials and services in the United States, Poland, China, and internationally. The company processes and sells ferrous and nonferrous scrap metals to steel mills and foundries, aluminum sheet and ingot manufacturers, brass and bronze ingot makers, copper refineries and mills, secondary lead smelters, specialty steel mills, high temperature alloy manufacturers, and other consumers. It also manufactures and sells finished long steel products, including reinforcing bar, merchant bar, light structural, and other special sections, as well as semi-finished billets for rerolling and forging applications. In addition, the company provides fabricated steel products used to reinforce concrete primarily in the construction of commercial and non-commercial buildings, hospitals, convention centers, industrial plants, power plants, highways, bridges, arenas, stadiums, and dams; sells and rents construction-related products and equipment to concrete installers and other businesses; and manufactures and sells strength bars for the truck trailer industry, special bar steels for the energy market, and armor plates for military vehicles. Further, it manufactures rebars, merchant bars, and wire rods; and sells fabricated rebars, wire meshes, fabricated meshes, assembled rebar cages, and other fabricated rebar by-products to fabricators, manufacturers, distributors, and construction companies. The company was founded in 1915 and is headquartered in Irving, Texas. <<<
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VanEck Inflation Allocation ETF (RAAX) -
RAAX Holdings
Top 9 Holdings (67.64% of Total Assets)
PIT
VanEck Commodity Strategy ETF
21.14%
IGF
iShares Global Infrastructure ETF
12.91%
GDX
VanEck Gold Miners ETF
6.69%
EINC
VanEck Energy Income ETF
5.52%
XLE
Energy Select Sector SPDR Fund
5.43%
VNQ
Vanguard Real Estate Index Fund
4.82%
XOP
SPDR S&P Oil & Gas Exploration & Production ETF
4.35%
MOO
VanEck Agribusiness ETF
3.42%
NURE
Nuveen Short-Term REIT ETF
3.38%
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>>> Billionaire Miner Friedland Warns of a Copper ‘Train Wreck’ as Supply Stalls
Bloomberg
by James Attwood and Jacob Lorinc
June 26, 2023
https://finance.yahoo.com/news/billionaire-miner-friedland-warns-copper-163137782.html
(Bloomberg) -- Copper is poised to follow other commodities upended by recent price surges as the mining industry struggles to expand ahead of accelerating demand, warns the man behind some of the world’s biggest mines.
Demand for critical raw materials is set to jump as nations mandate clean energy and transport while clambering to develop their own supply chains. But a combination of factors suggests supply won’t keep pace, according to billionaire Robert Friedland. They include the fact that deposits are getting pricier and tricker to find and dig up, funding is scarce and societies have yet to grasp mining’s role in the shift from fossil fuels.
“We’re heading for a train wreck here,” the founder and executive co-chairman of Ivanhoe Mines Ltd. said in an interview at Bloomberg’s New York headquarters. “My fear is that when push finally comes to shove” copper can go up 10 times.
Friedland, who made his fortune from Canadian nickel and is behind massive copper finds in Mongolia and the Democratic Republic of Congo, has long championed the importance of the metal used in everything from wires to weaponry. Some analysts share his concern about a looming copper crunch, but consensus is for far more gradual price gains in the coming years.
Futures are down 10% from a January peak as an uneven post-pandemic recovery in China — the world’s biggest metals consumer — and inflation-fighting efforts by central banks restrains demand. Still, Friedland sees copper’s longer-term prospects supported by decarbonization, ongoing Chinese demand, the emergence of India and re-militarization in the wake of Russia’s invasion of Ukraine.
On the supply side, output in top producer Chile has plateaued as ore quality deteriorates. The industry in general is having to dig deeper and contend with an uptick in resource nationalism and far more stringent environmental and social standards.
Investors have yet to grasp the significance of a global rush for the building blocks of clean energy, Friedland said. He points to very low physical inventories of copper coinciding with historically low relative valuations of mining companies. Large premiums paid in recent acquisitions indicate the mining industry understands where the market is headed, he said, although consolidation won’t solve the dilemma of how to boost production.
Friedland points to other commodities as examples of what may be in store for a tightening copper market. Chinese spot prices of molybdenum doubled from August to February amid supply disruptions and growing demand from the renewables and military sectors. One gauge of semi-processed lithium shot up 422% in 2021.
“When metals are required, the prices go crazy and nobody’s willing to sell them,” he said. “We’re heading into that sort of situation.”
The 72-year-old magnate is making his latest mining bet on the US. Ivanhoe Electric Inc., which has BlackRock Inc. and BHP Group as investors, is exploring in Arizona when the US is starting to realize the importance of domestic sources of raw materials and supply chains for greening the economy.l
China is a dominant player in processing of nickel, copper, cobalt and other resources that are key to economic growth and clean-energy technologies. With initiatives such as the Inflation Reduction Act, the US is seeking to curtail global dependence on China as competition between the two nations increases. The European Union has already proposed classifying copper and nickel as critical raw materials in legislation designed to bolster supplies, alongside other metals key to the energy transition.
“Europe is in a panic about where their raw material is going to come from,” Friedland said. “The US is in a panic about where their raw material is going to come from. And so we’re going to see a lot of volatility and change in the way our supply chain is organized.”
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>>> Is It Time to Invest in Wheat ETF (WEAT)?
Zacks
Sanghamitra Saha
June 12, 2023
https://finance.yahoo.com/news/time-invest-wheat-etf-weat-170000918.html
The recent surge in wheat prices has caught the attention of investors looking for potential opportunities in the commodities market. The Teucrium Wheat ETF WEAT gained about 2% on Jun 8, 2023, reflecting the growing market interest in this agricultural commodity.
Wheat Production Areas and Optimal Weather Conditions
To make informed investment decisions regarding wheat ETFs, it's crucial to understand the major wheat-producing areas and the weather conditions favorable for wheat production. The top wheat-producing countries include Russia, Ukraine, the United States, India, and Canada.
Investors should note that wheat thrives in temperate climates with adequate moisture during critical growth stages. The ideal weather conditions for wheat cultivation include cool temperatures during germination and early growth, followed by warmer temperatures during grain fill. Sufficient rainfall or access to irrigation is also crucial to support healthy wheat growth.
In this article, we will explore the factors driving the rise in wheat prices and analyze whether it's a good time to buy a wheat ETF.
Collapse of the Kakhovka Dam
One of the primary factors contributing to the recent increase in wheat prices is the collapse of the Kakhovka dam and hydroelectric power station in Ukraine. This unfortunate event occurred in a region of the Dnieper River under Russian control, raising concerns about Ukraine's ability to access affordable supplies of wheat.
Ukraine is a major exporter of wheat, barley, corn, and sunflower oil, with a significant portion of its produce being shipped to developing nations in Africa, the Middle East, and parts of Asia. The disruption in the supply chain has renewed market fears about the stability of Ukraine's food exports, leading to a spike in global wheat prices.
Drought Conditions in the Midwest
Another factor impacting wheat prices is the prevailing drought conditions in the Midwest, particularly in Kansas, which happens to be a significant wheat-producing region. While the market hasn't shown significant concern about the drought yet, if the dry spell persists, it could have a severe impact on the wheat crop supply. Drought can lead to lower yields and poorer quality of wheat, potentially driving up prices further.
The underlying wheat futures looks to reflect the daily changes of a weighted average of the closing prices for 3 futures contracts for wheat that are traded on the CBOT: the second-to-expire contract, the third-to-expire contract and the contract expiring in the Dec. following the expiration month of the third-to-expire contract. The fund charges 22 bps in fees.
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#Hemp Hemp, Inc. focuses on the provision of industrial hemp. Its products include the King of Hemp pre-roll blends, fortified pre-rolls; Bubba Kush hemp; caviar/moon rocks; and diamonds and crumbles. The company also involved in processing and farming industrial hemp; extracting hemp CBD oil; and educating and empowering hemp farmers and entrepreneurs with knowledge, processing, infrastructure, and support. In addition, it engages in the sale of hemp accessories, such as extractors, harvesters, storage bags, containers, fertilizer, soil amendments, humidifiers, dehumidifiers, balers, greenhouses, and greenhouse equipment; and drying, trimming, curing, storing, and brokering for other farmers harvesting hemp, as well as provision of research and development, hemp consulting, and educational entertainment services. The company was formerly known as Marijuana, Inc. and changed its name to Hemp, Inc. in June 2012. Hemp, Inc. was incorporated in 2008 and is based in Las Vegas, Nevada.
>>> Which Billionaire Owns The Most Land In The U.S.? Hint, It's Not Bill Gates
Benzinga
by AJ Fabino
December 7, 2022
https://finance.yahoo.com/news/billionaire-owns-most-land-u-175836135.html
Earlier this year, in May, claims were made that Microsoft Corp co-founder Bill Gates owned the majority of America’s farmland.
While that is false, with the billionaire amassing nearly 270,000 acres of farmland across the country, compared to 900 million total farm acres, a different billionaire privately owns 2.2 million acres, making him the largest landowner in the U.S.
John Malone, the former CEO of Tele-Communications Inc., which AT&T Inc. purchased for more than $50 billion in 1999, has a variety of ranching and real estate businesses, primarily in Maine, New Mexico, Colorado, and Wyoming.
Worth $9.6 billion, Malone, a media veteran, said he purchased the land because "they are not making it anymore." He also owns three hotels in Dublin, Ireland, and a fourth in Limerick.
The current Liberty Media Corp chairman made the decision to put his billions of dollars in wealth into land after spending a summer working on a family farm in Pennsylvania.
Bell Ranch in New Mexico, a 290,100-acre plain dotted with mesas, rimrock canyons, meadows, and a distinctive bell-shaped mountain, was one of his first significant acquisitions. In addition, Florida's Bridlewood Farms is a noteworthy asset.
He now holds the title of the largest landlord in the US, surpassing Ted Turner, with a total of 2.2 million acres of crops, ranch property, and woodland.
Malone noted in a CNBC interview that preservation was his primary motivation for purchasing land, and he intends to purchase more. He said that his properties serve as a reliable source of income and a solid hedge against inflation.
"The conservation of lands is important," the billionaire said. "That was a virus that I got from Ted Turner."
He continued, "the forestry part of it in the Northeast is a pretty good business, with very low return on capital, but very stable and leverageable," Malone said. "And we think it will provide good inflation protection in the long run. That's basically the motivation there. It just seemed like a good thing to do."
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>>> Farmland Partners Announces Senior Executive Succession Plan
BusinessWire
November 8, 2022
https://finance.yahoo.com/news/farmland-partners-announces-senior-executive-121000150.html
President Luca Fabbri to Succeed Paul Pittman as CEO; Pittman to Remain Executive Chairman and Full-Time Employee of Company
DENVER, November 08, 2022--(BUSINESS WIRE)--Farmland Partners Inc. (NYSE: FPI) (the "Company" or "FPI") today announced that its Board of Directors has approved a senior executive succession plan pursuant to which the Company’s President Luca Fabbri will become Chief Executive Officer, effective following the filing of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which is expected to occur in late February 2023. At the same time, Fabbri will join the Company’s Board of Directors. FPI’s current Chairman and Chief Executive Officer, Paul Pittman, will remain as Executive Chairman of the Company’s Board of Directors and as a full-time employee. Pittman and Fabbri will continue to work side-by-side to formulate corporate strategy, execute the Company’s growth plan and drive shareholder value.
Fabbri co-founded FPI as a public company with Pittman in 2014 and served as the Company’s Chief Financial Officer and Treasurer from the Company’s inception, before assuming the position of President in October 2021.
"Luca played a key role in the initial formation, capitalization and formulation of the strategic direction of FPI, has the undivided confidence of our entire team and has over time taken on an increasing number of top executive duties. Moreover, Luca has been a close colleague and friend for many years, and I am confident will work extremely well with me as Executive Chairman," said Pittman. "This appointment is a natural progression in a process started with Luca’s appointment as President in 2021. There is no one I trust more than Luca to help chart a course for FPI’s future, and I look forward to continuing our close collaboration for years to come."
Prior to co-founding FPI, Fabbri was an entrepreneur and executive in finance, technology, and agriculture. He has a B.S. with Honors in Economics from the University of Naples (Italy) and an M.B.A. in Finance from the Massachusetts Institute of Technology.
"I appreciate the confidence that Paul and the Board of Directors have placed in me, and I’m eager to lead FPI’s talented team and continue delivering for our stockholders," said Fabbri. "Farmland is an attractive asset class, and FPI is uniquely positioned to continue providing strong risk-adjusted shareholder returns in all economic environments. I can’t think of a more exciting business to be in right now."
