Wednesday, November 3, 2010

Post-election "green" investing outlook

Tuesday saw the end of some market uncertainty with the defeat of California’s Prop 23. Enactment of this proposition would have been a real blow to alternative energy and alternative fuel companies in the U.S. Solar company shares, which gain most of the mainstream media attention, were hard hit during the past 1 ½ weeks but saw an across the board bounce today.

One of the few solar stocks not sharing in today’s gains was First Solar(FSLR), which saw a $13.00 one-day drop last Thursday and further loss on Friday. Most of these stocks will take a few weeks to regain their late October price levels, if not longer. With demand and production continuing to grow, many solar stocks seem destined for new 52-week highs before the end of the year.

Much uncertainty remains among green investors after the election. The Republican party is well known for its support of big oil and coal. They are equally well known for their lack of support for energy efficiency/saving measures and alternative energy sources. Look for federal support programs for everything except ethanol to be slashed, particularly funds coming from the Department of Energy. At least the military branches do not need direct congressional approval to continue spending on alternative energy.

If Republicans were really as patriotic as they like to claim they would be using the U.S. military alternative energy initiatives as an example for the entire country to follow. Our biggest national security issue is more likely energy-dependence on other(often unfriendly) countries than terrorism. And we don’t and never will be able to produce enough oil domestically to meet our current demand.

Obstructing legislation to reduce domestic oil demand, such as higher mpg standards, higher lighting efficiency standards, higher energy efficiency for household appliances, etc…, does nothing but extend and exacerbate an already bad situation. Blocking federal and state incentives for alternative energy installations only lets China and the European nations widen their lead over the U.S. in implementation of these technologies. When the real petroleum crunch does come, those countries with the greatest percentages of solar, wind, geothermal and nuclear energy production will have huge strategic advantages.
America needs to grow food, not fuel

The reason ethanol receives so much support in the U.S. is its reliance upon Big Agriculture. No biomass-based petroleum substitute can be produced in the quantities needed without massive amounts of fertilizer, pesticides, genetically-modified seed stocks and millions of miles put on petroleum-powered tractors, harvesters and trucks. We need an innovative alternative to the internal combustion engine, not a biological substitute for petroleum fuels.

When did the U.S. become afraid of innovation? When did maintaining the existing business status quo become more important than being the world’s technology leader? When did saving a few dollars or a few jobs today start to overshadow the very future of the country? Our political leaders from both parties are bickering about ideological irrelevancies while our credibility with the rest of the world evaporates. When did being a Republican or a Democrat become more important than being an American?

Alternative energies are here to stay. Private industry leaders and the military see the writing on the wall and are taking the initiative to break away from petroleum dependence. But the process would be much faster and more integrated if there were national leadership rather than just national lip-service. For investors, alternative energy and smart-grid companies remain the wave of the future no matter what happens in Washington.

Tuesday, November 2, 2010

Book review: "Plumbing" by Sunset Books

Every homeowner and every real estate investor should have at least a rudimentary level of plumbing. Such knowledge is useful during initial inspections(not to replace a professional inspection) prior to purchase and to be able to describe needed repairs to a licensed plumber after purchase. Many dollars can also be saved over the years by doing basic plumbing repairs and upgrades yourself instead of hiring a professional.

“Plumbing”, published by Sunset Books as part of their You Can Build series, is an excellent do-it-yourself book. It is written clearly and concisely by Esther Ferington and the editors of Sunset Books. All major topics are covered in depth along with illustrating color photos. This book is a good starting place for those with no knowledge of plumbing and also a good refresher for anyone that is out of practice.
A lot of money can be saved by doing simple plumbing jobs like installing a new faucet yourself instead of hiring a licensed plumber, especially if a problem occurs during the weekend.

The book starts by surveying the tools and materials used in common plumbing systems. The specific use of each tool and pipe material is covered, as well as the reasons for using them. Basic bathroom and kitchen repairs and upgrades come next, followed by a thorough chapter on sinks, clothes washers and water heaters. The final chapters are about installing new plumbing lines and outdoor plumbing projects.

For any homeowner, real estate investor and/or landlord trying to save money on simple plumbing repairs or upgrades, this is a great book that will get you through fixing a leaking toilet, replacing a faucet set or installing a low-flow shower head. Those more confident of their abilities will find detailed instructions and illustrations for replacing/installing new sinks, toilets, clothes washer connections, etc… At the very least, enough plumbing information can be gleaned from a thorough reading to know if a hired, licensed plumber is on the right track.

Suggested retail price for “Plumbing” is $24.95 in soft-cover. has it available for $18.21 new. Many local libraries will have it in stock as well.

Monday, November 1, 2010

The current state of the "green" stock market

Solar, wind and wave power are the future of energy

The upcoming elections, recent earnings reports, continued economic unrest and Prop23 in California have not been kind to my “green” stock portfolio. The past two weeks have seen pullbacks in several sectors even though the DOW and NASDAQ continue to see very slight gains on most days. I do not see a Republican majority in congress and/or the Senate doing “green” share prices much good but am not yet convinced that will happen.

Solar shares have taken a big hit across the board. A few seemed to be shaking it off and recovering last week but have since stalled again. I am predicting at least three to four weeks to start approaching the October 15 levels again. A Republican majority and passage of Prop 23 could make that a much longer road.

Mining stocks, and rare earth/lithium miners in particular, are also down and consolidating. These stocks should bounce back quickly as Chinese export concerns remain high along with high demand. If the overall market starts to falter, silver and gold miners should benefit most.

Water treatment and infrastructure shares barely stumbled and are already nearly recovered. The major players, such as Calgon Carbon(CCC), Veolia Environment(VE), Consolidated Water(CWCO) and Watts Water Technologies(WTS) should do well. Consolidated has had a bad year but seems to have turned around. Calgon and Watts are performing strongly.

Battery technology companies remain steady performers and could start to surge at any time. Demand will grow with increasing market penetration by electric vehicles and commercial solar/wind power installations. New research breakthroughs could put a company into leadership position quickly.

Most of the maritime shipping companies, particularly those based in Greece, saw a slight pullback last week. Continuing weakness of orders, rising fuel costs and Greek economic uncertainty remain issues for these stocks. Nevertheless, goods still need to be moved, international trade continues and I remain bullish on maritime shipping as the cheapest way of getting large amounts of product from here to there.

Wind power company shares are mostly flat. Even with increased demand, especially overseas, this is not likely to change anytime soon. Wind is just not glamorous enough for most investors and does not have as much perceived potential for use on individual homes or commercial buildings.

Sunday, October 31, 2010

Office equipment review-the Epson Workforce 635

As an investor in both real estate and the stock market, office machines are part of my life. I regularly need to FAX documents to a bank or customer. I need to be able to receive a FAX. Being able to make copies without going through the computer can save a lot of time. And scanning documents to a hard drive file so that the paper original can be filed(hopefully permanently) saves a lot of desk and file clutter in the office.

This blog came to the attention of Walt & Co.(Epson marketing and promotions) last month and I was offered an Epson Workforce 635 for evaluation. I was clear with the contact person that I have used nothing but Hewlett Packard printers and all-in-ones for more than ten years. A week later the new Epson arrived at my door.

I was quite impressed by the easy set-up on a PC running Windows7. From opening the box to the first test print took less than 30 minutes with no glitches. I used a USB connection because there was already a cable in place. Other connection options for this printer are wired or wireless network.

The Workforce 635 has many features that save time and make business life easier. It will automatically copy and scan double-sided documents. Borderless printing is available. Text is very crisp and sharp and graphics/photos have accurate colors and fine detail without edge artifacts or banding in large, evenly colored areas. Text-only printing is very fast and graphics take only slightly longer.

