Investing 102

[GregWeld]

Originally Posted by chichirone

Going to school on these. If you had an opportunity to invest in shares of a commercial real estate LLC or buy real estate shares publicly shared, which would be more attractive to you? Better question may be, what attributes would you look at if considering a commercial real estate LLC that is being organized to buy a single location or land development project?

Single entities always assume more risk. Then you're really investing with the management -- which is fine if you know them and their history of bringing successful developments to market. I've been investing with a guy in apartment buildings for 20+ years and every one of them has a been a total score. My biggest fear is if he dies... Then what? I really have never asked him.. and maybe I should.

Smaller money --- more LIQUID --- as in way way way more liquid is a publicly traded REIT such as the ones I mentioned earlier "O" and "NNN" as well as many others. You can sell with a click of the mouse. Not so in LLC's where you're a minor partner and really have ZERO control as an investor.

If you have tons of money -- don't have any need for it (as in see it go to zero) and have no immediate (5 to 10 years) need for the cash for "other stuff" -- then LLC's have some nice tax benefits such as depreciation etc that work pretty well... and if there's cash flow (interest)... and the upside of a sale and return of principal down the road - they can be real corkers! I was in a 344 unit class A apartment complex in Tucson that was dead money for 4 years - until it was sold to convert to condos - and returned 117%. I'll take a double in 4 years every day if I could get it. But for 4 years before then I was kicking myself for having ever looked at the deal.

So the criteria for these two commercial real estate investments is:

Do you want liquidity and relative safety with a dividend but no tax benefit or
Do you tie up your money (Illiquid) and increase risk (single entity) with a tax benefit... and a possibility much larger total return out to an unknown date.

I own both types... but I have no liquidity issues either... 20 years ago I knew I was gambling (I was 40 and not 60+) - and it worked out well. I've since invested with the same guy in several apartment complexes but I would NOT invest like this with anyone else if he should quit business or whatever. In my mind - I'm not investing in an apartment... I'm investing in him with and I get his considerable skills.

Good question by the way.

[Woody]

Originally Posted by chichirone

Going to school on these. If you had an opportunity to invest in shares of a commercial real estate LLC or buy real estate shares publicly shared, which would be more attractive to you? Better question may be, what attributes would you look at if considering a commercial real estate LLC that is being organized to buy a single location or land development project?

One thing to watch out for with REITS is that they are very interest rate sensitive. If you believe we are going into a rising interest rate environment you could expect lower share prices. The last few weeks is a pretty good example. As the 10-year yield has risen, most REITs share prices have declined.

[WSSix]

good article IMO

http://online.wsj.com/articles/dont-...ide-1411140558

[toy71camaro]

I went to make a "gamble" purchase (had a couple items in mind. Baba was one)...

But, I just couldn't pull the trigger. Knowing full well on how many other choices I have that wouldn't be a "gamble" and still go up. lol.

Edit... i went ahead and gambled. Its a very small % of my retirement. and part of it came from some employees that werent performing anyway.

[Vince@Meanstreets]

Set my trigger at $89 at 7 am and went to work. I guess my money is safe for a few days.

[toy71camaro]

If nothing else, at least its a little excitement in the midst of all the steady eddies just working away like clockwork.

More excitement than throwing it all down on red! lol

[GregWeld]

Originally Posted by Woody

One thing to watch out for with REITS is that they are very interest rate sensitive. If you believe we are going into a rising interest rate environment you could expect lower share prices. The last few weeks is a pretty good example. As the 10-year yield has risen, most REITs share prices have declined.

I've warned here many times - that when interest rates rise - stocks die. Of course this is over simplification... but it's very very interrelated and must be given some measure of attention. However... if you went in and out of stocks over every interest rate move - you'd just be losing time and again so that's really a dumb strategy. The better strategy is that NEW MONEY would go into a higher yielding "whatever". Let's say tax free bond rates hit 6%... then that's where you'd put some new money to work. The problem with bonds is that they don't come with the compounded growth that stocks do over time... and generally -- if it's s dividend paying stock - the price action (taking the share price lower) is supported by the dividend -- so when you buy new shares at lower prices - your yield (dividend percentage) has risen... so you get a new blended rate of yield.

This is when things can get complicated --- but that's also usually easily explained = normally foreseen - and discussed when these thing occur.

[GregWeld]

I wish I didn't have to start a post with these kinds of statements - but here it goes again. I'm only using this stock as an EXAMPLE. I'm not saying anyone should buy / sell / or hold it. It's just a current example for Investing 102.


FUNDAMENTAL CHANGES in a company - or bad news about a company - affects it's SHARE PRICE. You must pay attention to this kind of stuff -- and if possible - try to be "EARLY" in your decision making process. You don't want to be the last guy stampeding to the door when someone yells FIRE...


McDonalds (MCD) HAS BEEN a fantastic money maker for investors for many years. It's had steady growth - it pays a nice dividend - it's a name that everyone loved and trusted. In other words - it was a stellar investment you could count on. History can help GUIDE us in making investing decisions. What else do we have to go on? Your gut feelings - your basic knowledge - and a little research for historical facts and figures... there really isn't anything else. We certainly don't have crystal balls.... or do we??

Hmmmmmmmm......