About Farmland Partners Inc.
Farmland Partners Inc. is an internally managed real estate company that owns and seeks to acquire high-quality North American farmland and makes loans to farmers secured by farm real estate. As of the date of this release, the Company owns and/or manages more than 190,000 acres in 18 states, including Alabama, Arkansas, California, Colorado, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Louisiana, Michigan, Mississippi, Missouri, Nebraska, North Carolina, South Carolina, and Virginia. We have approximately 26 crop types and more than 100 tenants. The Company elected to be taxed as a real estate investment trust, or REIT, for U.S. federal income tax purposes, commencing with the taxable year ended December 31, 2014. Additional information: www.farmlandpartners.com or (720) 452-3100.
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>>> Corteva, Inc. (CTVA) operates in the agriculture business. It operates through two segments, Seed and Crop Protection.
The Seed segment develops and supplies advanced germplasm and traits that produce optimum yield for farms. It offers trait technologies that enhance resistance to weather, disease, insects, and herbicides used to control weeds, as well as food and nutritional characteristics. This segment also provides digital solutions that assist farmer decision-making with a view to optimize product selection, and maximize yield and profitability.
The Crop Protection segment offers products that protect against weeds, insects and other pests, and diseases, as well as enhances crop health above and below ground through nitrogen management and seed-applied technologies. This segment provides herbicides, insecticides, nitrogen stabilizers, and pasture and range management herbicides. It serves agricultural input industry.
The company operates in the United States, Canada, Latin America, the Asia Pacific, Europe, the Middle East, and Africa. Corteva, Inc. was incorporated in 2018 and is headquartered in Indianapolis, Indiana. (Dupont)
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>>> Rogers International Commodity Index
From Wikipedia
https://en.wikipedia.org/wiki/Rogers_International_Commodity_Index
The Rogers International Commodity Index (RICI) is a broad index of commodity futures designed by Jim Rogers in 1996/1997. The first fund tracking the index began on July 31, 1998.[citation needed]
Overview
The index was designed to meet the need for consistent investing in commodities through a broad-based international vehicle. The index tracks 38 commodity futures contracts from 13 international exchanges. The list of commodities is subject to change by the RICI Committee. In general, a commodity will be considered fit to be included in the index if it plays a significant role in worldwide (developed and developing countries) consumption. If one particular commodity is being traded on more than one international exchange, the most liquid contract globally, in terms of volume and open interest combined, is then selected for inclusion in the index. Liquidity is also used in determining weights in the Index.
The index is divided into three sub-indices, which reflect the three sub-segments of the RICI -
RICI Agriculture
RICI Energy
RICI Metals
The sub-indices' contribution to main index from the beginning are
Agriculture - 34.90%
Energy - 44.00%
Metals - 21.10%
according to the RICI Handbook (see reference below).
Calculation key points
Each commodity is rebalanced on the start of each month towards initial weights, determined annually by the RICI Committee as discussed in the RICI Handbook (see reference below). The RICI has had very few changes since 1996 making it the most stable, consistent, and transparent of all the commodity indexes. When one invests in the RICI, one knows what one will own a few years down the road in sharp contrast to the other commodity indexes which change significantly.[citation needed]
For each commodity, the most valid (most actively traded from the committee point of view) expiration is chosen to be included into the RICI calculation. The index is rolled at the end of each month to contracts that are expected to be most active during the next month. Generally, if the next calendar month of a futures contract includes a first notice day, a delivery day or historical evidence that liquidity migrates to a next contract month during this period, then the next contract month is intended to be applied to calculate the index – taking legal constraints into account.[citation needed]
The index calculation methodology is reviewed annually by the index committee during its meeting in December and possibly amended thereafter. Meetings can be called at any time if conditions warrant it.[citation needed]
The RICI's website (http://www.rogersrawmaterials.com/) is not working from June 02, 2021, and its owners have said nothing about this.
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>>> Best Water ETFs for Q3 2021
FIW, CGW, and PHO are the best water ETFs for Q3 2021
Investopedia
By NATHAN REIFF
Jun 2, 2021
https://www.investopedia.com/articles/etfs/top-water-etfs/?utm_campaign=quote-yahoo&utm_source=yahoo&utm_medium=referral
Water is one of the planet's most coveted and widely used resources. Like other commodities, such as oil and gold, water assets can add significant diversification to any portfolio. One of the best ways to gain exposure to the water industry is through a water exchange-traded fund (ETF). These ETFs invest in companies involved in the treatment and purification of water, as well as its distribution. Some notable names include Germany-based BASF SE (BAS.DE), 3M Co. (MMM), and ITT Inc. (ITT). As an essential commodity, water ETFs are often used as a defensive position in a portfolio. To the extent that water scarcity becomes a growing threat, these ETFs could be a significant offensive play as well.
KEY TAKEAWAYS
Water ETFs have outperformed compared to the broader market in the past year.
The water ETFs with the best 1-year trailing total returns are FIW, CGW, and PHO.
The top holdings of these ETFs are Pentair plc, American Water Works Company Inc., and Roper Technologies Inc., respectively.
Compared to other types of ETFs, the water ETF universe is small, comprised of 4 funds that trade in the U.S., excluding inverse and leveraged ETFs, as well as ETFs with fewer than $50 million in assets. These ETFs do not invest in water as a commodity or in water rights, but focus on water resources companies. These funds have outperformed relative to the S&P 500, which posted a 1-year trailing total return of 41.0% as of May 28, 2021.1 The best-performing water ETF based on performance over the past year is the First Trust Water ETF (FIW). We examine the top 3 water ETFs as measured by 1-year trailing total returns below. Numbers for the first two funds below are for May 30, and numbers for the third fund are for May 31, 2021.
First Trust Water ETF (FIW)
1-Year Trailing Total Returns: 51.1%
Expense Ratio: 0.54%
Annual Dividend Yield: 0.47%
3-Month Average Daily Volume: 59,434
Assets Under Management: $985.8 million
Inception Date: May 8, 2007
Issuing Company: First Trust
FIW is a multi-cap ETF that invests in a blend of value and growth stocks. It tracks the ISE Clean Edge Water Index. The index is comprised of exchange-listed companies deriving a substantial portion of their revenue from the potable and wastewater industry. They are selected according to market cap, liquidity, and other requirements.3 The fund's top three holdings include Pentair plc (PNR), an American water treatment company incorporated in Ireland; Roper Technologies Inc. (ROP), a maker of industrial solutions including pumps and fluid handling systems; and Xylem Inc. (XYL), a water technology provider to residential, commercial, industrial, and agricultural clients.
Invesco S&P Global Water Index ETF (CGW)
1-Year Trailing Total Returns: 47.5%
Expense Ratio: 0.57%
Annual Dividend Yield: 1.24%
3-Month Average Daily Volume: 71,275
Assets Under Management: $930.9 million
Inception Date: May 14, 2007
Issuing Company: Invesco
CGW is a multi-cap blended fund that tracks the S&P Global Water Index. The index is comprised of a portfolio of companies from developed markets representing water utilities, infrastructure, equipment, instruments, and materials. The large majority of CGW's portfolio represents either industrial or utilities companies.5 The top holdings of CGW include American Water Works Company Inc. (AWK), a water public utility company; Xylem; and Veolia Environnement SA (VIE:PAR), a France-based water and waste management and energy services company.
Invesco Water Resources ETF (PHO)
1-Year Trailing Total Returns: 46.4%
Expense Ratio: 0.60%
Annual Dividend Yield: 0.32%
3-Month Average Daily Volume: 97,797
Assets Under Management: $1.6 billion
Inception Date: Dec. 6, 2005
Issuing Company: Invesco
PHO is a multi-cap blended fund that targets the Nasdaq OMX US Water Index. The index tracks U.S.-listed companies that create products to conserve or purify water. As such, PHO holds companies ranging from water utilities to infrastructure as well as materials and water equipment businesses. Machinery stocks, the largest share of PHO's portfolio, comprise more than a third of assets, while water utilities and industrial companies are the second- and third-largest areas, respectively.7 The top three holdings include Roper Technologies; Xylem; and Danaher Corp. (DHR), a designer and provider of professional, medical, industrial, and commercial products to a variety of sectors, including the environmental sector.
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>>> Metals ETFs: Investing in Base and Industrial Metals
The Balance
BY MARK KENNEDY
August 18, 2021
https://www.thebalance.com/metals-etfs-investing-in-base-and-industrial-metals-1214761
There’s no doubt that when it comes to metals, gold and precious metals get most of the attention. That's true for the average person walking down the street, and it's true for the average investor, as well. Investors flock to gold exchange-traded funds (ETFs) and precious metals ETFs as relatively safe investments when market volatility spikes. However, that doesn’t mean investors should forget about the “other” metal ETFs.
Base metals and industrial metals are important commodities in sectors such as construction and technology, so they shouldn’t be ignored. Whether you are looking to diversify your portfolio or seize a perceived opportunity with metal commodities, you should consider metal ETFs for your investing strategy.
Breaking Down Industrial Metals ETFs
There are quite a few different types of metal ETFs to consider for your portfolio. They can vary by region, utilize different investment strategies, or specialize in a specific type of metal.
Like any type of ETF, these products allow investors to enter certain sectors or invest in certain markets without loading up on equities or battling index basket pricing. Instead, you can get instant exposure to your desired market with one easy transaction.
Some metal funds target metals as commodities, using futures to track the underlying target assets. Other ETFs target company stocks that are involved in the mining, exploration, or distribution of the metals. There are also inverse and ?leveraged metal ETFs, which use advanced strategies to either short or outperform the underlying index in the near-term. International metal ETFs allow investors to add exposure from different countries. Metal exchange-traded notes (ETNs) offer a similar investment product as ETFs, but with some key differences.
List of Base and Industrial Metals ETFs and ETNs
As with any investment—a company stock, mutual fund, ETF, or otherwise—please make sure you thoroughly research these products before placing any trades on them (either long or short). Conduct your due diligence, watch how these funds react to different market conditions, take a look under the hood and see what is in the funds.
Furthermore, while this list is current as of Aug. 18, 2021, ETFs and ETNs are constantly in flux. The name, ticker symbol, investment goals, or holdings in any of these products could have since changed.
ETFs have many advantages, but they have disadvantages, as well (as does any investment). It is important to understand the investment vehicle before you trade it. If you have any questions or concerns, make sure you consult a stockbroker, a financial advisor, or another financial industry professional.
With those disclaimers out of the way, here's a list of industrial metal ETFs and ETNs to kickstart your research:
CPER - United States Copper Index Fund
DBB - Invesco DB Base Metals Fund
JJMTF - iPath Bloomberg Industrial Metals Subindex Total Return ETN
JJCTF - iPath Bloomberg Copper Subindex Total Return ETN
PICK - iShares MSCI Global Select Metals & Mining Producers ETF
REMX - VanEck Vectors Rare Earth/Strategic Metals ETF
RJZ - ELEMENTS Rogers International Commodity Index Metals Total Return ETN
SLX - VanEck Vectors Steel ETF
UCIB - ETRACS CMCI Total Return ETN Series B
XME - SPDR S&P Metals & Mining ETF
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>>> Timber ETFs Sag As Rally Fades
ETF.com
by Jessica Ferringer
June 18, 2021
https://finance.yahoo.com/news/timber-etfs-sag-rally-fades-201500053.html
Lumber prices have been on fire over the past few months, fueled by the surge in demand as the country emerges from COVID. Now it appears the rally has run out of gas.
Lumber prices are an input into one of the major leading economic indicators, the housing market. And though housing demand is currently red hot at a time when supply is running thin, homebuilders have been delaying construction as sky-high lumber prices have driven up costs.
This was evidenced when May housing starts rose less than expected, while homebuilder confidence fell to a 10-month low.
Lumber Prices
However, the trailing month has shown a reversal of the trend, with lumber prices falling significantly from their peak in early May.
What prices do from here is anybody’s guess. But one thing we have seen with other reopening trades is volatility, and volatility creates opportunity for investors. When it comes to ETFs, there are two ETFs offering exposure to the lumber industry through equities.
Though both the iShares Global Timber & Forestry ETF (WOOD) and the Invesco MSCI Global Timber ETF (CUT) offer exposure to the global timber space, there are some clear distinctions between the two.
WOOD is 15 basis points cheaper, with an average spread of 0.21% relative to CUT’s 0.24%. While WOOD has 25 holdings, CUT takes a less specific and more diversified approach, with 203 holdings (two-thirds of which are due to a 0.23% position in the Invesco India ETF (PIN)).