This machine is obviously designed for heavy daily use. It is solid and very quiet when operating. The automatic document feeder will take up to 30 originals and the paper tray is designed for more than 200 sheets. It takes individual large-capacity ink cartridges for black, yellow, cyan and magenta that are very easy to change. The included software has a great driver interface for printing from a computer and the control panel on the printer makes access to any commands easy. Good optical recognition software is also included for converting scanned documents into editable text documents.  Prints can be made directly from all common types of digital camera flash memory cards.

I have used the Workforce 635 for three weeks and am pleased with all aspects of its performance. It has produced high-quality bordered and borderless letter-sized photographs on both glossy and matte photo stock. Post-card sized mail pieces on plain 110# card stock were no problem. Tri-fold brochures on heavy presentation paper and many house flyers and documents on my standard 24#, 30%-recycled bright white paper were quickly printed. After nearly 350 total pages there has not been a single mis-feed or paper-jam and I am still on the first set of ink cartridges. That is pretty impressive performance for any printer. Scanning and Fax operation have also been flawless.

I would not hesitate to recommend the Epson Workforce 635 to anyone looking for an office machine capable of handling scanning, copying, FAX and printing on a daily basis. It has a smaller footprint than some competitors and produces less than average vibration/wobble during printing. Just as important in a busy office is the low noise level during all operations. Pricing should be approximately $250 and this machine should stand up to many years of heavy-duty use.

Saturday, October 30, 2010

My new commitment to writing

I have been writing an on-line real estate and real estate investing column with a focus on the Saint Petersburg area for for nine months. I started The Zen Estate blog to share my interests in both real estate and “green” stock market investing. A more recent addition is the Florida Image Tools blog concentrating on photography tips and personal experiences relating to Florida. I also contribute occasional personal opinion articles to and “green” articles to Greenwalacom.

The writing has been a thoroughly enjoyed pleasure, but inspiration and time have sometimes been lacking. This has led to short contribution gaps at both Examiner and The Zen Estate. I have worked hard on my schedule the past few months and arrived at a better place that seems to be working for me. My original goal was to post three to four articles and/or photos per week at each destination. I have now consistently achieved that goal for three months.

This morning I am rededicating myself to a new writing goal. Having seen a direct relationship between the frequency of new posts and number of readers, particularly at, I am now committing myself to a minimum of six new articles at each outlet every week. I am looking forward to this new challenge and will no longer accept time constraints or lack of topics as excuses.

I have recently expanded my stock market “green company” portfolio and am about to greatly expand that again next week. While taking considerably more time to manage the larger stock portfolio, I am also anticipating a wealth of new article material for this blog as things progress. I am setting aside at least one hour each early morning for quality time with my cameras and will continue to use that material for Florida Image Tools articles.

Please give me relevant feedback on blog post and articles so that I can continue improving the content. I welcome any ideas for new topics of interest. I am currently completing an in-depth on-line course covering options trading techniques, at which I am a complete neophyte. The first book review went live on Florida Image Tools this morning and I anticipate many more book reviews on a range of topics. What do you want to hear about? What do you think about what you have seen so far?

Friday, October 29, 2010

Green investing now

Solar power, wind power, wave power and advanced battery technology for electric vehicles are all the future of green investing. All of these industries are dependent on rare earth elements.

The past few weeks have seen a lot of consolidation going on in the green investing market. Solar, wind, batteries and rare earths/lithium have all stalled or pulled back. It seems the companies enjoying the fastest share price growth since July have been the hardest hit in the second half of October. This is all expected to be temporary as demand for all products continues to grow, though parts of the wind power industry seem to be faltering.

I do not follow wind as avidly as most green sectors because share performance has been lackluster for years. A-Power Energy Systems(APWR) shares are at early May levels and have not varied more than +/-$1 per share since that time. Vestas Wind Systems(VWDRY), once the darling of green energy companies, has been on a long, multi-year decline and recently hit a new 52-week low with no recovery in sight. China Wind Systems(CWS) has been essentially flat since late January and also shows no signs of imminent improvement. There are plenty of new wind farms being built and on order but that activity is not transferring to share price.

The solar power sector has been a great performer since early June, with a few companies outpacing the pack. JA Solar(JASO), Trina solar(TSL), Renesola(SOL), SolarFun Power Holdings(SOLF) and GT Solar(SOLR) have all set new 52-week highs in the past month. Most of the rest of the sector have seen increasing share prices since mid-summer. The past two weeks saw a significant pull-back that I do not expect to last past the upcoming election next week.

Rare earth element and lithium producers have been steady performers. Trading volume and volatility have increased in lockstep with anxiety over China’s rare earth exporting policy. My favorite companies in this sector are Great Western Minerals Group(GWMGF), Avalon Rare Metals(AVARF), Hudson Resources(HUDRF) and Western Lithium USA(WLCDF). All have been slowly but surely increasing share price except WLCDF, which has been more erratic. These are all very solid and well established companies with a guaranteed and growing market for their product. I remain strongly bullish across the board.

Battery technology is rapidly improving and battery demand is growing even more rapidly. More and more of our “can’t live without” gadgets require batteries and electric vehicles will be taking a prominent place within the transportation industry during the next decade. My top picks in this sector are Advanced Battery Technologies(ABAT), Valence Technology(VNLC), A123 Systems(AONE), Power One(PWER), Ener1(HEV) and Hong King Highpower Technology(HPJ). These companies are all carving out their own piece of the battery market pie and will all be major players for years to come. Expect share prices to follow the integration of electric vehicles. Batteries will also play a large role in the integration of large-scale solar and wind installation with the commercial electric grid.

While most green stocks seem stalled right now, and solar shares have really tumbled, I am not discouraged. These are relatively young growth industries and there are plenty of growing pains left on the way to maturity. Growth is the key word. There is huge world-wide demand for the products produced by all of the companies named above and that demand is going to increase, not go away.

Time is on the side of green. As petroleum prices increase, alternatives will become increasingly cheaper. As infrastructure is upgraded to accommodate the new green technologies, their rate of adoption and integration will increase proportionally. Anyone who still thinks that solar and wind power and electric vehicles are passing fads is just not willing to face reality. It will take time to fully phase out petroleum and coal from transportation and power production but the writing is clearly on the wall and investors getting on the boat early will get the best seats and the most benefits.

Monday, October 25, 2010

Lighting news for investors

The lighting business is changing rapidly and that is creating opportunities for investors. Traditional companies are adapting rapidly or being left behind and new-tech companies are proving their worth or having short lives. Innovation is rampant and there is no clear technology or industry leader yet.

+Incandescent light bulbs are 130 years old, waste 90% of the energy used as heat rather than light and are on the way out in the U.S. The last plant making the bulbs in North America is closed. Companies in the lighting business are very much on-board with the change and ready to move forward.

+Rep. Joe Barton of Texas has introduced a bill to repeal President Bush’s energy efficiency standards but it is getting no traction. Others will try to get around the new reality in different ways-one German businessman is trying to sell incandescent bulbs as “heat balls”. Expect more creative sales techniques as the phase-out deadlines get closer.

+There is no single leader in the battle to replace the incandescent bulb. Compact fluorescents(CFL’s) are an established technology with a low price-point but contain mercury and other toxic components. LED’s are growing in popularity but are still quite expensive even though their long working life makes them cheap over the long-term. High intensity discharge(HID) metal halide bulbs have some advantage of their own for certain application. Combinations of the above are beginning to appear(halogen-CFL by General Electric). Organic light emitting diode(OLED) technology is just beginning to enter the lighting field and should have advantages in some areas.

+Research and innovation will continue. General Electric now has an LED bulb that uses jet engine technology to cool the LED’s instead of aluminum heat sinks. New technologies and new applications of existing technologies will allow new lighting products to come to market. There might never be just one “standard” type of light such as the incandescent bulb was for so many years. And that is not necessarily a bad thing.