You've read me preaching about buying companies you understand - the ones that perhaps make products you use... or where you buy gas - or lumber - or tires... whatever. Remember - this is BASIC INVESTING.... so if you're a beginner with "X" amount of dollars to invest. Might as well start out with a name or couple of names you know. McDonalds fits this bill perfectly. That's a good way to begin - or even add to your portfolio. BUT this is only the beginning - it does not let you off the hook for being DILIGENT about your money. IF you're not diligent about your investments... who do you think is going to be? Me? Hell no! Not my job to write daily about what I think <even though I do sometimes>. It's YOUR JOB to pay attention. So with that in mind here's why I write today.


A few months back - maybe even a year or so ago -- I wrote that I was considering selling my McDonalds stake. I don't eat there any more - and when I did / do - it was very disappointing. The food was cold - or not prepared well... the stores seemed to be dirtier than they used to be... Many times I could not understand the employee taking my order (I F'n HATE THAT - this is AMERICA where we speak ENGLISH).... I cut them some slack because historically this was a good company and we had "history" together and it was a base holding of mine. However - I tend to run around the country a bit... and it didn't seem to matter where I was - the stores had the very same slow service - dirty floors or tables - poor food quality. THIS IS A FUNDAMENTAL CHANGE... and I needed to listen to what my guts were telling me. CUT AND RUN. I wrote here that I was selling my stake. I'd had enough --- and more importantly maybe I WAS LOOKING INTO THE CRYSTAL BALL. My brain seems to function just fine (relatively)... and if I'm not a happy customer - perhaps other customers are feeling the same way. Eventually this will affect the sales - which affects the share price!! DOH!! Not rocket science.

Sure enough -- we begin to get reports of same store sales declines... This info only serves to reinforce my crystal ball prediction. That doesn't make me smart - that just tells me what I thought might happen - is happening.


If you always go to Lowe's (LOW) and you suddenly think - WTF this store has turned to crap I can't find what I want - and you get in your car and drive to Home Depot (HD) and you're suddenly happy.... and you own LOW... maybe you better switch it up. Maybe it's your cellphone provider... Verizon (VZ) vs AT&T (T). There's a zillion examples I could drag out here.... Are you an Apple (AAPL) fanboi? Suddenly you find yourself buying a Microsoft (MSFT) laptop instead and loving it. Better pay attention to that if you own APPL shares.

So today I wake up to find this article.... which prompted this post. Now news organizations are writing about "my" feelings. That can't be good.


http://www.usatoday.com/story/money/...part/15908697/



THE ONLY POINT HERE IS THAT YOU SHOULD BE A PRETTY DECENT JUDGE FOR WHAT'S GOING ON.... and this works particularly well if you're buying companies you know and understand and use. If you used to shop on eBay daily and you find you haven't shopped their in months -- stop and listen to that!! It's telling you something you should be aware of - particularly if you own the shares!! USE THIS TO YOUR ADVANTAGE don't toss this valuable info
aside. Use your guts and your brains to help you! We're not always right - but sometimes we can sorta be right - and sometimes we're dead wrong - but it's the only thing we have going for us. In investing - we only need to be right a little more than half the time.


++++++++++++++++++++++++++++++++++



Okay then -- that brings up another opportunity. Buying the turnaround. This really isn't INVESTING 102... but I'm adding the info anyway.


Let's say you were so brilliant that you sold your McDonalds (MCD) - I have to chuckle at myself here... and you've been out for awhile. Now let's begin to continue to pay attention to the share prices and the news. There may be a buying opportunity when they get low enough and the management starts to right the ship!! Then you'd want to be "early" and try to dribble back in to the shares as they begin to find their footing again. Nobody knows when a company is going to teeter --- or if they can save it --- how long that takes -- what that looks like.... but it's my job to manage my money (employees) and I've got to be constantly on the lookout for opportunity. Sometimes I get it wrong.... and that's why I don't go whole hog into anything. I SCALE IN or even scale out if you're unsure. I've usually lost the most money when I was 100% positive I was so right I couldn't possibly be wrong.... <Buzzer>

[glassman]

So true, so true. i'm optimistacally long on MCD, (its "sentimental" to my wife, her first job and a lot of quality relationships came out of it). But its a very small part of my/our portfolio.
#5 of that ariticle was spot on (well they all were) when "whats next" for the company? what to do? Little pressure for the CEO

Its easy for us to understand MCD, but the more complex stocks like tech and biotech i'm effin lost. Can't even go with a gut on those.

But like you (Greg) said "BE DILIGENT" and watch, some things can happen like a theif in the night.

on a side note, speakin of English, why do they print the DMV booklets (here in commufornia) in eight languages but the roadsigns in one?

[GregWeld]

I found this to be interesting and worth reading and making note of what's being said.


http://www.forbes.com/sites/eamonnfi...mas-alibubble/


I made a killing during the dot.com era.... I'd buy half a million of Microsoft/Dell/Intel/Cisco/Juniper.... in the morning - before noon I was playing golf after flipping them out up .50 or a buck a share...

The only thing that bailed me out was paying cash for a house built in 1923 and gutting it and doing a year long remodel... using the cash that I was flipping over and over. So I was busy doing the remodel and quit trading during the end of that period. Otherwise - my guess is I'd have lost half or more in a manor of weeks.

It all seemed so easy! Every day - every thing went up... but people weren't buying companies - they were just buying hype... and there were more buyers than sellers. Ultimately the above names became real companies and have made money -- but I can give you a list of fly by night dot.coms that were nothing - made nothing - and only counted "eyeballs". POOF! They're gone.

I don't think Alibaba is a nothing.... and I'm not choosing a side here - don't own it - probably won't for no other reason than I prefer income over a "maybe" --- in the meantime - a maybe can make millions --- we'll see how it all plays out.