Of the two ETFs, CUT was first to market, with an inception date in November 2007 relative to June 2008 for WOOD. However, investors seem to be drawn to the lower expense ratio, with WOOD having more than triple the assets of the smaller CUT, and seeing about 8x as much daily volume on average. When considering these two ETFs, it seems that here, diversification will cost a little extra. Nearly all of WOOD’s holdings are included in CUT’s portfolio, with the exception of Sumitomo Forestry, which is 3.2% of the portfolio.
In spite of their differences, both ETFs have been the beneficiary of skyrocketing lumber prices over the past year, rising more than 60% over the trailing one-year as of June 15.
Demand for lumber soared as homeowners in lockdown decided to renovate, and cheap mortgages kindled housing starts. On the supply side, lumber mills, like many other industries, faced labor market challenges.
However, over the past month, CUT has fallen by 3.4%, and the more concentrated WOOD has dropped by 6.0%.
Performance Chasers Beware
Analyzing these ETFs using the ETF Fund Flows Tool helps to illustrate the important but too-often-forgotten lesson of the perils of chasing performance.
Both funds had been relatively quiet in terms of flows, beginning to gain traction in April and May, when lumber prices were set aflame.
WOOD experienced its highest daily inflow on May 11, with nearly $17.5 million coming into the fund, and the following day seeing an additional $17.3 million. CUT’s flows tell a similar story, with $4 million in flows on May 7.
Since then, WOOD has seen outflows, while CUT’s investors seem to be holding steady.
But what does performance look like since early May?
In investing, time horizon is an important consideration. If you are trying to time the market with lumber prices, good luck. If you are looking for a buy-and-hold position in the industry, the choice between ETFs comes down to costs since the overlap is heavy and, not surprisingly, returns have mostly been in lockstep.
Those with shorter time horizons might want to consider paying up for slightly more diversification, as, at least for the moment, WOOD appears to be more negatively impacted by the crash in lumber prices.
For prior articles on Timber ETFs, check out our Timber ETFs channel.
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>>> 3 reasons why lumber prices will tumble 30% by year end, according to a veteran portfolio manager
Market Insider
by Isabelle Lee
Aug. 28, 2021
https://markets.businessinsider.com/news/commodities/lumber-price-outlook-3-reasons-decline-michael-gayed-housing-sawmill-2021-8
The price of lumber has yet to bottom - and will fall as much as 30% off by the end of the year, Micheal Gayed says.
Gayed is an award-winning portfolio manager for Toroso Investments who has long touted lumber as a powerful indicator for the US economy. He gave three reasons why lumber could fall to $357 per thousand board feet by the end of 2021.
The price of lumber has yet to bottom and will shed as much as 30% by the end of the year, veteran portfolio manager Micheal Gayed said.
This means the commodity could slip to as low as $357 per thousand board feet, from around $510 per thousand board feet lumber was trading at on August 27.
Gayed, an award-winning portfolio manager for Toroso Investments who has long touted lumber as a powerful indicator for the US economy, said there are three reasons the commodity will see a protracted slide. First is the slow down in housing construction as elevated prices dissuade buyers and sap demand, he said. The market is set to reverse, and if housing cools, so will construction, he added. Various data show that the housing crisis is getting worse in the US.
"Lumber is sort of your closest real-time gauge of housing activity," Gayed, who also runs the ATAC Rotation Fund, told Insider. "Housing activity is probably just due to slow down aggressively."
Lumber prices have slipped 70% from record highs of $1,711 reached in May. Prior to that record, prices had skyrocketed more than 500% during the COVID-19 pandemic amid supply-chain disruptions.
Gayed's second reason is an oversupply in lumber as sawmills rushed to meet demand, he said. Lumber production, which starts in the mills, was severely disrupted when much of the economy shut down.
But now, many analysts see North America's biggest lumber producers set up for a rebound following an immense blow during the height of the pandemic caused by lockdowns and raging wildfires.
The third reason, Gayed said, is that the market will soon realize that inflation is indeed transitory. Lower inflation typically results in lower Treasury yields, and yields, he says, generally move in the same direction as lumber.
Gayed is well known for his 2015 report on the relationship between gold, lumber, and the economy, and when to play "offense" and "defense." If lumber is outperforming gold in roughly four months, Gayed said, investors should take a more aggressive stance as this indicates economic strength. If gold is outperforming lumber in the same time period, he advises investors to do the opposite.
A final reason lumber could see a further downturn - one which Gayed says is less talked about - is the looming crisis related to the debt ceiling, which US Republican lawmakers have recently signaled they will not lift.
"The implication is that if S&P and Moody's downgrade US debt like they did in 2011, and the reaction is the same, it ... would broadly hurt economic activity."
Gayed pointed to the massive correction in 2011 when the US stock market crashed after a credit rating downgrade by S&P - the first time the country was downgraded.
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>>> Oil Spike Lifts Energy ETFs
Yahoo Finance
Dan Mika
June 22, 2021
https://finance.yahoo.com/news/oil-spike-lifts-energy-etfs-150000081.html
The stars are aligning for a bull run in the oil markets, as the world continues to shed its pandemic-induced cabin fever with road trips and flights amid uncertainty over how flexible the supply of the commodity will be in handling that demand.
Prices for the U.S. benchmark West Texas Intermediate recovered from the $40 per barrel mark at the start of the year to hit $70 per barrel earlier in June on the back of massive demand for travel in places where COVID-19 is on the retreat.
The International Energy Agency’s latest projections expect global oil demand to recover to prepandemic levels by the end of 2022, leading to domestic surplus drawdowns and a possible lag in refineries being able to keep up in turning crude into gasoline.
Consider the Invesco DB Energy Fund (DBE), which tracks energy-related futures contracts and has posted year-to-date returns of 38.93%. Let’s compare it to the other largest commodity baskets in the ETF realm.
Invesco DB Base Metals Fund (DBB), industrial metals: 12.98%
Invesco DB Agriculture Fund (DBA), agriculture: 9.54%
Aberdeen Standard Physical Precious Metals Basket Shares ETF (GLTR), precious metals: -4.26%
Here’s what’s driving oil prices higher, and how ETF investors can get into the market.
Geopolitics & Demand Flip
The crude oil crash last March was driven by both ends of the supply and demand curve. Much of the world went into lockdown to avoid the spread of COVID-19, which kept people from driving and flying, sending demand down substantially.
At the same time, Saudi Arabia and Russia began an oil production war after the latter walked out of OPEC negotiations on how the cartel’s members would react to the pandemic. The spat between the world’s second- and third-largest producers depressed prices further until early April, when the two countries agreed to curtail production.
The world was awash in oil that it didn’t need late last spring, so much so that the price of West Texas Intermediate went negative on April 20 as traders with expiring oil futures were forced to pay buyers to take those contracts on instead of taking delivery of oil they couldn’t store.
Now, the scenario is flipped on its head.
Americans are itching to travel after nearly a year and a half at home, and other countries are opening up to travel as more people get vaccinated.
At the same time, geopolitics in the Middle East could complicate global oil supplies. Iranian President-elect Ebrahim Raisi told reporters on Monday that he would not meet with U.S. President Biden or negotiate on other matters, while demanding the U.S. lift its banking and shipping sanctions on the country.
A hardline approach could scuttle attempts to revive the Iran Nuclear Deal and leave the country unable to export to other countries that move money through American financial institutions.
Tying Investment To Crude Prices
The ETF most closely following the whims of the oil market is the US Oil Fund LP (USO), which holds futures contracts expiring within two months into the future at the latest. Its closest competitor is the Invesco DB Oil Fund (DBO), which is less prone to price swings because it moves its expiring contracts into whatever month is most attractive within the next 13 months on the market.
However, the funds have respective expense ratios of 0.79% and 0.78%, both fairly pricey compared to the broader ETF market. Plus, both funds are structured as commodity pools, so long-term holders could incur greater capital gains taxes.
A less volatile option is the ProShares K-1 Free Crude Oil Strategy ETF (OILK), which splits its exposure equally between contracts that roll each month and contracts that expire semiannually. This fund is structured as an open-ended fund rather than a commodities pool, which keeps investors from having to make a separate filing come tax time, and which an expense ratio of 0.68%.
Producers & Refiners
The simplest way to get exposure to the companies in the oil space is by using the Energy Select Sector SPDR Fund (XLE). The benchmark fund following U.S. energy companies in the S&P 500 has year-to-date returns of 43.98% and an expense ratio of 0.12%.
Alternative options for a broader energy portfolio include the Vanguard Energy ETF (VDE), which has a wider share of holdings, and produced 47.48% returns so far this year. It has a 0.10% expense.
An option with narrowed focus is the VanEck Vectors Oil Refiners ETF (CRAK), the only fund right now that’s solely tracking the companies that turn crude oil into the stuff that goes into gas tanks. However, it carries a relatively pricey expense ratio of 0.60%.
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>>> Inflation Is Here. Four Ways to Hedge Your Investments.
Barron's
By Lisa Beilfuss
May 16, 2021
https://www.barrons.com/articles/investments-rising-inflation-51621028603?siteid=yhoof2
Inflation is an insidious threat, a force that eats away at investment returns and erodes savings and purchasing power. Whether rising inflation is temporary, as central bankers say, or something more persistent, increasing prices across the U.S. economy warrant investors’ attention.
“A controlled burn can quickly turn into a wildfire,” says Nancy Tengler, chief investment officer at Laffer Tengler Investments, of the possibility of more lasting inflation.
Barron’s queried a half-dozen investment professionals about inflation hedging—and profiting— strategies. Forget gold, they say, but Treasury inflation-protected securities, or TIPS, are an obvious tool. We highlight four alternatives for investors to consider:
Certain Stocks
Natural-resource stocks are good inflation plays, strategists say, given their positive correlation to inflation. During the great inflation of the mid-1960s to early 1980s, oil and gas, agriculture, and metals and mining stocks outperformed the broad market and can play a role in mitigating the impact of higher prices this time around, says Peter Mladina, director of portfolio research at Northern Trust Wealth Management.
Within natural resources, Tengler likes energy companies, including Chevron (ticker: CVX) and EOG Resources (EOG), agriculture plays Caterpillar (CAT) and Deere (DE), and water company Xylem (XYL).
While many strategists have reservations about cryptocurrencies as an inflation hedge, some say that indirect exposure to Bitcoin, which has a capped supply, makes sense. Tengler recommends Square (SQ), which holds Bitcoin on its balance sheet. For blockchain exposure, she likes the exchange-traded fund Amplify Transformational Data Sharing (BLOK).
Land/Real Estate
“With inflation, you should have some ability to raise rents,” says Christopher Didier, managing director at Baird Family Wealth Group. He prefers multifamily homes, lake properties, and suburban homes over apartments, primary residences, and urban dwellings. He also recommends that clients consider undeveloped land, or industrial land repurposed for development, as well as farmland.
Veblen Goods
Scarcity gets a premium price when inflation kicks in, says Jim Paulsen, chief investment strategist at the Leuthold Group. With goods such as luxury watches, demand tends to rise as prices do—the so-called Veblen effect.
Consider the price of an Audemars Piguet Royal Oak Jumbo 15202ST, which rose 57% in value from November 2018 to November 2020, according to data from Watch Price Trend. Since then, the watch is up 89% to roughly $100,000. In a sign of rising demand for luxury watches, Swiss exports of watches rose 37% from a year earlier, the fastest rate since 2010, Bloomberg data show.
Collectibles
Steve Ivy, CEO of Heritage Auctions, the world’s third-largest auction house, says that over the past year, all categories of the roughly $75 billion global collectibles market (not including fine art) are up significantly, as inflation concerns increase and fiscal stimulus means people simply have more money.
The value of rare coins and comic books has risen by about 20%, while baseball cards are up 15% to 40%, to name a few categories. There are costs to storing collectibles as well as tax and liquidity considerations, so Ivy says investors should plan on holding them for at least 10 years.
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>>> How to Invest in Farmland
Benzinga
by Chris Davis
August 31, 2020
https://www.benzinga.com/money/how-to-invest-in-farmland/
The investment mainstream has mostly forgotten commodities since their historically high 2009 levels. Farmland rents reached record levels along demand from emerging markets and net farm income (NFI). But even as commodities prices fell in the late 2010s, rents stayed at their zenith. Economists expect NFI to continue dropping during the coronavirus, meaning that the high rents must be paid from lower and lower amounts of income.