Adapting firms that will retain a strong presence in the lighting industry are General Electric(GE) and Philips(PHG). The strongest player so far in the LED lighting field is Cree Inc.(CREE). Others in the industry are all jostling for position. A very large and unanswered part of the equation is consumer sentiment and how the public will spend its dollar/voting power. There will be more than a few winners and early investors, as always, will reap the greatest rewards.

Saturday, October 23, 2010

Rare earth elements are good investments now

Rare earth elements and lithium, usually pretty far under most investors’ radar, are making headlines lately. Because of China’s huge and growing domestic electronics and solar industries, they have needed to cut exports the keep Chinese businesses supplied. As China currently supplies more than 95% of the world’s rare earth elements, the diminishing exports are a cause for serious concern. The rest of the world is scrambling to find alternative supplies of these very important additives. Electric vehicles and the ever growing list of other battery-dependent products is driving the value of lithium.

Add to China’s reduced export quotas a growing tension about trade in general over allegations of currency manipulation and the stage is set for a lot of anxiety. That anxiety may be warranted is borne out by China’s total cut-off of exports to Japan for several weeks. There have also been rumors, denied by China, that the U.S. could be similarly cut off from rare earth supplies if they force the currency issue.

All of these recent happenings have been very good for the share prices of North America’s rare earth and lithium exploration, mining and production companies. Since rumblings of export reductions first emerged from China in the early summer, many of these U.S. and Canadian companies have watched their market values steadily climb. That climb should continue and possibly increase during the coming years as China further reduces exports and supplies of rare earth elements become even scarcer in the west.

There are many very small exploration companies, fewer mining companies and fewer still refiners for rare earth elements. Most I think of as background clutter because they are not traded on any major U.S. exchanges or as Pink Sheets. I track only a handful that are easily tradable in the U.S. with on-line software but always keep my eyes and ears open for new possibilities.

My personal favorite is Great Western Minerals Group(GWMGF). This is a very well positioned company that will probably end up being the only company outside of China to mine, grind and refine rare earths-real one stop shopping. Great Western shares have gone from $0.13 in mid-May to a new 52-week high of $0.47 this week. I expect this company to be a real player as China continues to choke off the world-wide rare earths supply.

The real rock star of the rare earth companies is Avalon Rare Metals. Shares of Avalon have risen from $1.09 in April to a new 52-week high of $4.87 this week. This is a solid, well managed company with a great track record and an established position. Its shares price should have many more new highs in the coming years.

Rare Element Resources has really seen its share price explode. REE has gone from $2.79 in August to an all-time new high of $13.71 this week. This is incredible considering what a struggle so much of the wider economy is going through.

Other companies on my personal radar are First Liberty Power(FLPC), Western Lithium USA Corp(WLCDF), American Lithium Minerals(AMLM) and Taseko Mines Ltd(TGB). Any of the much smaller and more difficult to trade exploration and mining companies could also hit a big strike at any time. Don’t be surprised if some of these rare earth and lithium specialists become buy-out target for the large multi-national mining companies looking to cash in on the coming rare earth shortage. I am watching this sector very closely.

Thursday, October 21, 2010

Manipulated markets can cause ruin

Today we have another guest post by Ron Robins, founder and analyst of Investing for the Soul. Ron’s post warns of some of the dangers of governments trying to manipulate currency markets. This subject is the current cause of much tension between the U.S. and China and is also driving uncertainty on Wall Street and the precious metals markets.

Market manipulations eventually led to Soviet economic collapse. Though not as overt as the Soviets, it is the manipulation of currencies and interest rates by major economic powers that has mostly led to massive misalignments is investment and consumption that pose extraordinary dangers to global economic health.

Ask anyone if they believe that the Chinese currency, the renminbi, is manipulated. Almost everyone agrees that it is. Are US interest rates manipulated? Again, everyone knows they are. (Not too long ago it was only the short term rates that were controlled. Now the US Federal Reserve [the Fed] is buying longer dated US treasury bonds to bring their rates down too.) Countries all over the world are manipulating their currencies lower to gain export advantages and maintaining near zero interest rates to spur domestic demand and cheap government borrowing.

It is basic economics that where markets are manipulated, supply and demand are distorted. And one distortion creates the need for a further distortion, and so on. The longer the distortions continue the greater the possibility of total market failure. We are near that point today with currencies and interest rates.

The Chinese have scored a major mercantile advantage by pegging their currency, the renminbi, at a relatively set and undervalued rate to the U.S. dollar. Not only have US exports suffered, but the exports of many other countries have suffered as well. Under US law, the Chinese should probably have been labeled a “currency manipulator.” However, by bowing to Chinese demands that they not be labeled a currency manipulator, President Obama’s administration is losing credibility everywhere.

So, Americans are waking up to find that not only does China dictate U.S. foreign exchange policy, but China indirectly influences its domestic economic agenda as well. Everything from employment policies (export expansion) to government funding needs (requiring Chinese funding) are all partly defined by the present exchange rate policies.

Increasingly, Americans realize that on the foreign exchange front they have been “checkmated”-as in the game of chess-by China. Should difficult economic times continue, or worsen, increasing American anger is likely at this arrangement. It could pass the breaking point and encourage America to act unilaterally against China. Currency turmoil might then embrace the globe.

However, one never discussed but possible reason why the US government has been afraid to label China (and Japan previously) as currency manipulators may be because the US itself may be acting covertly to manage the dollar exchange rate.

According to the US government’s own legislation, it can act secretly in currency exchange markets to affect the dollar’s exchange rate using the Treasury’s Exchange Stabilization Fund (ESF). The US Treasury say that the ESF, “with the approval of the President, may deal in gold, foreign exchange, and other instruments of credit and securities.” The ESF was established by the Gold Reserve Act of 1934 and then amended in the late 1970’s.

Also, the Fed engages in opaque currency “swaps” with other nations, and there is significant evidence of U.S. Treasury and Fed engagement in gold price suppression. Gold is the “anti-dollar” and barometer of confidence in the dollar. (See my August 24 column, “The Ethics of Gold,” at and

Another manipulation of the Fed is its control of short term rates-and now possibly long term ones as well-to smooth out the booms and busts of the economy. However, we see the falsity of this argument. After almost two years at a near zero per cent  federal funds rate the US economic quagmire continues-or worsens.

Induced low rates over the past ten years or so created a massive real estate boom and bust, discouraged savings, led to inordinate financial risk taking and moral hazard, unsustainable consumer debt, and now excessive, possibly uncontrollable government deficits and debt.

In their seminal work, “Growth in a Time of Debt,” published January 2010, Professors Carmen M. Reinhart and Kenneth S. Rogoff found that when government debt/GDP ratios exceed 90 per cent, economic growth rates fall considerably. According to the BIS, U.S. government debt/GDP will be 92 per cent by the end of 2010 and 100 per cent in 2011.

Furthermore, on September 1, the International Monetary Fund said, “general government debt in the G-20 advanced economies surged from 78 per cent of GDP in 2007 to 97 per cent of GDP in 2009 and is projected to rise to 115 per cent of GDP in 2015.”

Unfortunately, the present and future private deleveraging of debt in the U.S. and some other developed countries means potentially continued high-or higher-government deficits as economic growth is retarded or declines further. The Fed has said that to counter any renewed softness in US economic activity it will significantly expand its purchase of US government bonds and possibly other assets. This has the potential for fueling a huge expansion of the money supply and creating high or even hyperinflation.

The U.S. and some other countries are following a path whereby every manipulation begets further manipulation, and which then begets even further manipulation. With China, perhaps Japan again soon, and other countries controlling their currency values, the U.S. may be forced overtly or covertly to counter their currency manipulations. And with continuing economic difficulties, with interest rate policy having created a debt nightmare and becoming increasingly ineffective, the Fed may institute money proliferation policies that have the possibility of leading to high or ever hyperinflation.