Investing in farmland means understanding a cross-section of factors — weather patterns, soil type, telephone pole location, cropping history, field size — and balancing that against the farmland rent you can extract from the tenant. Investors must also contend with the higher number of retail investors in the commodities market, a relatively recent change that causes higher volatility in the short-term market.
Contents
How to Invest in Farmland
Best Brokers and Platforms for Investing in Farmland
Why Invest in Farmland
Don’t Forget the Fundamentals
How to Invest in Farmland
Learning how to invest in farmland means learning a number of different financial vehicles. Most retail investors do not have the means or the access to directly purchase pastureland. There can be a huge upfront cost because of the volume of land involved, not to mention you would need to find someone who could properly maintain the land and pull a profit from it.
Modern technology provides a plethora of new ways to invest in farmland, from direct investment to passive real estate investment. Here are some basic tips to keep in mind regardless of the financial vehicle you choose.
Tip 1: For Direct Investors
The direct purchase of farmland to rent brings the highest returns and the highest risk. The upfront cost is high because you must purchase a plot of land large enough to house a farm. Your 1st step is to find a good price because farmland can vary widely from county to county, state to state.
You can purchase land a number of ways:
Land conversion – Just like you can buy a house to upgrade and flip, you can buy land to convert to pastureland or cropland. Conversions can be advantageous because of the low sale price — as long as the conversion costs are kept low, as well.
Sale-leaseback – Some farmers don’t want the added responsibility of owning the land they work on, or they may be unable to handle the costs. In these cases, they may sell the land to you and pay rent to continue profiting from its utility.
Buy-lease – You have an opportunity for high returns if you buy farmland with no tenant, as long as you can find one.
Tip 2: For Communal Investors
If you want to invest passively in farmland with other investors, you can invest through a real estate investment trust (REIT) with a specialization in farmland. Currently, Gladstone Land Corporation (NASDAQ: LAND) and Farmland Partners (NYSE: FPI) are 2 publicly-listed choices and great real estate investing for beginners in the farmland space.
Farmland Partners – The largest publicly-traded U.S. farmland REIT, FPI manages more than $1 billion in assets, featuring over 150,000 acres in 17 states. The company leases to more than 100 tenants with a diversified portfolio of crops.
Gladstone Land Corporation – LAND manages 111 farms in 10 states with a specialty in health foods. Its farms are valued at around $890 million and comprise more than 86,000 total acres.
Tip 3: For Passive Investors
Crowdfunding brings together funds from many investors and provides access to farmland. Although the 1st wave of these platforms is limited to accredited investors (high net worth individuals with more than $1 million in assets or 2 years of $200,000+ income per annum), managers have stated they will have options available for nonaccredited investors soon.
Best Brokers and Platforms for Investing in Farmland
Connect to farmland investments through the reputable brokers and platforms mentioned here. Although we have vetted all of these platforms for basic viability, you should still compare them closely to see which ones you like best.
Read Review
Minimum Investment
$10,000
Fees
1% of your total investment + 1% per year in asset management fees
GET STARTED
1. Best Broker for Farmland: FarmTogether
Using FarmTogether, you can earn your returns from quarterly rent payments and land appreciation. The website is intuitive and beginners benefit from the extensive investor education tools. They specialize in institutional quality farmland, so investment minimums can be high.
Min Investment: $10,000
Fees: 1% of your initial investment, 1% management fee
Read Benzinga’s full FarmTogether review.
Read Review
Minimum Investment
Between $3,000 and $10,000, depending
Fees
0.75% and 1% per year based on asset value
GET STARTED
2. Best Investing Platform for Farmland: AcreTrader
AcreTrader allows investors access to income-producing farmland with low minimum investments and a marketplace for selling back shares. You must be an accredited investor to join, however.
Min Investment: $10,000
Fees: 0.75%-1% annual management fee
Read Benzinga’s full AcreTrader review.
Minimum Investment
$5,000 to $25,000.
Fees
Varies
GET STARTED
3. Best for Accredited Investors: Harvest Returns
Harvest Returns is a great way for investors to support smaller family farms. The company has marketed the platform as a way to get involved in tax-advantaged opportunity zones.
Min Investment: $5,000
Fees: Variable
GET STARTED
4. Best for Investing in Sustainable Farms: Steward
If you are looking to invest in human-scale farms that would have trouble getting funding from traditional sources, Steward is your platform. The minimum investment is tiny, and you enjoy a very close relationship with the farms you choose.
Min Investment: $100
Fees: 1% annual service fee based on invested capital
GET STARTED
5. Best for Commodity Farmland: Farmland LP
As stated on its website, Farmland LP is focused on organic food and the farmland market. They manage more than $160 million in assets across 2 funds with hundreds of investors “that showcase how large-scale sustainable agriculture is more profitable than conventional.”
Min Investment: Variable
Fees: Variable
Minimum Investment
$10,000 to $100,000, depending
Fees
Varies
GET STARTED
6. Best for Agricultural Operations: FarmFundr
If you prefer to invest with guidance from an experienced team, Farmfundr may be the platform for you.
Min Investment: $10,000
Fees: 0.75%-1% annual management fee; 3% sponsor fee when FarmFundr doesn’t take direct equity
Why Invest in Farmland
The USDA reports that farmland has returned 11.5% since 1991 on average, which places it as the 2nd best performing asset class in that 30-year time period. The value of farmland in the U.S. over the past 5 decades has gone up an average of 6.1% per annum. Having 2 simultaneous streams of value evens out the volatility, making farmland a great investment for risk-averse traders or those nearing retirement.
Farmland also enjoys a low correlation with the rest of the stock market. You don’t have to worry about recessions and the higher frequency of the boom-bust cycle, and commodities also benefit from inflation.
Don’t Forget the Fundamentals
Despite all of the attention on newer, shinier industries, farmland continues to be a solid, valuable investment that pays off in cash rent yields and land appreciation. There is nothing wrong with speculating in these industries as they can certainly be profitable. If you speculate in tandem with good fundamentals, you can actually take on more risk while protecting your portfolio’s downside.
Experts estimate that investor groups hold more than 30% of active U.S. farmland, so there is plenty of room for passive investors or investors without huge amounts of capital. With the access that new technology provides, there’s no reason not to consider this always essential part of the American economy in your portfolio.
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From Dew's board - >>> Re: Commodities/natural-resources/inflation hedges
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=163785004
My commodity/natural resources holdings are mostly legacy positions where the cost basis is too low to sell; these include CVX, RDS, and WY (by way of PCL).
As an integrated wood-products company, WY is not a pure natural-resources play the way PCL used to be, although its timberland assets may offer some inflation protection. On the other hand, WY shares may flounder in an environment where interest rates are rising to the extent that investors consider the stock as a bond proxy.
I have what has become, through price appreciation, a very large position in CLF. However, following its acquisitions of steelmakers AK Steel and Arcellor Mittal USA, CLF is an integrated steelmaker rather than an iron-ore mining company, so it’s a stretch to think of the new CLF as a commodity/natural-resources play.
In the agriculture sector, I’m long DE, which benefits indirectly from higher commodity (i.e. crop) prices. I commented on DE’s business model in #msg-161984736. Regards, Dew
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>>> Farmland Partners Inc. (FPI) is an internally managed real estate company that owns and seeks to acquire high-quality North American farmland and makes loans to farmers secured by farm real estate. As of the date of this release, the Company owns approximately 155,000 acres in 16 states, including Alabama, Arkansas, California, Colorado, Florida, Georgia, Illinois, Kansas, Louisiana, Michigan, Mississippi, Nebraska, North Carolina, South Carolina, South Dakota and Virginia. We have approximately 26 crop types and over 100 tenants. The Company elected to be taxed as a real estate investment trust, or REIT, for U.S. federal income tax purposes, commencing with the taxable year ended December 31, 2014.
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>>> Founded in 1997, Gladstone Land (LAND) is a publicly traded real estate investment trust that acquires and owns farmland and farm-related properties located in major agricultural markets in the U.S. and leases its properties to unrelated third-party farmers. The Company, which reports the aggregate fair value of its farmland holdings on a quarterly basis, currently owns 127 farms, comprised of approximately 94,000 acres in 13 different states, valued at approximately $1.0 billion.
Gladstone Land's farms are predominantly located in regions where its tenants are able to grow fresh produce annual row crops, such as berries and vegetables, which are generally planted and harvested annually. The Company also owns farms growing permanent crops, such as almonds, apples, figs, olives, pistachios, and other orchards, as well as blueberry groves and vineyards, which are generally planted every 10 to 20-plus years and harvested annually.
The Company may also acquire property related to farming, such as cooling facilities, processing buildings, packaging facilities, and distribution centers. The Company pays monthly distributions to its stockholders and has paid 93 consecutive monthly cash distributions on its common stock since its initial public offering in January 2013. The Company has increased its common distributions 20 times over the prior 23 quarters, and the current per-share distribution on its common stock is $0.0449 per month, or $0.5388 per year.
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https://finance.yahoo.com/quote/LAND/profile?p=LAND
>>> I Put Half Of My Net Worth Into These Hard Asset Investments
Seeking Alpha
Nov. 14, 2020
by Jussi Askola
https://seekingalpha.com/article/4388468-i-put-half-of-net-worth-hard-asset-investments
Summary
Most investors put their net worth in financial assets like stocks, bonds and cash.
I prefer to invest mine in hard assets.
You can get exposure to hard assets through publicly-traded vehicles.
Below I explain why I have 60% of my net worth in hard assets, and why you should do the same.
Most investors have the vast majority of their net worth in financial assets. Typically stocks, bonds and cash. These assets are extremely easy to invest in, which explains their popularity. But they come with a lot of downside too. From volatility to returns that barely beat inflation, they come with various disadvantages, depending on which asset class you’re talking about.
Let’s take each of the three most popular financial assets one by one.
Cash. This is like throwing money down the drain. The average savings account has only a 0.06% interest rate according to the FDIC. With inflation running at 2%, you’re losing purchasing power at that rate.
Bonds. They pay nothing or next to nothing after inflation and taxes. They’re better than cash, don’t get me wrong. But all you’re doing with bonds is maintaining your net worth, you’re not growing it. Long-term corporate bond ETFs (VCLT - BLV) yield just around 3%.
Stocks. Stocks tend to outperform cash and bonds over time. But they’re extraordinarily complex. To truly understand a stock, you need to understand all the moving pieces of a business that may have dozens of subsidiaries, subsidiaries with subsidiaries of their own, foreign operations, and more. And the risk is significant. Putting a large chunk of your net worth in the next Enron is a sure way to evaporate your savings. Finally, today's valuations are astronomically high with the S&P 500 (SPY) trading at 36x earnings, which is over 2x its historical average. Put differently, stocks are now priced at a 2.7% earnings yield even as we go trough a major crisis:
So, if all of the above assets have major problems with them, where do you put your net worth?
Hard Assets.
“Hard assets” is a term for tangible assets that have physical substance. Hard assets physically exist in the world and typically have some practical real-world use. The total list of hard assets would be far too long to reproduce here. But some good examples include:
Real estate.
Pipelines.
Farmland.
Timberland.
Airports.
Toll roads.
Other miscellaneous types of infrastructure.
All of these assets fulfill a real-world need and therefore often have stable, dependable cash flows. Not all hard assets are equal in terms of their income potential. Some are more dependable than others. But as a class, they offer high yield with relatively lower risk.
You might say: “sure, hard assets are good, but I can’t afford a second mortgage… so how do I get my exposure?”
The answer is simple: Through publicly-traded vehicles like REITs. REITs trade on exchanges like stocks but are built on portfolios of hard assets. They typically have mandates specifying that they pass a certain amount of their net income on to investors in the form of dividends. And they’re run by management teams, so you don’t need to worry about physically managing the properties yourself. By buying REITs and other REIT-like entities, you can get quick exposure to a diversified portfolio of hard assets. This is where I have over half of my net worth today, and I don’t plan on changing that any time soon.
Why Favor Hard Assets Over Stocks, Bonds, and Cash?
Reason #1: Yield
The cold hard truth is that there’s just not a lot of yield out there these days. The 10-year Treasury yields a minuscule 0.83%, while the SPDR S&P 500 ETF (SPY) yields 1.6%. The Nasdaq, meanwhile, is lagging both: The Invesco QQQ Trust ETF (QQQ) yields just 0.51%. In this market, the yield is hard to come by.
Unless that is, you look into REITs. REITs as measured by the Vanguard Real Estate ETF (VNQ) yield around 4%. That’s the market as a whole. Individual REITs can yield anywhere from 6% to 8%. If you’re really adventurous, you can find REITs yielding as much as 10%.
Our Core Portfolio is heavily invested in REITs and other hard assets. We target an ~8% yield a ~75% payout ratio. Generally, our actual portfolio yield and payout ratio are close to these targets.
Reason #2: Higher Total Returns
It’s possible to generate very high total returns with hard assets. If you buy real estate with a 6%-7% cap rate and finance half at 3%-4%, you get a 10% yield. That’s a strong return even with no price appreciation in the equation. Throw in a modest 2%-3% annual gain in there, and you’ve got a 15% a year investment.
You can do the same by buying hard assets through REITs and other publicly traded hard asset companies. Case in point: Brookfield Asset Management (BAM). Over the past 30 years, it has earned a 16% annualized return, compared to just 7% for the S&P 500.
Another example: Realty Income (O) has nearly quadrupled the returns of the S&P500 since its IPO in 1994:
On average, REITs have outperformed nearly every other asset class over the past 20 years leading up the COVID-19 crisis. When you earn high dividends, not much growth is needed to earn double-digit total returns:
Reason #3: Valuation
Finally, we get to valuation. The sad truth about the markets these days is that steep valuations are starting to become the norm. The vast majority of tech stocks trade at more than 10 times book value. Big players like Netflix (NFLX) and Amazon (AMZN) trade at anywhere from 70 to 120 times earnings. These kinds of valuations can’t persist forever. Even with strong earnings growth, it’s hard to justify a 120X multiple. And with tech making up an ever-larger percentage of the S&P 500’s market cap, we’re really talking about “stocks” as a whole here.
Hard assets, by contrast, are cheap relative to cash flow at the moment, particularly if you get your exposure through REITs. In many cases, REITs are down for the year in 2020, and priced at up to 50% discounts to the underlying value of their assets. To be sure, REITs ran into some collections problems that dampened earnings early in the pandemic. But they’re beginning to turn that around even as valuations remain opportunistic.
Smart Money is Rushing into Hard Assets
If you want to know where to invest, you need to look at where institutional investors are putting their money. Institutional investors own about 80% of the public equity market, and a growing share of investments in hard assets.
That institutional investors are increasing in clout is obvious. From 2008 to 2018, institutional capital nearly tripled. It’s expected to rise to $100 trillion by 2030.
That a large share of this capital is going into hard assets also is evident. Many pension funds and other big institutions favor yield in their portfolios as income is paramount for institutions with regular cash expenses. As mentioned above, there’s barely any yield these days in stocks and Treasuries. So yield-hungry institutions will likely move into hard assets in the years ahead. That may include direct investments as well as positions in REITs.
How to Profit from Hard Assets
Once you’ve decided you want exposure to hard assets, there are several asset classes you can look into. In no particular order:
Commercial real estate. Investments in apartment communities, e-commerce warehouses, data centers, or even casinos. AvalonBay Communities (AVB) and Digital Realty (NYSE:DLR.PK) would be classic examples.
Airports. Believe it or not, there are publicly-listed airports you can buy today on equity markets. Grupo Aeroportuario del Pacifico (PAC) is an example of one.
Timberland and farmland. You can invest directly in Timberland and Farmland through LPs and REITs like Gladstone Land (LAND) and Catchmark Timber (CTT).
Energy pipelines. Companies that transport oil and gas by pipe systems. Examples include the 10%-yielding Enterprise Product Partners (EPD) and Energy Transfer (ET).
Windmills. You can invest in alternative energy projects through partnerships like Brookfield Renewable Partners (BEP).
All of the hard assets listed above have high-income potential and have delivered steady growth over time. With a diversified portfolio consisting of these types of assets, you could outperform the markets.
That’s not to say there aren’t risks with hard assets. On the contrary, there are several you need to look out for. Retail REITs are vulnerable to industry trends like e-commerce, which has wreaked havoc on lower quality mall REITs CBL (CBL) and Washington Prime Group (WPG). Pipelines are subject to regulatory scrutiny and often find their projects delayed for long periods. Airports see revenue dip during recessions. The value of windmills decreases over time.
Because of these risk factors, you need to be careful about which hard assets you invest in. It’s not a simple matter of buying any hard asset and hoping it will deliver a good return. Nor is it as simple as buying a REIT ETF (VNQ) — with VNQ, you won’t get the 6%-8% yields mentioned earlier. Instead, you need to be selective and build a reasonably diversified portfolio of hard assets with the desired characteristics.
Our Hard Asset Portfolio
Over the years, we have built a portfolio of REITs and REIT-like entities that delivers on three key metrics:
High Yield
Low Payout Ratio
Substantial Discount to NAV
With this portfolio, we generate approximately $10,000 in annual income on just $160,000. You can see how this breaks down in the table below.
These are the characteristics of our Core Portfolio in November 2020. In today’s market, this is quite achievable. However, you may struggle to build a portfolio with these characteristics if you wait too long. With ultra-low interest rates, capital will flood into hard assets. Valuations will surge and yields will compress. Put simply, the smart money is getting into hard assets today — not waiting for tomorrow.
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>>> The Price of the Stuff That Makes Everything Is Surging
Global economic rebound is fueling a blistering commodities rally
Bloomberg
By Eddie Spence and Megan Durisin
May 1, 2021
https://www.bloomberg.com/news/articles/2021-05-01/the-price-of-the-stuff-that-makes-everything-is-surging?srnd=premium
The prices of raw materials used to make almost everything are skyrocketing, and the upward trajectory looks set to continue as the world economy roars back to life.
From steel and copper to corn and lumber, commodities started 2021 with a bang, surging to levels not seen for years. The rally threatens to raise the cost of goods from the lunchtime sandwich to gleaming skyscrapers. It’s also lit the fuse on the massive reflation trade that’s gripped markets this year and pushed up inflation expectations. With the U.S. economy pumped up on fiscal stimulus, and Europe’s economy starting to reopen as its vaccination rollout gets into gear, there’s little reason to expect a change in direction.
One Direction
Commodities from food to metal are soaring
JPMorgan Chase & Co. said this week it sees a continued rally in commodities and that the “reflation and reopening trade will continue.” On top of that, the Federal Reserve and other central banks seem calm about inflation, meaning economies could be left to run hot, which will rev up demand even more.
“The most important drivers supporting commodity prices are the global economic recovery and acceleration in the reopening phase,” said Giovanni Staunovo, commodity analyst at UBS Group AG. The bank expects commodities as a whole to rise about 10% in the next year.
China, a crucial source of supply and demand for raw materials, is playing a big role, particularly as the government tries to reduce production of key metals like steel and aluminum. It’s also buying up massive amounts of grains. Food prices are also being affected as poor weather in key growing nations like Brazil and France hits harvests.
As just about every basic material gets rapidly more expensive, here’s some ways the rally is rippling across the globe to create winners and losers.
Going Green
Copper has enjoyed an unstoppable rally for more than a year thanks to pledges by governments to boost renewable energy and electric vehicle use. That’ll make all the various forms of green technology that rely on it a bit more expensive.
Bigger power grids is one such case. About 1.9 million tons of copper was used to build electricity networks in 2020, according to BloombergNEF, and the price of the red metal is up more than 90% in the past year. Usage will almost double by 2050, BNEF forecasts, while demand from other low carbon technologies like electric vehicles and solar panels will also balloon.
Copper's Brilliant Year
Buyers and Sellers
For countries, the impact of the commodity rally depends on whether they’re an exporter or importer. For those relying heavily on exporting raw materials, the huge upswings can only be good news for public finances, especially when they’ve just been stricken by a once-in-a-century pandemic. The likes of Australia (iron ore), Chile (copper) and Indonesia (palm oil) all make huge sums from commodities.
Meanwhile, countries looking to rebuild infrastructure may find their budgets buy less than they used to. President Joe Biden’s $2.3 trillion plan is one such case. Electricity grids, railways and refurbishing buildings are among the items on the shopping list that will use large amounts of metal.
Consultancy CRU Group estimates the program will add 5 million tons of steel to the 80 million the U.S. uses each year, with similar boosts to aluminum and copper demand.
Commodity Dependence
Developing countries tend to have a greater share of commodity exports
Meat
It’s been a tough year to be in the meat business, from devastating Covid outbreaks to the deadly pig disease that hit Germany and is roaring back in China.
And as crop prices surge, farmers rearing poultry, pigs and cattle are among the first to get squeezed by the eye-watering run-up in grains. Costs for corn fed to livestock have doubled in the past year, and soybean meal is more than 40% higher. While there’s a delay before that hits the burger chain or steakhouse, there are already signs of prices creeping higher.
Old Steel Mills
Steel producers in Europe and America have suffered for years from low prices caused by global overcapacity. Plants struggled to make money and job security became a growing worry. Over 85,000 steel jobs were lost in the European Union between 2008 and 2019, according to industry association Eurofer.
That’s all changed dramatically thanks to booming steel prices. Futures in China, by far the biggest producer, have smashed records — even outpacing gains in key ingredient iron ore — as the government took measures to curb output. That’s supercharged rallies of benchmark prices in Europe and America, where mills were already running at maximum capacity as they try to meet unexpectedly high demand.
Demand Factor
Steel prices have been boosted by higher demand, China output cuts
Breakfast Tables
Whether you prefer latte or espresso, sweetened or plain, the key ingredients of a cup of coffee have surged. Arabica coffee futures have risen about 33% in the past year, while raw sugar has also advanced. Fancy a slice of toast? Benchmark wheat prices have hit the highest since 2013.
Of course, rising commodities don’t immediately show up on grocery shelves and cafe menus. They make up just a part of the costs for retailers, which often absorb the initial increase to keep customers coming back. But there’s a limit to that margin hit, and high prices could ultimately feed through to consumers.
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>>> REITs as an inflation play
Real estate investment trusts can help generate income and hedge against inflation.
BY FIDELITY LEARNING CENTER
04/28/2021
https://www.fidelity.com/learning-center/overview
Key takeaways
In an inflationary environment, real estate investment trusts (REITs) offer investors a unique combination of potential for capital appreciation, inflation hedging, and income.
REITs invest in a wide variety of types of real estate. Among the potential winners: REITs that invest in industrial real estate, data centers and communication-tower properties..
REITs also have unique tax and reporting complexities that other types of investments may not.
Careful security selection by active managers can help manage the risks of investing in REITs.
With inflation rising and interest rates still near historic lows, investments that have historically performed well in inflationary times are appealing and so are those that can deliver income despite low rates.
Historically, when inflation has risen, stocks and real estate have tended to fare relatively well compared with bonds. While past performance offers no guarantees about what may happen in the future, the track record of both stocks and real estate may make this a good time to find out more about REITs, which are companies that own, operate, or finance income-generating real estate including offices, apartments, shopping centers, hotels, and more.
Most REITs are publicly traded and enable investors to earn dividends from real estate without having to buy individual properties. REITs offer the potential for capital appreciation of stocks (and the potential exposure to stock market volatility), income in the form of dividends, and also the benefit of exposure to underlying real estate that has tended to gain in value during inflationary times. Furthermore, after a year of COVID-related restrictions which emptied many commercial buildings of tenants and customers, many REITs are trading at modest valuations even as economic growth revives.
Why REITs?
Besides its historical role as an inflation hedge and a source of income, real estate can also provide diversification within the equity portion of an investor's portfolio. While it's difficult and expensive to get exposure to real estate by buying and managing a building or developing a piece of land, buying shares of REITs that purchase and bundle buildings or land offer a practical and relatively liquid means of doing so. Keep in mind, though, that diversification and asset allocation do not ensure a profit or guarantee against loss.
"I find REITS to be quite attractive and we're adding them," says Adam Kramer, lead manager of the Fidelity® Multi-Asset Income fund and co-manager of the Fidelity® Strategic Dividend Income fund. "It's a really interesting time for real estate in so many ways, because we've had this huge retreat from offices, an acceleration of the retreat from brick and mortar shopping, and now at least some things are coming back."
Potential winners and losers
While REITs overall may be attractive, though, would-be investors need to understand that not every REIT is equally attractive. REITs typically specialize in certain types of properties such as retail or apartment buildings and COVID-19 has accelerated trends that are transforming real estate markets, benefiting some types of properties and disfavoring others.
Steve Buller, manager of Fidelity® Real Estate Investment ETF says 2 of the most significant trends he's watching are the ongoing decline of brick-and-mortar retail properties and the accompanying growth in demand for industrial real estate driven by the growth of e-commerce. He says that owners of data-center and communication-tower properties have also experienced rapid demand growth as telecommuting has gone mainstream over the past year.