If a vicious circle of manipulations by US authorities and other countries occurs, given time, it might rival some aspects of the soviet command economy-and with a possibly similar tragic outcome. Hopefully, Americans and others wake up before it is too late and realize that manipulated markets can eventually cause ruin.

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Tuesday, October 19, 2010

Is MERS nothing but a scam?

MERS stands for Mortgage Electronic Registry System. This system was set up by banks and other financial institutions specifically to save themselves time and fees when selling mortgages to each other. It was intended from the very beginning to make an end-run around the requirement in every local jurisdiction in the country to transfer and record the original mortgage loan paperwork with each and every transaction. The headline on their web site home page says “Process loans, not paperwork.” They seem proud of being “created by the real estate finance industry.” MERS “eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans.”

The problem is all those local and state laws still on the books everywhere across the entire country that do require the preparation and recording of assignments when trading any mortgage loans. It seems like everyone just decided to look the other way while the financial companies made things much easier and cheaper for themselves. To make things even worse, by no longer properly recording the mortgage loan assignments state and county registrars are shielded from knowing who the true owner is. Mortgage loans transferred through MERS list MERS as the mortgagee even though they don’t hold title to the land.

Which brings up another problem with MERS. Many of MERS member companies have MERS carry out foreclosures in MERS’s name. This despite the fact that MERS does not own legal title to the mortgages. MERS therefore lacks legal standing to foreclose. Foreclosure courts have a very difficult time disputing this because the mortgage loan assignments are not recorded so the actual owner cannot be found.

All of the above is further complicated by the fact that MERS has no employees. This means all actions taken by the company are out-sourced to third parties. The third parties are usually document processing companies such as LPS or DOCX or large attorneys’ offices specializing in document processing. Yes, the same ones under so much scrutiny in Florida and around the country for questionable signature, verification practices and notary stamps.

Given the way the real estate crisis has played out during the past few years, it is hard not to wonder if MERS wasn’t a planned scam from the first. If the financial companies wanted to be able to sell and trade and securitize mortgages as quickly as possible without scrutiny, what better way than to remove those sales and trades from public view. The true legal owners of any given mortgage loan could no longer be tracked down through any public records. No government regulators could track how or when or how often mortgage loans were assigned. It was as if a huge segment of the mortgage industry got sucked into a black hole never to be seen again. Until people started to default on those “hidden”, “off-the-books” mortgages, of course.

Saturday, October 16, 2010

Real Estate Investors start to feel the effects of foreclosure fraud

There is a wide, deep, blue sea of foreclosure problems just starting to be explored. Investigations into foreclosure fraud by the federal government, state governments and the lending banks have had major effects on the real estate world. Until very recently there had been little to no change at the local level. That has changed during the past week.

Real estate investors and others purchasing property at courthouse auctions are seeing large portions of the daily docket cancelled. On some days the entire docket is cancelled and there are no foreclosure sales. This is a big change from dozens to hundreds of properties each day.

It can now be a last minute scramble to find a title company willing to issue insurance on foreclosure sales. Most investors have a deep network of title companies, but some foreclosed properties are just no longer insurable because of questionable titles. This situation is bound to get much worse in the near future.

As more news of foreclosure fraud and the questions it is raising reach the main-stream public, people will become more skeptical of buying foreclosed properties, with or without title insurance. And who can blame them. How many title insurance companies would be able to survive if they had to pay off on even one quarter of the policies written on foreclosure sales during the past two years?

There might actually be a kernel of good news hidden in this mess. Non-foreclosure real estate sales will look more desirable compared to foreclosures, even at a higher price, and closings will be possible. Prices will probably stabilize or even rise slightly as a huge amount of foreclosed inventory is removed from the market as (at least temporarily) unsalable.

This situation should give real estate investors, lenders and title insurance companies a chance to take a long, hard look at their business models and make the changes needed to move forward. Investors by nature tend to be very adaptable and take such changes in the business landscape in stride. Lenders and title companies will have to return to older, tried-and-true ways of financing and transferring property.

Thursday, October 14, 2010

New battery research yielding results

This is the time for battery companies to take the lead. Many of the emerging “green” industries are dependent on electrical power storage for success. Electric vehicles and intermittent renewable energy sources such as wind and solar need batteries or other types of power storage. Current battery technology has problems for which new research is developing solutions.

Lithium ion is the present battery technology of choice for its dense energy storage but heat produced during both charging and discharging cycles is a serious problem. Just remember stories of laptop computers and cell phones catching fire and notice how warm your digital camera battery is immediately after recharging. A few solutions aimed at this problem are beginning to appear.

Quallion, based in California, has developed a partial cure for heat build-up in Li-ion batteries for use in heavy-duty trucks to reduce time spent with the engine idling. Their design uses arrays of interconnected, smaller batteries that produce less heat individually and are easier to keep cool en-masse. The arrays are connected to allow continued performance even if individual cells fail. The Li-ion battery arrays weigh much less than a similar amount of storage using conventional lead-acid batteries. Using battery power for interior lights and cooling/heating while parked would significantly reduce the amounts of greenhouse gasses produced by the idling diesel engines of these over-the-road trucks.
Another coming change applies new research to the anode(negative side) of Li-ion batteries. Graphite is the present material of choice but has a limited capacity to hold lithium. The amount of lithium determines the amount of energy that can be stored in a given battery. Silicon can hold nearly ten times as much lithium as graphite but develops cracks after several charge/discharge cycles because of the expansion/contraction caused by the heat produced. Putting micron-sized pores in the silicon surface give enough room for expansion/contraction without cracking. This breakthrough will allow batteries of the same size and weight to hold many times the amount of power now possible. Much smaller batteries for large-scale uses, such as electric vehicles and buffers between solar/wind installations and the commercial power grid should soon be on the way.

Cathode(positive side) research is also bearing fruit. BASF is experimenting with a Nickel-Cobalt-Manganese(NCM) cathode material that could have wide applications. They claim up to 60% more energy storage capacity for same-sized batteries. This amount of increased storage could mean up to 50% more distance per charge for an electric vehicle. For consumer electronics it would mean greatly extended use time for laptop computers, cell phones, etc…

One of the older and better-established battery technologies might also make a comeback thanks to new research. Sodium-Nickel-Chloride(Na-beta) batteries have been around for a long time but like other types of rechargeables produce heat when recharged. It seems changing the shape of the battery from the traditional long cylinder to a flat pancake produces much less heat. An added bonus is the ability to deliver up to 30% more power. The materials that go into Na-beta batteries are cheaper and more easily available than those required for Li-ion batteries.

Another older battery technology is also being revived. GP Batteries received this year’s Battery Manufacturer of the Year-Alternative Chemistries award. They developed a new Nickel-Metal Hydride battery for use in electric vehicles.

Continued research and creative thinking is all of the above areas are needed. Battery storage plays an important role in the continued integration of greener/renewable energy sources into everyday life. Grid interface is a major problem for more widespread use of intermittent power generation like wind and solar. Better battery storage solutions are one way to move forward.

While battery company stocks have been lagging behind other “green” sectors, this situation will not last forever. Batteries have too large a role to play in the success of alternative energy production. The companies that best take advantage of new research will come out ahead in market share and stock share price. I watch several of the largest and most innovative battery companies closely and think they may soon follow the solar PV industry along the path of increasing share prices.

Thursday, October 7, 2010

Where does foreclosure fraud go from here?

The pile of federal, state and local officials landing on the country’s mortgage lenders is starting to get pretty deep. State Attorneys General, the U.S. Attorney General, governors, state legislators, U.S. Representatives and Senators, all are calling for lenders to halt foreclosure proceedings until the issue of fraudulent paperwork can be sorted out. Many of the same officials are also calling for criminal charges against guilty companies and individuals. Things, as they say, are complicated.

One of the stickiest issues is proving who actually owns the original mortgage loan note because the owner of the note has sole legal right to foreclose on the mortgaged property. After Wall Street decided to make more money by bundling mortgages together, getting them credit-rated and selling them as securities, they were subsequently often sold several more times. For many of those mortgages, no one knows where the original loan note is. Often enough no one is even sure who is supposed to own the note. The lenders are still processing the loans(taking the payments, or not), but do not have and cannot get the original notes. They are under tremendous pressure because of the sheer numbers of loan defaults – they have to foreclose so they can recoup something from the sale of the property.

The lenders turn to “paper-mills” that can’t find the original notes, either. But they guarantee delivery of requested documents within a deadline. So they manufacture a replacement document because they know the lender and the judge in the courtroom will be too busy to notice little discrepancies like forged signatures of attorneys and bank officers, inconsistent dates and improper notary stamps. It just won’t be a problem because the homeowners being foreclosed won’t be able to afford defense lawyers and won’t know enough to be able to defend themselves. And so things went for two years.

There were occasional but persistent stories right from the start about homeowners coming home from work to find the locks changed and the house empty, without receiving any notice from the lender. There were stories about homeowners finding problems with document dates and document facts but being ignored by lenders and judges. Most put these stories down to disgruntled, down-on-their-luck homeowners. After all, how could you possibly not know the bank was about to evict you?

It turns out that most of those stories were probably true. If the lender fails to tell you about imminent eviction(by officially serving the correct paperwork), how would you know? When the banks are so confused they are evicting people from homes that do not even have mortgages on them, it causes questions about what else the banks might be wrong about? When two banks both try to foreclose on the same property, what other mistakes are they making? The lenders are admitting in sworn testimony that they don’t read or verify the truth of the contents of foreclosure affidavits. They are proving with their actions they do not know who owns given properties.

So it seems foreclosures do need to stop for a while. There are legal requirements for foreclosure and the past few years has made a farce of those legalities. Everyone involved has played their part in undermining justice for the homeowners – the lenders, lawyers, judges, notaries and document-processing companies. Not a single person is trying to justify non-payments of mortgage loans, but legal requirements for foreclosure must be met.

If twenty people witnessed a murder and the guilty party was not informed of his Miranda rights and was questioned without a lawyer present, he would be set free. Those are legal requirements, not just niceties to attend to whenever there is time or nothing better to do. Homeowners deserve the same protection of the law. If a lender cannot prove ownership of the original mortgage loan note, does not properly serve the required notice, does not file the required documents with the court containing the required signatures, proper dates and notary seals, foreclosure should not be allowed to proceed. These legal requirements are not mere “technical issues” as some lenders have facetiously tried to claim.

Criminal charges should be filed against guilty companies and individuals. It will greatly slow down the country’s economic recovery. It will prolong the pain of a reeling housing market. It will cause many more financial institutions to go bankrupt(and rightly so). But it is a necessary thing. To do anything less would be to hold other values higher and more important than justice and the law.

Tuesday, October 5, 2010

REIT's for real estate investing

Almost every conventional financial adviser will recommend diversifying invested assets to safeguard against loss if one sector of the economy underperforms. The common advice is to split the sum to be invested into some combination of stocks, bonds, cash or CD’s, precious metals and real estate. The amount invested in each sector will vary with age, total amount invested, desired annual growth/income, and the beliefs of each financial adviser.

I am not a strong personal fan of that style of diversification. I do still believe in keeping at least a portion of funds invested in real estate. Real estate, in my opinion, should be looked at as a hedge against economic downturns and inflation, similar to the way most investors look to gold. Real estate should not be looked at as a way to get rich quick, but owning a few houses occupied by renters or owner-financed buyers can provide a steady monthly cash-flow with little work and possible tax advantages.

Most average investors either don’t have the funds or the willingness to own and manage their own real estate investments. There is an alternative available giving investors almost all of the advantages of owning real estate without having any management responsibilities. Real Estate Investment Trusts(REIT’s) were started in the U.S. in 1960 to provide a sort of mutual fund for real estate.

REIT’s must follow some basic rules. They must hold at least 75% of total investment assets as real estate and derive at least 75% of gross income from rents or mortgage/interest payments. A REIT must be jointly owned by 100 people or more and be managed by a board of directors or trustees. At least 90% of income must be distributed to investors as dividends.

Owning shares of a well managed REIT therefore has advantages even over most stocks. Not only does an investor get the benefit of rising share price but also of unusually hefty dividend payments. So far in 2010, REIT’s have been vastly outperforming all of the main market indexes. There are many to choose from and most specialize in one type of property: hospitals, assisted living communities, single-family homes, large apartment buildings, commercial retail, manufacturing, etc… This fact makes it possible to stay diversified within the real estate sector.

I ran a very basic stock screen to see what would turn up. I chose real estate, $10 to $500 per share, $10-million to $10-billion market capitalization, outperforming the 50-day moving average and outperforming the DJIA by 5% or more. This simple search gave me 15 REIT’s to choose from on October 4th, 2010. Five of these have increased share price by more than 20% since the beginning of the year.

The top performer is Saul Centers Inc.(BFS), up 30.8% YTD and closely followed by Avalon Bay Communities Inc.(AVB) with a 30% YTD gain. Developers Diversified Realty(DDR) is up 29% so far this year and Digital Realty Trust Inc.(DDR) is up 23%. Worst performing of the top five is Kimco Realty Crop.(KIM), which is up a mere 19.9% since January 1. The most expensive shares are Avalon Bay at $106, the cheapest are Digital Realty at only $11.91 per share. Remember, there is still a nice dividend to collect as well as the increase in share price. This is pretty impressive performance in the current economy!

If you want to diversify your investments into real estate but don’t want to be a landlord or have to deal with mortgage payments, or even the actual rehabbing and reselling of properties, consider adding shares of a few REIT’s to your portfolio. Do the homework, just like if you were buying a house. Look for proven past performance and high, steady dividends. Buy sectors you believe in: healthcare, commercial retail, etc… And like any other stock, don’t be an ostrich and just it ignore. Pay attention, check on it regularly and don’t be afraid to sell and invest elsewhere if performance starts to lag.

Saturday, October 2, 2010

Foreclosure fraud fallout for real estate investors

This post is for everyone involved in any form of real estate investing. Direct investors are those who buy properties and then either rent them for monthly income or re-sell them for a one-time profit. Indirect real estate investors(some of whom do not even think of themselves as real estate investors) buy shares of stock in companies that make mortgage loans, write mortgage or title insurance policies or REIT’s that manage large property portfolios. Be aware the developing situation concerning mortgage and foreclosure fraud is going to cause problems for nearly everyone involved in even the slightest way.

The seven largest mortgage lenders in the country are now part of a federal investigation into foreclosure fraud. More federal investigations will follow this first one. Attorneys General for Florida, California and Connecticut have now started their own foreclosure fraud investigations. These state fraud investigations will also proliferate, at least in the states with the highest numbers of foreclosures. At least one U.S. Senator and one U.S. Representative are now publicly calling for the responsible federal agencies to bring criminal charges against companies and individuals found responsible for foreclosure fraud. Foreclosure proceedings in many states are already grinding to a halt. Homeowners are not being evicted and sales are not being allowed.

Some of the repercussions are already being seen. Some lenders have halted foreclosure evictions and sales in some states. Some states have halted foreclosure proceedings by certain lenders. Law firms specializing in processing foreclosure paperwork are being investigated. Mortgage loan insurance companies are starting to sue mortgage lenders for improper procedures and for not following their own in-house risk-avoidance rules. Title insurance companies are starting to refuse policies on property sales by some lenders. When these types of companies start getting nervous and turning on their own, things tend to escalate quickly.

*Investors who buy property in order to produce rental income
Hopefully you have title insurance on all the properties in your portfolio. Even if you do have title insurance, be prepared for possible problems with properties bought as foreclosures from the lenders under investigation. If there are problems, be prepared for multiple stalling tactics from the title insurance company while they try to pass the buck back up the line. If you own properties without title insurance you are in a very tough spot right now.