That same trend toward telecommuting is also raising questions about the future of office real estate. Buller expects a likely reduction in future demand for office space and is also watching to see how the shift toward remote work could influence demand for apartments as telecommuters reconsider where they are able to live while still earning a living.
Value and income
Kramer says that many REITs still have a lot of this uncertainty priced into them and because so much bad news took place last year a lot of companies already cut their dividends. He feels more comfortable about dividends actually growing from the low single digits to the mid single digits next year. "When you consider dividend yield, dividend growth, and potential for multiple expansion, REITs look more attractive to me than other income-oriented asset classes," says Kramer. "So that's why we've been looking across the full spectrum, but not only in the US. I'm finding opportunities in Canada as well. Canada is way behind the US in terms of the vaccine rollout and there’s more uncertainty around the reopening and use of some of the properties that these REITs own."
Managing the unique risks of REITs
Careful security selection by active managers can help manage the risks of investing in this distinctive and highly variegated asset class. One of the unique characteristics of REIT shares is that they are liquid assets that derive their value partly from the ownership of illiquid assets. That can pose operating challenges because changes in real estate values or economic downturns can have a significant negative effect on real estate owners. REITs also have unique tax and reporting complexities that other types of investments may not. Experienced managers with deep knowledge of individual companies and real estate markets can help investors avoid some of the risks while gaining the benefits of diversification, income potential, and inflation hedging.
Finding ideas
Many investors may have some exposure to REITs through diversified mutual funds and ETFs. Those who want to further diversify their portfolios with REITs should determine their existing level of exposure, consider the risks and complexities, and research professionally managed mutual funds and ETFs. You can run screens using the Mutual Fund and ETF Evaluators on Fidelity.com. Below are the results of some illustrative mutual fund screens (these are not recommendations of Fidelity).
Mutual funds that invest in REITs
Fidelity funds
Fidelity® Real Estate Investment Portfolio (FRESX)
Fidelity® International Real Estate Fund (FIREX)
Fidelity® Real Estate Income Fund (FRIFX)
Fidelity® Multi-Asset Income Fund (FMSDX)
Non-Fidelity funds
MFS Global Real Estate Fund (MGLAX)
American Century Global Real Estate Fund (ARYVX)
Franklin Real Estate Securities Fund (FREEX)
Exchange-traded funds
Alps Active REIT ETF (REIT)
Fidelity® Real Estate Investment ETF (FPRO)
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Kay so why have Commodities been so robust and what's their future be ?
1yr
20yr.....LOOK !.....* At how the 1.46 Top began the whole thing !
Boy.....Why, the 1.24 Level just gave away.........* See 1st chart above
Lumber / Wheat / Copper / Rice / Nails and other stuff
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=163219851
>>> The Grocery Price Shock Is Coming to a Store Near You
Bloomberg
by Agnieszka de Sousa and Sybilla Gross
April 24, 2021
https://finance.yahoo.com/news/grocery-price-shock-coming-store-040004484.html
(Bloomberg) -- Corn, wheat, soybeans, vegetable oils: A small handful of commodities form the backbone of much of the world’s diet and they’re dramatically more expensive, flashing alarm signals for global shopping budgets.
This week, the Bloomberg Agriculture Spot Index — which tracks key farm products — surged the most in almost nine years, driven by a rally in crop futures. With global food prices already at the highest since mid-2014, this latest jump is being closely watched because staple crops are a ubiquitous influence on grocery shelves — from bread and pizza dough to meat and even soda.
Soaring raw material prices have broad repercussions for households and businesses, and threaten a world economy trying to recover from the damage of the coronavirus pandemic. They help fuel food inflation, bringing more pain for families that are already grappling with financial pressure from the loss of jobs or incomes. For central banks, a spike in prices at a time of weak growth creates an unwelcome policy choice and could limit their ability to loosen policy.
“There seems to be sort of a bullish force behind the prices internationally,” Abdolreza Abbassian, senior economist at the United Nations’ Food and Agriculture Organization, said in an interview. “The indications are that there is very little reason to believe prices would remain at these levels. It’s more likely they will rise further. Hardship is still ahead.”
Emerging markets, in some cases already under pressure from weaker currencies, are particularly vulnerable because food costs make up a larger share of their spending. For the poorest and often politically unstable countries, the surge in raw materials threatens to further stoke global hunger.
“The relentless rise in prices acts as a misery multiplier, driving millions deeper into hunger and desperation,” Chris Nikoi, the World Food Programme’s regional director for West Africa, said earlier this month. It’s “pushing a basic meal beyond the reach of millions of poor families who were already struggling to get by.”
The most recent crop spikes follow months of price gains fueled by booming import demand from China. Corn prices have doubled in the past year, while soybeans are up about 80% and wheat 30%. With China’s purchases continuing and a spate of adverse weather conditions threatening crops in Brazil and the U.S., there are few signs of respite. Analysts including those at Rabobank, Mintec and HSBC Global Research all see a risk of even higher prices as a result, though it will vary across markets.
The impact on grocery shelves can already be seen in surging tortilla prices in Mexico, beef in Brazil and retail palm oil in Myanmar. In the U.S., it’s more expensive bacon and other meat cuts.
“Generally people see this inflation continuing,” said Tosin Jack, an analyst at Mintec, which monitors commodity prices. “The trend will continue for some time and it will translate into consumer goods.”
The threat of food inflation is making governments nervous. Russia, one of the world’s top grain exporters, has ordered a freeze on some retail food prices while taking steps to curb shipments. Bolivia has temporarily banned exports of beef to safeguard supplies at home and put a lid on prices.
Overall, global food costs have surged for 10 straight months, the longest rally in more than a decade, according to a UN gauge. The surge is stirring memories of 2008 and 2011, when spikes led to food riots in more than 30 nations across Africa, Asia and the Middle East, and contributed to political strife and uprisings in the Arab Spring.
Even in rich nations, where food is a smaller percentage of overall consumer spending, changes to some bills could be coming. In Europe, for example, the time lag between rising commodity prices and higher shelf prices is typically six months, according to OC&C Strategy Consultants. Retailers and manufacturers often use various techniques to soften the blow for consumers, including cutting the depth of promotions or reducing the size of products while keeping prices unchanged.
“Once the big commodities, like wheat, sugar, bulk oils, start rising in price for a sustained period of time manufacturers have little choice but to pass those higher costs on,” said Will Hayllar, London-based managing partner at OC&C.
And commodities aren’t the only component in driving up the price of food. Higher freight costs and other supply-chain headaches as well as packaging can all add up. Food and beverage giants are already signaling they’re watching margins. Coca-Cola Co. has flagged higher costs in plastic and aluminum, as well as coffee and high-fructose corn syrup, the key ingredient in soda. Nestle SA, the world’s biggest food company, warned it won’t be able to hedge all of its commodity costs and it’s raising prices where appropriate.
“This is a very volatile environment right now, very low visibility, lots of surprise,” Nestle Chief Executive Mark Schneider said this week on a call with analysts. “We will take pricing action.”
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>>> Bill Gates is betting big on US farmland – should you stake your claim?
Justin Anderson
April 6, 2021
https://finance.yahoo.com/news/bill-gates-betting-big-us-150000215.html
Bill Gates is betting big on US farmland – should you stake your claim?
Bill Gates is best known for revolutionizing personal computing, but lately he’s gotten back to the land.
The Microsoft co-founder and his wife, Melinda, are now the top owners of farmland in the country, with some 242,000 acres to their names.
That might seem like a somewhat primitive place for such a technical whiz to put his wealth. But then again, when the onetime richest man in the world makes a major investment, he should probably get the benefit of the doubt.
So what’s the appeal of farmland for a proven fortune builder like Bill Gates? And with investing easier than ever to do via mobile apps, how can you get in on this opportunity?
Read on and find out.
What's in it for Bill Gates?
The farmland market remains very fragmented, both in the U.S. and globally: Most farms are still family operations.
The Department of Agriculture estimates that institutional ownership of U.S. farmland is just 2.2%.
But since the 2008 financial crisis, a growing number of financial institutions and rich individuals have been buying up the asset.
Gates is known as a shrewd investor, and his growing stake in farmland also fits in nicely with his charitable foundation, which aims to improve food production in poorer countries, among other objectives.
Gates made a splash in 2017 when he bought $520 million worth of U.S. farmland from the Canada Pension Plan Investment Board, and he’s continued to invest since.
When you consider U.S. farmland as an investment, it’s not hard to understand why.
Big returns from a booming business
Farmland is a proven source of higher returns than you get from more traditional portfolios.
Between 1991 and 2019, U.S. farmland delivered more than 11% in returns to its investors, according to research from FarmTogether, an investment platform that allows qualified investors to purchase stakes in U.S. farmland without buying a whole farm.
That’s better than traditional real estate, better than bonds and gold — it’s even better than the stock market, which over the same period grew by 9.6%.
Farmland investment combines the allure of stable income with gains from long-term productivity increases, as population growth and the subsequent demand for more and better food drive improvements in farming technology.
And it’s turning into a booming business: One study found that farm tech investment soared 370% to $4.7 billion from 2013 to 2019.
A rare opportunity
Because some 96% American farms are family-owned, and tend to be passed down from one generation to another, farmland has always been a difficult asset class for an investor to buy into.
But that’s changing right now.
Over the next 20 years, approximately 370 million acres of U.S. farmland will change hands, according to the American Farmland Trust.
That’s because a large proportion of the next generation evidently isn’t interested in taking up farming: Farmers over age 65 own 40% of the land and outnumber farmers below 35 by a factor of six to one.
So, as more farmers retire and sell or rent out their land, a profitable but difficult-to-acquire asset is hitting the market during a rare window.
All this may eventually prove that Gates has been a smart early investor once again.
How can you get in?
You can invest in farmland yourself and take advantage of this opportunity.
Technology makes it as simple as downloading an app and creating an account. Even if you’re not an accredited investor with the SEC, you can still get an idea of what’s available.
“As an asset class, there have been barriers of entry” for new investors, says FarmTogether’s David Perez, adding that part of his company’s roadmap is to open its offerings up to a wider swath of investors.
If all of this sounds good to you, what are you waiting for? If it’s good enough for Bill Gates, after all, it’ll probably do right by you too.
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>>> How to Invest in Timber REITs
There’s more to real estate investment trusts than apartments, malls, and other buildings. Here's an overview of the publicly traded timberland REITs you could invest in.
Motley Fool
by Matthew Frankel, CFP
Aug 27, 2019
https://www.fool.com/investing/how-to-invest-in-timber-reits.aspx
When most investors think of real estate investment trusts, or REITs, they think of companies that own buildings. For example, the best-known REITs own malls, hotels, offices, hospitals, apartments, and self-storage buildings, among other property types.
However, there are some REITs that own land, not buildings. Timber REITs are in this category. They own land and make their money primarily from harvesting the trees that grow on their land and selling wood and related products.
Timber REITs can make excellent long-term investments. However, since they make their money in a somewhat different way than most other REITs, it's a good idea to learn exactly what you're getting into before considering an investment. With that in mind, here's a rundown of what you should know before buying a timber, or timberland REIT, as well as an overview of the publicly traded timberland REITs you could invest in.
Note: The terms "timber REIT" and "timberland REIT" are interchangeable, so just be aware that when you see either of these terms, they refer to the same type of company.
What is a real estate investment trust (REIT)?
A real estate investment trust, or REIT, is a specialized type of company that invests in real estate or related assets as its primary business. For example, a REIT may invest in apartment buildings with the goal of profiting from the rental income. Or, a REIT may invest in mortgages and aim to make a profit from the interest collected.
However, it's not enough for a company to simply make real estate its primary business. There are several companies that own real estate assets that aren't classified as REITs. In order to qualify as a REIT, a company must meet the following three criteria:
REITs must invest a minimum of 75% of their assets in real estate or related assets and must derive at least 75% of their income from these assets. In other words, a retailer who happens to own its buildings cannot qualify as a REIT, as its income is derived from its retail sales.
REITs must distribute a minimum of 90% of their taxable income to shareholders, and most choose to distribute all of their taxable income. This is why REITs tend to have above-average dividend yields and is the best-known attribute of REITs.
REITs must be classified as corporations, must have at least 100 shareholders, and no five shareholders can control more than 50% of a REIT's shares.
So, why would a company want to go through the trouble of getting classified as a REIT? Simply put, if a company meets all of these requirements, it gets a big tax advantage. REITs pay no corporate tax whatsoever on their profits -- instead, the only tax imposed on REIT profits happens on the individual level when paid out as dividends.
This is a huge advantage over how most stocks work. If a non-REIT dividend stock, say AT&T, earns a profit, that profit is effectively taxed twice -- once on the corporate level and then again on the individual level when a dividend is paid.
The majority of REITs specialize in a certain type of real estate asset. For example, you'll find REITs that own large portfolios of hotels or those own shopping malls. REITs that own physical real estate are known as equity REITs, while REITs that own mortgages and other financial assets are known as mortgage REITs.
What is a timber REIT?
Timber REITs own and operate land that is used for the production and harvesting of timber. They make most of their money by selling raw timber, refined wood, or wood-based products. In addition, some timber REITs also make money in other ways, such as by exploring and capitalizing on minerals, oil, gas, and other natural resources on their land, as well as by leasing some of their lands to other businesses.
Timber REITs make a lot of sense as long-term investments. Wood prices tend to keep up with inflation over time, and demand for wood products naturally increases over time as the population grows and the need for housing gets larger.
Risks you need to know
Because they don't own buildings (at least not as a primary business function), timber REITs avoid some of the risks of other REITs. For example, timber REITs don't have to worry about vacancy risk, as they don't have tenants that can move out.
However, there are still some big risk factors timber REIT investors should be aware of:
Interest rate risk: All income-based investments that are designed to be held for the long term are vulnerable to fluctuations in interest rates. In a nutshell, rising risk-free interest rates tend to be a negative catalyst for REITs, while falling risk-free rates tend to be a positive catalyst. There's no official benchmark rate to watch, but the 10-year Treasury yield tends to be a good indicator for REITs.
The reason behind this is twofold. For one thing, most REITs need to borrow money in order to grow, and rising rates make borrowing more expensive. Furthermore, investors generally expect to receive a certain risk premium for investing in riskier assets like stocks versus what they could expect to get from risk-free investments. So, as the rates paid by risk-free investments increase, so do the yields paid by REITs. Stock prices and dividend yields have an inverse relationship, so rising yields mean lower stock prices while falling yields mean higher stock prices.
Cyclicality risk: It may come as a bit of a surprise, but timber is a highly cyclical industry. In terms of economic sensitivity, timber REITs are among the most sensitive -- ranked right up there with hotels.
For starters, there's little guaranteed income relative to other REITs. In an office building, for example, tenants generally sign multiyear leases, so if the economy takes a downturn, the building owner still gets paid. Timber REITs have no tenants, so their income depends purely on market prices and industry demand.
Speaking of demand, remember that the product that timber REITs produce (wood) is a commodity, just like oil, natural gas, or steel. Therefore, its price is only as high as market demand at any given point. Roughly 50% of U.S. softwood lumber consumption is from homebuilders, so wood demand is highly correlated with the strength of the housing market. In a recession, don't be surprised if timber REITs underperform the rest of the real estate sector.
Regulatory risk: Natural resource harvesting is a regulated industry, so it's always a possibility that government regulations can change over time. This isn't exactly a predictable risk, but it's certainly something investors should be aware of.
The four major timber REITs
As of July 2019, there are four publicly traded REITs that specialize in timberlands. Here's a list of them, ranked in descending order of market capitalization, or the total number of a company's shares outstanding multiplied by the stock's market price. That's followed by a brief description of each company and its general business strategy.
Acres of Timberlands Owned
1. Weyerhaeuser (NYSE:WY)
$19.0 billion
12.2 million
2. Rayonier (NYSE:RYN)
$3.8 billion
2.6 million
3. PotlatchDeltic Corp (NASDAQ:PCH)
$2.6 billion
1.9 million
4. CatchMark Timber Trust (NYSE: CTT)
$492 million
459,000 (plus 1.1 million as joint ventures)
Now, you may be thinking that all of these timber REITs are essentially the same. After all, don't they grow trees, cut them down, and sell them? How different can they be? You might be surprised...
1. Weyerhaeuser: The industry leader
When it comes to timber REITs, Weyerhaeuser is in a league of its own. The company is roughly three times the size of all the other timber REITs combined in terms of market capitalization.
Weyerhaeuser's strategy is: to acquire high-quality timberlands; to run the most efficient operation possible (its size gives it a huge advantage in this category); and to reinvest in the business as needed to maintain or grow its market share.
Weyerhaeuser operates in three business segments.
The timberlands segment is the largest private owner of timberlands in the U.S. and is sustainability certified. The company's land is geographically diverse, with millions of acres in the Southern, Western, and Northern parts of the country, which gives it access to a wide variety of timber types as well as easy access to markets all over the United States.
The wood products segment is a leading manufacturer of lumber, engineered wood, and other products. The company has the No. 3 market share in lumber production and the top share in engineered wood.
Finally, the real estate, energy, and natural resources segment is there to maximize the value of the company's land by exploring other money-making uses. The company has identified 1.6 million acres (about 13% of the total) of its land for various "asset value optimization" uses. This can mean mineral extraction, oil and gas production (or more specifically, leasing the land for that purpose), and using the company's land for wind or solar power generation.
Weyerhaeuser is committed to a sustainable and growing dividend and has increased its payout by a total of 127% since 2011, with raises every year from that year until the present. On top of that, Weyerhaeuser has returned an additional $3.2 billion to shareholders in the form of share repurchases.
Finally, Weyerhaeuser has a very strong balance sheet, with debt making up less than 25% of its total capitalization, a rather low leverage for a REIT. The company has investment-grade (Baa2/BBB) credit ratings and has the financial flexibility to pursue any attractive opportunities that arise.
2. Rayonier
Rayonier is the second-largest timber REIT, but it's a distant second. By land size, Rayonier is less than one-fourth the size of Weyerhaeuser.
However, there's a lot to like about Rayonier's business, which has been around since 1926. Like Weyerhaeuser, Rayonier is sustainability certified. It also has some international exposure -- in addition to large acreage in the Southern and Northwestern United States, 16% of Rayonier's timberlands are in New Zealand. This gives it a big edge, especially when selling into Asian markets (particularly China).
The biggest difference between Rayonier and Weyerhaeuser is manufacturing. Rayonier is a pure-play timber REIT. In other words, it harvests timber from its land and tries to extract maximum value in other ways, but it doesn't have a manufacturing operation. To put this into perspective, Rayonier earned 66% of its EBITDA from 2016 through 2018 from its timber operation, with virtually all of the rest coming from its real estate segment. Weyerhaeuser generated just 56% of its EBITDA for that time period from its timber and real estate operations combined, with the other 44% coming from manufacturing.
To be clear, I'm not necessarily saying one is better than another. Manufacturing certainly adds diversification to the earnings of the timber REITs who have such a business. I'm simply saying that if you want to invest in timber production and not worry about the manufacturing side of the business, Rayonier could be worth a look.
Rayonier also has a strong balance sheet, with debt making up just 17% of its total capitalization. However, it doesn't have quite as strong of a dividend track record as its larger counterpart.
3. PotlatchDeltic
The third-largest timber REIT, PotlatchDeltic is about two-thirds the size of Rayonier in terms of both market capitalization and volume of land it owns. Like the previous two companies, the largest concentration of timberlands in PotlatchDeltic's portfolio is in the Southern United States (mostly in Arkansas), with the rest in Idaho and Minnesota.
In addition to its timber operation, PotlatchDeltic has a large manufacturing business. Through its seven large manufacturing facilities that produce lumber and plywood, PotlatchDeltic is one of the Top 10 lumber producers in the U.S. What's more, the company's manufacturing business has been growing rapidly. Thanks to major capital investments, the company's lumber shipments grew by 70% from 2013 to 2019.
PotlatchDeltic's real estate segment is somewhat different from Weyerhaeuser's. The company has identified about 230,000 acres of land in rural areas that it plans to sell over time. They aren't just for minerals and oil/gas subleases. PotlatchDeltic plans to sell lands primarily for recreational and residential purposes. In fact, the company even has a 4,800-acre master planned community in Little Rock, Arkansas, that has been successful at generating strong returns.
PotlatchDeltic has a strong dividend track record, with a 29% increase in its dividend per share from 2012 through 2018. And while the company doesn't buy back shares at a massive rate, it does so strategically when it makes sense. For example, in the first quarter of 2019, PotlatchDeltic bought back $10 million of its stock for 30% less than the original issue price of those shares.
4. CatchMark Timber Trust
The smallest timber REIT, CatchMark owns about 1.6 million acres, although as noted in the table above, the majority of those acres are owned in joint ventures, hence the relatively small market capitalization. Virtually all of the company's timberlands are located in the Southern United States, with a particularly large presence (over 1 million acres) in Texas. The company recently started to diversify into the Pacific Northwest, but this is (for now) a small piece of the pie.
CatchMark has a somewhat unique mix of earnings. About half of its EBITDA comes from its timber business, while the rest is roughly split between its real estate operations (27% in 2018) and its investment management segment (21%). Like Rayonier, CatchMark has no manufacturing business.
The company's real estate segment sells non-core land from the company's portfolio, and also leases land for hunting and other recreational purposes. And the investment management segment is a unique aspect of CatchMark, as the company gets significant management fee income from its joint ventures.
CatchMark is a relatively young company, having completed its IPO in 2013. It's important to realize that in the process of ramping up its operations, the company took on quite a bit of debt. In fact, the company's debt makes up about 50% of its total capitalization as of March 2019 (recall that Weyerhaeuser and Rayonier had debt to capitalizations of 20% and 17%, respectively, at the same point in time). CatchMark's net debt to EBITDA (2019 expected) ratio of 8.6-to-1 is certainly on the very high end for REITs. The company plans to reduce its leverage going forward, but for now, it is certainly something investors should be aware of.
The bottom line on timber REITs
Timber REITs can be a great way to capitalize as the U.S. housing market strengthens. While housing starts have steadily risen since the end of the Great Recession, they are still quite low on a historical basis. Since 1970, housing starts have averaged 1.5 million per year, and the latest data shows an annualized rate of 1.25 million as of July 2019.
In addition, because housing starts are at a historically low level, the average age of the existing housing supply is increasing. From 2005 through 2017, the average age of a house in the U.S. has increased from about 31 years to more than 38 years, which has created a strengthening remodeling market. Both of these factors point to a rising need for lumber.
The bottom line is that if you have a positive outlook on the U.S. housing market, one of these four timber REITs could be a good addition to your portfolio.
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>>> 3 Commodities to Invest In
By GEOFFREY MICHAEL
Feb 10, 2020
https://www.investopedia.com/financial-edge/0412/the-3-best-commodities-to-invest-in.aspx
What Is a Commodity Investing?
Crude Oil
Gold
Base Metals
The Bottom Line
Any savvy investor knows that you can't put all your eggs in one basket. Even though it may not cut out risk entirely, diversifying your investment portfolio can help you reach your investment goals by maximizing your returns.
There are plenty of different investment vehicles for you to choose from including stocks, bonds, mutual funds, futures, and currencies. These can be broken down even further, grouping together assets that share characteristics—large-cap stocks, financials, government bonds are just a few examples.
And don't forget commodities. These are basic goods that can be transformed into other goods and services. There are a number of different commodity investments for both new and experienced traders. But before you head out to make the leap, here are a few important things you need to know about commodity investing, including the best ones to consider.
KEY TAKEAWAYS
Investing in commodities can provide investors with diversification, a hedge against inflation, and excess positive returns.
Investors may experience volatility when their investments track a single commodity or one sector of the economy.
Supply, demand, and geopolitics all affect commodity prices.
Investors can trade commodity-based futures, stocks, ETFs, or mutual funds, or they can hold physical commodities like gold bullion.
What Is a Commodity Investing?
Commodity trading goes back centuries, even before stocks and bonds exchanged hands. It was a very important business, linking different cultures and people together. From spices and silks in the early days to the exchanges where these assets are now traded, commodities are still a popular investment vehicle.
Investors hoping to get into the commodity market, there are several different ways to do so. Commodity-hungry investors can consider investing directly in the physical commodity, or indirectly by purchasing shares in commodity companies, mutual funds, or exchange traded funds (ETFs).
Benefits
One of the biggest benefits of investing in commodities is the fact that they tend to protect investors against the effects of inflation. Generally, demand for commodities tends to be high during periods of high inflation, which pushes up prices. It's also a good bet against the U.S. dollar, so when the greenback declines, commodity prices rise.