*Investors who buy properties for re-sale
This would be a good time to minimize inventory on hand. The big seven lenders are in the hot seat now but that spotlight is going to get wider. Be sure to get title insurance on every property purchased and try to re-sell while title insurance is still available for your buyers.

*Real estate stock investors
This would be a good time to consider moving funds into other investment sectors. The developing foreclosure fraud investigations are without doubt going to impact the share price of mortgage lenders, title insurance companies, mortgage loan insurance companies and mortgage/foreclosure paper processing companies at a minimum. Some effect of this already seems to be showing up in the markets. Without meaning to sound like a “chicken little”, this is going to get really ugly.

Wednesday, September 29, 2010

The current state of the mortgage mess

Since the very beginning of the mortgage foreclosure crisis two years ago there were rumblings of fraud by the lending institutions. A very few isolated cases of proven fraud made local newspaper headlines. More information has been available on-line at web sites and blogs specializing in consumer issues, mortgage/financial issues and real estate. Until the past few weeks this news stayed very much under the radar and out of the national network television/national newspaper headlines. That is beginning to change.

Mortgage fraud is a much more important to real estate investors. Many investors were holding rental and/or lease-option/owner financed properties which were financed by major lending institutions/banks. The investors were also hit hard by the bursting housing bubble and facing foreclosure on financed properties. This is a business for investors and they were much more inclined to fight back, researching the lenders’ legal requirements for foreclosure and hiring attorneys to protect their vested interests in financed properties. Most homeowners facing foreclosure, however, were broke(could not afford their mortgage payments), ignorant of the law, unaware of the rights as borrowers and not inclined to try to fight a big bank(no money for attorneys’ fees).

It makes a lot of sense to have rampant mortgage fraud in the current situation. The lenders were not any more prepared for the massive way of mortgage defaults that swept over the country than were the homeowners. The necessary procedures, personnel and knowledge were just not there. Many of the lenders relied on outside companies to handle the paperwork for foreclosures and those companies were not any more prepared than the banks themselves for the sudden tidal wave of defaults.

This situation resulted in many corners being cut and legal requirements being ignored in order to be able to keep up with the increased flow of foreclosure paperwork. County court systems were also not prepared and did not pay enough attention to the paperwork presented them during foreclosure proceedings. Now, even though there have been complaints from the very beginning, these issues are coming to light in the mainstream media because of federal investigations into the practices of the mortgage industry.

The big lenders want to shrug off these illegal practices(mortgage fraud) as merely “technical issues”. Court decisions on issues of legal procedure, however, tend to place a great deal of importance on “technical issues”. It will be very interesting to see if any of the lending companies, processing companies or individuals involved ever face criminal prosecution or if any of the affected former homeowners ever receive any recompense.

One widespread “technical issue” that has come to light is bank officers signing affidavits without personal knowledge of the truth of the information contained in the affidavits as required by law. Unauthorized bank and processing company personal forging the signatures of bank officers on foreclosure paperwork also appears to be common and accepted practice and is also illegal. Large volumes of foreclosure papers seem to have been signed without a notary present to witness the signatures as required by law. These are very serious issues. The presence of any of these issues in any given foreclosure procedure would be legal grounds for the dismissal of that foreclosure. Tens of thousands of foreclosures seem to have been pushed through the court system in this way. It is fraud on a massive scale and it happened because the lenders either were not aware of the proper procedures or did not feel they had the time to follow the proper procedures. Ignorance of the law and time issues are not normally well-received excuses for fraud in other areas of business and should not be considered adequate excuses for mortgage lenders.

Now we wait to see where things go from here. If the federal government does the right thing and decides to prosecute lenders and processing companies and individuals for fraud, it will get very messy and drawn out and clog the court systems for years. And what can possibly be done for the former homeowners, who have already been evicted from their homes and the houses sold at foreclosure auction or privately by the banks? Or will it all just get swept under the carpet as an unavoidable consequence of the housing bubble fall-out and the feeling that banks are already under too much pressure?

Sunday, September 26, 2010

Geothermal energy is "green" and out of the spotlight

“Green” renewable energy is a popular topic in the news and with environmentally-minded stock market investors. Solar and wind production get almost all of the headlines, though, especially from the mainstream media outlets of large-city newspapers and network television. Bio-fuels, liquid fuels that can replace diesel and gasoline, consistently run in third place. Another contender that is even more earth-friendly gets very little media attention and is also very much “under the radar” with investors is geothermal energy.

What media coverage has received concentrated on a selected few areas of the world with obvious surface geysers(have to have those spectacular photos!) such as Iceland and California. This is high-temperature geothermal, using water and/or steam directly out of the ground and operating above 300F. The average person or investor does not even know geothermal is a proven energy source even at much lower temperatures, shallower depths and areas with no near-surface activity at all.

Low-temperature geothermal energy production can provide heating, cooling and hot water for buildings as well as electricity production with no emissions and very little above-ground infrastructure. It is also practical with already existing and proven technology almost anywhere on the planet. Installing a system is more expensive than most solar equivalents but bring the same energy savings, require fewer toxic chemicals and carbon emissions to manufacture the components and less potential future maintenance.

The U.S. military and Department of Energy(DOE) are putting considerable resources into geothermal right now(though still less than solar or wind). The DOE recently announced $20-million of new funding for a variety of geothermal projects ranging from large-scale commercial electricity generation to reclaiming the energy absorbed by oil & gas drilling brines discharged as waste-water to small systems supplying heating and cooling to a few buildings combined with aquaculture operations(one of which is currently operating in New York City). The new funding covers seven geothermal technologies suitable for cities, small towns and remote areas. The National Renewable Energy Laboratory(NREL) is teaming with IKEA stores to bring geothermal energy to new big-box stores. The Environmental Protection Agency(EPA) is investing in geothermal to reclaim some heavily polluted areas and the military is also investing heavily to reduce petroleum dependence at its bases.

One type or another of geothermal energy production is practical nearly anywhere in North America. Norwegian researchers think current oil & gas drilling technology could make geothermal much more easily accessible and the supply is inexhaustible. The United States Geological Survey(USGS) says over 120,000 MW of low-temperature geothermal energy is easily available and Rocky Mountain Power utility company has found about 800 MW of geothermal potential within 100 miles of its transmission lines in California, Utah, Oregon and Idaho. Nevada is becoming a geothermal hot-spot and U.S. Geothermal is now building a 11.5 MW plant in the northwest corner of the state to replace an existing power plant.

Stock share prices for companies in the field of geothermal energy production have been mostly flat for the past year, ignored by investors the same way geothermal has been ignored by the press. My current watch list has only four companies: U.S. Geothermal(HTM), Ormat Technologies(ORA), Nevada Geothermal Power(NGLPF) and Sierra Geothermal Power(SRAGF). ORA and HTM are by far the largest of the geothermal companies in North America. ORA’s shares currently trade around $29.50. The others are all under $1.00 per share, making them quite cheap investments. They are all low volatility stocks. With the spate of recently interest and money from DOE and the military ORA and HTM are both showing some signs of life and increasing share prices. With increased interest in geothermal within Nevada, NGLPF and SRAGF should follow the same path. Larger companies, such as Siemens and General Electric, are also showing signs of more interest in geothermal as a power source.

Is geothermal energy production on the verge of a major move into the mainstream of renewable energy? Are share prices of companies involved with geothermal about to start a long, steep climb to the stratosphere? It is still too early to make that call with any accuracy. The current interest and money in geothermal from federal government agencies bodes well. Private-sector interest and money from the likes of IKEA is also a very promising signal. Watch these stocks closely as things seem about to get quite interesting and may move quickly.

Photo courtesy of

Friday, September 24, 2010

Higher US Savings Is Economic Game Changer

I am happy to present The Zen Estate's first guest post. Mr. Ron Robbins volunteered this very interesting article about U.S. savings rates and their effects on the American and world economies. I firmly believe that Americans need to save more and consume less. That has been a core issue of the "green" movement since the very beginning and seems like simple common sense(not so simple and not that common as it should be).

Thursday, 23 September 2010 at 12:07, By Ron Robbins, Founder & Analyst-Investing for the Soul

There is one prayer of governments and businesses around the world: that Americans forgo higher savings, banish their job and retirement income worries, and go on a spending spree. However, this is not to be. Were the prayer to be fulfilled the global trade and other economic imbalances of the past and present would be unresolved, even magnified. But fortunately, the early stages of their resolution are at hand.

To help resolve these global imbalances, US savings rates must go up while its consumption of goods and services relative to GDP goes down. And this will be a generational game-changer for the US and for the world, causing economic difficulties everywhere for the years ahead.

Depending on how fast its savings rates rise, the US economy will be mired in recessionary or depressionary conditions for some years. But America has faced many daunting economic challenges before and each time it rebirths to greater prosperity. This is likely to be true again.

America once had high savings rates with much lower levels of personal consumption than now. Between, 1950 and 1975, its savings rates were generally in the 8 to 12 per cent range of disposable income, and personal consumption relative to GDP averaged around 64 per cent. In the years between 1975 and 2000 savings rates declined significantly to under 5 per cent and then to 1 per cent by 2005 when personal consumption rose to a high of about 72 per cent of GDP.

Since 2006, America’s savings rates have been moving up-and most especially after the 2008 financial crisis. Today, they average about 6 per cent.

Furthermore, it is probable that US savings rates will move even together to the 10 to 15 per cent range in the next few years as Americans worry about job security, home values, and retirement income. As this happens, US consumption rates will fall back to the 60 per cents region. This will have initially deleterious effects for the global economy and countries reliant on exports for income and jobs. Thus this is another game-changing situation.

No country or countries can presently replace the American consumer. For instance, the combined annual personal consumption of China and India is about $2 trillion, compared to America’s nearly $9 tln.

The big Asian exporters, as well as Germany, will have to find other markets for their products-or stimulate internal consumption to grow. Intra-regional Asian trade is growing rapidly but “is still mainly driven by supply-chain links involving intermediate goods rather than newly surging end-market demad in Asia,” says Stephen Roach, non-executive chairman for Asia at Morgan Stanley, in a Financial Times report.

So where will increased US savings go? As of now they are going mostly into bonds, especially US government bonds. Annual funding needs for the US government over the next few years will probably be close to $2 tln if economic growth stalls or declines. That sum is equal to about 13 per cent of US GDP. It will be increasingly financed from within the US by savers, banks and especially the Federal Reserve(the Fed).

The Fed will create new money to purchase US Treasury debt and probably other assets. This “money-printing” will generate huge amounts of “excess” dollars. The consequences of this action will produce a litany of global economic difficulties. These will include a slumping dollar, domestic inflation-and even possibly hyperinflation.

Upset at the dollar’s fall, other countries and regions from China to Japan to Europe, will attempt to devalue their currencies, leading to probable currency and trade wars. (I have written more on these subjects in previous columns.)

Of course a lower dollar and likely new US import restriction will mean higher US import prices, or even unavailability of some products. This will give some American manufacturers the opportunity to recoup previously lost domestic markets and the servicing of new ones as well. US industrial production could be re-ignited and even induce foreign companies and manufacturers to buy or invest in US domestic manufacturers as well.

With US imports from oil and computers to foodstuffs, as well as domestically manufactured goods costing more, Americans will find their standard of living declining.

“The need to overcome the effects of reduced[American] individual buying power will lead to the invention of a new class of product which will be a major trend of 2010 and into the future: Technology for The Poor…,” says Gerald Celente, the renowned American trends forecaster and president of the Trends Institute. Continuing, he says that, “growing with the same speed as the Internet Revolution, the trend will be recognized, explored and exploited by legions of skilled but jobless geeks, innovators and inventors who will design and launch a new class of products and services affordable by millions of newly downscaled Western consumers…”

Mr. Celente further forecasts, “a ‘not made in China’ consumer crusade that will spread among developed nations, leading to trade wars and protectionism.”

Americans have little choice but to increase personal savings rates. The Fed will “hyperventilate” to derail prolonged economic malaise and promulgate vast quantities of new dollars, causing the dollar to fall-or crash! A dollar fall will produce inflation; a crash could ignite hyperinflation in the US and elsewhere. Also unleashed could be ‘buy America’ strategies and policies within the US thus further inciting the risk of global currency and trade wars.

This sounds like dire news. However, a new, free America could be born as it rids itself of the shackles of debt. Americans, renowned for their outstanding drive, creativity and innovation, may create a new generation of ingenious products and services geared to the new economic reality. ‘Made in America’ products could again fill retail shelves. And Asia’s export-reliant countries will finally focus on enhancing domestic consumer demand to purchase their wares, thereby bringing much improved living standards to their populations.

Higher US savings will be an economic game-changer for the US and the world.

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Tuesday, September 21, 2010

Where does housing go from here?

The “housing crisis” in the U.S. has been a major blow to almost every homeowner, every real estate investor, every bank and financial institution writing mortgages and the financial system as a whole. Things are slightly more stable than six months ago. “Slightly” is the key word and the stabilization might well be only an illusion.

The federal government has done a lot to “help” through actions of the Federal Reserve, HUD, FHA, Fannie Mae and Freddie Mac, and direct bailouts to most of the mortgage lenders. Most of the changes seem to have allowed the pain to be less over a much longer time period. The bailouts let the financial institutions get back to profitability quickly without going bankrupt. All of the iterations of HAMP and other programs to help borrowers have instead also mostly helped the financial institutions. Changes to the way banks can report foreclosed and repossessed properties also benefitted the banks and not the homeowners.

Now homeowners trying to sell are still slashing the asking price to find buyers so prices are still falling in most parts of the country. Borrowers that were in trouble are still in trouble whether they were some of the lucky few granted rewritten mortgages or refinancing or not. Homes are still being foreclosed upon in record numbers. The inventory of REO residential properties for sale is growing and the “shadow inventory” of REO properties held by banks but not on the market is growing even faster. Buyers are going away to wait for better times or sitting on the sidelines waiting for even better prices. Private real estate investors are caught in the middle of the mess along with everyone else, getting “great” deals on foreclosure auction properties and seeing profit margins shrivel up before they can get the house back on the market.

There are a few bright spots though many would not see anything very good about them. Lenders, finally pushed into a corner by ballooning foreclosure inventories, are starting to seriously consider more mortgage rewrites and refinance packages to make existing deals realistically affordable for homeowners and avoid further foreclosures. Real estate investors are finding a large pool of takers for houses they are unable to sell for a profit by offering to rent, rent-to-own or lease-option instead.

Real stabilization and reduction of the REO inventory will only come when buyers agree that asking prices are fair and are not likely get any lower. This is classic free-market economics. When that point is reached it will still take several years for inventories of homes to reach reasonable levels again as many people who want to sell now are waiting for that time before listing their home. There is still some market for new-construction homes but it is small and remain that way until the existing-home situation is solved.

So, to the question asked in the title: “Where does housing go from here?” The sensible answer would seem to be: “Not very far and not very quickly.” This problem is just going to have to work itself out, almost certainly over the course of the next several years. It just is not going to matter very much what else the federal government does or the banks do or real estate investors do or anyone else does. The “housing crisis” was created by nearly everyone involved trying to get rich quick and the fallout and pain is going to last for a long time. Those who were prudent and kept the risks in mind have not been hurt nearly as badly as those who let greed drive the risks right out of their minds. Hopefully the one thing we can all count on after going through this is that lenders and borrowers will both learn important lessons from it. Don’t try to take that to the bank!