Aside from the benefits of diversification, there is the potential to maximize returns with commodity investing. Although commodity prices are subject to fluctuations in the market—exchange rates, interest rates, the global economy—global demand is strong. This has an overall positive impact on the stocks of companies that deal specifically with commodities, which can translate to positive returns to investors.
Unique Risks
One thing to keep in mind is that commodities tend to be much more volatile than other kinds of investments—especially funds that track a single commodity or a specific sector of the economy.
Investors who trade futures should remember that it involves speculation. Futures contracts involve tracking an underlying commodity or index. This could have an impact on the performance of the contract and, thus, give the investor a negative (or positive) difference. Futures also come with their own set of unique risks that must be managed independent of the underlying commodity.
Futures trading can be highly volatile because it involves speculation.
Crude Oil
As noted above, there are many different ways investors can choose to invest in commodities. If you have crude oil in mind, it helps to know what helps shape prices, and how you can invest in this commodity.
After production, crude oil is refined into many different products including the gasoline we use to fuel our vehicles. But it goes beyond just gas. Products made from petroleum include plastics, medicines, linoleum, shingles, ink, cosmetics, synthetic fibers, solvents, fertilizer, asphalt and thousands of others.
But what affects prices? Crude oil generally reacts to the laws of supply and demand. The higher the demand, the lower the supply. When that happens, prices tend to rise. When demand wanes, supplies are fairly consistent, leading to a drop in prices. For instance, when gas is in high demand—say, during the summer driving season—the price at the pumps rises, translating into higher crude oil prices.
Similarly, demand from developing nations like China and India—whose economies are still growing—is also pushing up prices. Geopolitics also has a big impact on the price of crude oil. Tensions in the Middle East, where much of the world's oil is produced, can send oil prices skyrocketing.
How to Invest in Crude Oil
Investing in physical crude oil isn't as easy as other commodities—you can't just buy a barrel of oil. As an investor, you may consider futures—the most direct method of owning the commodity outright. But futures can be highly volatile and need a good deal of capital. And they also require a lot of knowledge, so it's not really a good option for novice investors.
Investors may consider purchasing stocks in oil companies, crude oil mutual funds, or even ETFs. The vehicles trade on exchanges just like stocks, so they're easy to come by. The U.S. Oil Fund is one example. It tracks the movement of West Texas Intermediate light, sweet crude oil. Total net assets under management (AUM) in the fund as of Jan. 13, 2020, were $1.4 billion.
Other options include buying shares in mutual funds or energy sector ETFs, which invest directly in oil company stocks. These options tend to come with lower risks because they have more diversified offerings.
Gold
The gold market boasts diversity and growth. It's used in jewelry, technology, by central banks, and investors, giving rise to its market at different times within the global economy. The precious metal has traditionally been a safe investment and a hedge against inflation. When the U.S. dollar goes down, you can bet gold prices will go up.
Just like crude oil, when there's an increase in demand, the same happens to the price of gold. Furthermore, prices are affected when central banks—which hold gold—decide to diversify their monetary reserves by buying more gold.
How to Invest In Gold
Unlike crude oil, investors can take possession of the physical commodity. Investors who want to hold the physical commodity can do so by purchasing gold bullion bars or coins. But this means having to pay for a place to store it like a safety deposit box or a vault.
Another option, just like crude, is to go through the futures contract. Contracts require investors to deposit an initial margin. But again, there is a risk to this kind of investment. If the price rises, investors will profit. However, if the price drops, the investor stands to lose their money.
Stocks and ETFs, along with mutual fund options are aplenty. With gold stocks, investors aren't just limited to producers, but also to exploration and mining companies. As usual, it's a good idea for investors to do their homework and see what the operational risks are for each company.
Gold ETFs, on the other hand, provide exposure to the precious metal while tracking its price. For instance, the SPDR Gold Share ETF gives investors exposure to bullion without having to take possession of it.1?
Base Metals
Base metals are common metals used in commercial and industrial applications, like construction and manufacturing. Aluminum, zinc, and copper are good examples. They are relatively inexpensive, and supplies are generally stable because they're commonly found around the world. But because they are plentiful, prices tend to be much lower than precious metals. However, the increase in the applications of base metals coupled with rising global demand—particularly from China and other developing nations—continues to positively impact prices.
How to Invest in Base Metals
Holding on to aluminum, zinc, and copper may not necessarily be very fruitful, Because of their prices, investors would have to hold copious amounts of these commodities in order to profit. Instead, holding stocks in base metals companies like aluminum company Alcoa or a steel company like U.S. Steel is a great way to get a foot in the door. Furthermore, holding ETFs like the SPDR Metals & Mining ETF provides exposure to companies involved in metals and mining.2?
The Bottom Line
When deciding to invest in commodities, renowned investor Jim Rogers suggests that three key questions be answered:
What is the current level of world production?
What new supply sources are currently coming online?
Are there potential supplies that are undergoing exploration?
In addition to the commodities mentioned above, other commodities to consider are other precious metals—platinum, palladium, silver—lithium, cotton, and food products such as coffee, corn, oats, wheat, soybeans, and sugar. But as with all investment decisions, though, do your own research or consult with an experienced broker.
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>>> Vanguard Commodity Strategy Fund (VCMDX) -
https://investor.vanguard.com/mutual-funds/profile/VCMDX
Summary -
This fund’s purpose is to serve investors as a potential hedge against inflation risk and as further diversification for a traditional stock/bond portfolio. The fund will rely on commodity derivative securities to maximize inflation protection by seeking to outperform its benchmark and reduce the long-term volatility of a well-diversified, balanced portfolio. The commodity-linked exposure will be collateralized with a mix of short-term Treasury inflation-protected securities (TIPS) and Treasury bills (T-bills).
Commodity Sector Breakdown
Energy
Grains
Industrial Metals
Livestock
Precious Metals
Softs
Blomberg Commodity Index TR (Benchmark)
23.50%
26.00%
18.70%
4.90%
19.70%
7.20%
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Hexagonal micro-engraved silver bullion.
Deep micro-engraving, which is a newer high tech method not seen too often in the bullion world -
Bar, Yes, no one would buy those if they saw them in person. But the fake NGC and PCGS slabbed bullion coins are a bigger problem since you can't put the coin on a scale to weigh it. And the same problem for bullion bars sealed in assay cards, you can't weigh them.
Therefore it's extremely important when buying bullion to deal with a reputable dealer like Apmex. They get the bulk of their material directly from the various mints. Don't even think about buying bullion on Ebay.
Terrible looking fake if you compare it to a real Silver Eagle.
https://catalog.usmint.gov/american-eagle-2020-one-ounce-silver-proof-coin-20EA.html
>>> Counterfeit Battles Continued in May
Numismatic News
June 7, 2020
https://www.numismaticnews.net/article/counterfeit-battles-continued-in-may
One of the 10 fake silver American Eagles sold to an unsuspecting victim who responded to an unsolicited advertisement on Facebook. (Image courtesy of fraud victim.)
A fraudulent advertisement for bullion coins on Facebook, fake encapsulation holders, and requests for expert help from federal agencies kept the non-profit Anti-Counterfeiting Educational Foundation busy during May 2020.
“Among the cases, we’re investigating is the sale of 10 fake one-ounce silver American Eagles,” said Doug Davis, director of the ACEF Anti-Counterfeiting Task Force. “They were unsuspectingly purchased by someone who responded to an advertisement that popped up while he was checking his Facebook account. All 10 coins he received in response to his order were counterfeit.
“The victim provided us pictures showing one coin being cut in half to reveal it was composed of base metal, not silver,” explained Davis, a former Texas police chief. “We have provided information about the seller and the potential manufacturer to the U.S. Treasury Office of Inspector General, Customs and Border Protection (CBP), and to the Secret Service.”
Another case ACEF officials received in May involved counterfeit coins housed in fake Numismatic Guaranty Corporation (NGC) and Professional Coin Grading Service (PCGS) encapsulation holders. The victim spent $8,000 responding to an offer made on Mercari, an e-commerce platform. ACEF contacted NGC and PCGS to verify the holders were not genuine, and the information has been provided to federal law enforcement.
ACEF, which operates solely on donations from the public, cautions that the number of websites offering counterfeits for sale continues to grow.
“Analysis indicates that many of the websites are staying operational for only a few days and then shutting down, making it difficult to trace,” said Davis. “However, we have been able to determine they just turn around and open a new website under a different name. We have also been able to identify other third-party platforms that are being used to distribute counterfeit coins.
“We have been requested by CBP to send a list of websites selling counterfeit coins and precious metals so their investigators can use this intelligence information to identify manufacturers and importers,” he explained. “CBP and Secret Service have several cases being worked in the Los Angeles/ Long Beach area, and volunteers from the ACEF Anti-Counterfeiting Task Force have provided expert assistance there.”
ACEF volunteers also are providing expert help to Secret Service agents in San Francisco who are working on counterfeiting cases there and to CBP agents investigating seized numismatic fakes in the El Paso, Texas, area.
“Remember, if you don’t know precious metals, you’d better know a reputable seller, such as experts affiliated with the Accredited Precious Metals Dealer program,” said Davis.
More information on the program is available at www.APMDdealers.org.
Collectors, dealers, and the general public are encouraged to report any counterfeits or counterfeit fraud activity by email to Davis at the Anti-Counterfeiting Educational Foundation at Doug@ACEFonline.org.
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>>> Rare coin of Britain’s King Edward VIII fetches record $1.3M
today
AP
1-18-20
https://apnews.com/c641502744b24170f138ad3f789d7f9e
LONDON (AP) — One of the world’s rarest coins, a gold piece bearing the image of Britain’s King Edward VIII before his abdication, has sold for 1 million pounds ($1.3 million), setting a new record for a British coin.
The historical oddity shows Edward, the uncle of Queen Elizabeth II, before he relinquished the throne in 1936 to marry American divorcee Wallis Simpson.
The buyer was a private collector who wanted his identity kept secret. He told the BBC it was a “once-in-a-lifetime” opportunity.
Rebecca Morgan, head of collector services at the Royal Mint, said the record price was not surprising.
“The Edward VIII sovereign is one of the rarest and most collectible coins in the world,” Morgan said Friday.
The 22-carat gold coins were never released to the public. The Royal Mint says only a handful are known to exist.
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>>> A 125-year-old dime just sold for $1.32 million
19th August 2019
by David Williams
CNN
https://edition.cnn.com/style/article/rare-dime-auction-trnd/index.html
A Utah businessman paid $1.32 million for a dime last week at a Chicago coin auction.
It wasn't just any 10-cent piece; the 1894-S Barber Dime is one of only 24 that were ever made, according to Stack's Bowers Galleries, which held the auction Thursday night.
Only nine of the coins are confirmed to still exist.
The coin was purchased by Dell Loy Hansen, who also owns the Real Salt Lake MLS team.
Hansen is an avid coin collector and is working toward a collection that includes an example of every coin ever made by the US Mint from 1792 to the present, said John Brush, president of David Lawrence Rare Coins, who is helping Hansen curate his collection and was in Chicago to bid on the dime.
"When you're bidding a million dollars on a coin, it's nerve-wracking," Brush said. "You kind of get the sweaty palms, because that's a lot of money."
Brush said Hansen needs only six coins to complete his collection, but they are not available for sale.
PCGS
@PCGScoin
One of the most rare & popular branch mint coins this #PCGS PR63BM graded 1894-S Dime once resided in the collection of #LosAngeles icon, Dr. Jerry Buss, and will be offered for the first time in 31 years at the ANA World’s Fair of Money via @StacksBowershttps://bit.ly/2JanJKz
The 1894-S is known as a Barber Dime because it was designed by engraver Charles E. Barber, who designed many coins for US Mints.
The coins were struck at the San Francisco Mint on June 9, 1894, the Professional Coin Grading Service said in a statement. The service certified the coin's condition and authenticity.
Another 1894-S dime sold in 2016 to an anonymous buyer for almost $2 million.
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'Germania / Allegories' silver coins are now up to $41.99 on Apmex, and should climb considerably more. I got some a few weeks ago for $28.95, so not bad for such a short holding period.
I figure they'll be up to $75 or so once they sell out. The previous coin in the series is up to $120 on Apmex (!), which is pretty ridiculous, but it was the first in the series, so latecomers are forced to pay up.
Here's the third in the series (see below), due in Sept, which also looks like a winner. Folks on You Tube have called this series the 'Germania Mania'.
Mythology has been a big theme for some time with bullion series coins, and a lot of historical themes.
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