Friday, September 17, 2010

"Green" mining investments?

Mining is one segment of my “green” investing strategy with which some might not agree. I would argue that mining is absolutely essential to most “green” technologies, including wind power, solar power, super-conductivity, advanced battery designs, highly efficient LED lighting and smart-grid just for a start. Without the metals and other diverse elements supplied by the mining companies of the world, modern electronics and “green” technologies would not exist. Silver and gold, copper and iron have always been important to the electronics industry. Just as important to modern semiconductors are the “rare earth” elements.

The rare earth elements are not really rare but are quite common and well distributed in the earth’s crust. They are, however, fairly difficult to purify into usable form. The rare earth group consists of 17 elements mostly in the lanthanide series of the periodic table. They most commonly occur in nature as oxides and are often intermixed at the same location. Highly-concentrated deposits suitable for mining operations are well distributed around the planet.

The problem today is China’s domination of rare earth mining and production. China now produces over 97% of commercially used rare earth elements. This situation came about because Chinese production was cheap and rare earth elements were an excellent export commodity. The rise of the native Chinese electronics industry increased domestic demand for rare earths. China is in the process of stopping export of these essential elements.

The need for more locally produced rare earth elements is putting a spotlight on mining and refining companies capable of replacing Chinese supply. There is no shortage of these companies and most of them are quite “cheap”. When the major electronics producers start feeling the pinch of reduced Chinese rare earth export policy these mining companies are in a position to see rapid, long term growth and share-price increases. A few of the companies I watch most closely are Great Western Minerals Group(GWMGF), Avalon Rare Metals(AVARF) and Sociedad Quimica Y Minera(SQM).

Let me reinforce the importance of the rare earth elements to “green” technology. These elements are used in almost all semiconductors including photovoltaic and PETE(photon enhanced thermal emission) cells. Rare earths are absolutely necessary for the strong magnets needed for efficient wind power and hydroelectric generation. Low-temperature superconductors require rare earth elements. LED lighting depends on rare earths. Many lasers, high-refractive-index glass formulations, colors for phosphors and LED’s and glass, fluorescent lamp bulbs, ceramic capacitors and portable x-ray machines all depend on rare earth elements.

My view is rare earth mining and production companies outside of China are a great short- and long-term investment. They should do nothing but continue to increase in value and share price(unless bought by a larger or wealthier competitor). Our part as “green” investors is to push them as hard as we can to make their mining and production operations as “green” as possible. It is also our responsibility to push the EPA and all other responsible government bodies with oversight authority to do their duty and ensure all rules and regulations are followed.

Wednesday, September 15, 2010

Tampa Bay area real estate update

Homes in the Tampa Bay area are now selling for the same prices as ten years ago. August continued the slow downward price slide to $89 per square foot. That is 7% lower than last August and 4% lower than July. An average home lost $13,000 of its sale price. The number of homes sold increased by 2% but the total number of listings decreased by 1.5%.

The price decline in the greater Tampa area has been relentless. July home prices were down 3.6% from a year ago. June saw a 2.52% decline. Prices for May were 4.74% lower. The statistics remain very similar whether distressed property sales are included or excluded. Nearly 50% of all existing home sales in the area are now distressed properties. The Tampa area has seen slightly smaller price declines than Florida as a whole and prices have leveled off when averaged nationally.

Pinellas County was hardest hit in the Tampa Bay area for August. Sales of single family homes decreased by 8.1% for the month. Sales price lost almost 5% compared to the previous year. Average home price for Pinellas dropped to $135,000. While condominium sales in Pinellas were up 8.1% for August the median sale price of a condo lost 17.2% compared to a year ago.

Budget and staffing cuts within the Pinellas County, Florida government are affecting real estate and real estate investors. Starting October 4, the Pinellas County foreclosure auction will go on-line, replacing the current live daily auctions at the Clearwater and Saint Petersburg courthouses. The monthly tax deed sales will follow on October 20. Moving these auctions on-line will ease pressure on staff in the Clerk of the Court’s office. Pressure has not let up this year as foreclosures in Pinellas County continue to roll in at the rate of 1,000 per month, only very slightly below the rate for 2009.

In Clearwater, the City Council members have voted to purchase an entire city block in the East Gateway neighborhood. The decision was unanimous. The $1.675-million purchase will be funded by a $1.9-million loan from Clearwater’s Central Insurance Fund. Immediate plans are to put the purchase in a land bank. The city will decide what to do with the property at a later time. Involved is 2.2 acres of land with buildings including two motels, a restaurant, two duplexes and a single family home. This is a high crime area bordered by Cleveland Street, Grove Street, Betty Lane and Lincoln Avenue.

Monday, September 13, 2010

Why invest in "green" companies?

I feel quite strongly that we all need to be conscious of how we treat the planet we call home. Pollution is making breathing the air and drinking the water dangerous to our health. Modern “big agriculture”, using antibiotics and hormones as staple ingredients of animal feed, has made eating a pork chop or a chicken breast the equivalent of taking a prescription drug(no prescription needed). The systematic use of chemical fertilizers and pesticides in the fields has done the same for commercial vegetable and grain crops. All of these chemicals, along with all of the OTC and prescription drugs and vitamins that pass through everyone’s toilets, go on to become part of our drinking water supply.

This is why I think it is important for everyone who invests in the stock market to take a long, hard look at “green” investing. Companies that are trying to minimize the damage done to the earth deserve to be supported. It is not a hardship: there are thousands of publicly trades companies on the U.S. stock exchanges involved in the “green” movement. Plenty of diversity can found and more companies are turning up every day.

I take a fairly wide-angle view of what is “green”. My current watch list of companies that I will invest in numbers slightly over 200 and grows daily as I discover new opportunities. Industries on my list include: batteries, solar energy, wind energy, geothermal energy, water power, wave power, electric vehicles, fuel cells, kinetic energy storage(flywheels), smart grid, LED lighting, rare earth mineral mining(necessary for semiconductors), wireless network & storage(necessary to smart grid), water treatment/recovery/efficiency, ocean transport(more efficient than flying), organic/sustainable agriculture, green packaging and a few more. There are also many tech companies that supply needed components to solar, wind, water and other industries. I also list cleaner, more efficient current technologies such as internal combustion engines designed to run on natural gas or natural gas turbine engines designed for vehicle use.

Many of these “green” technologies have been lagging the general stock market. This is not because the companies involved have bad management, or lack sales revenues or solid profits, or do not have ample opportunity for future expansion. The reason their stock prices are lagging is because people do not yet believe in them enough to put their money into company stock. This needs to change. If we believe in the products we need to believe in the companies making the products.

The situation seems to just be reaching a tipping point. As word of China’s stranglehold on rare-earth mineral production reaches a greater audience, previously little-known companies like Avalon Rare Metal Inc. and Great Western Minerals Group are seeing more interest and slow, steady share price increases. A123 Systems Inc., a maker of lithium-ion rechargeable batteries, announced the opening of a new production plant in Livonia, Michigan dedicated to batteries for electric vehicles and the $7.36/share stock shot up $0.65/share in one day. When Westport Innovations, designers of natural gas conversions for commercial diesel engines, signed a partnership agreement with Cummins to build heavy truck and equipment engines their shares saw a substantial and maintained price increase.

“Green” companies are the wave of the future. The writing is on the wall and there is really no choice. Companies like Walmart are using hydrogen and fuel cell fork lifts and more-efficient semi’s and Frito Lay is using an electric truck delivery fleet in New York City and the U.S. military is installing solar and wind power on its bases. The only real question is: how long will you wait before investing in these companies? Why not get in now while there is maximum upside and the support will make a real difference to the company? I invest every dollar with the intention of that dollar making me more money and it is certainly possible to do that within the “green” sphere of companies.