| |
Eric Fry, longing for the Old World, reports...
"The greenback's spectacular ascent during the last several months has created a world of investment opportunity for the dollar-based investor," we remarked three weeks ago. "Therefore, why not swap some richly valued dollars for attractive non-dollar assets...
"Here's an idea," we continued, "sell U.S. stocks and buy European stocks... as a 'pair trade.' That's right: Sell short the SPDR S&P 500 ETF Trust (NYSE: SPY) and then buy an equivalent dollar amount of the SPDR Euro Stoxx 50 ETF (NYSE: FEZ). This sort of pair trade is a classic 'convergence trade,' which succeeds if the valuations of U.S. stocks and European stocks converge toward one another... "
We proposed this trade to take advantage of two phenomena:
1. European stocks have become much, much cheaper than their U.S. counterparts.
2. The strong dollar buys about 20% more euros today than it did last summer.
We still like this trade. But European stocks aren't the only Old World assets on the discount shelf. European real estate is also a bargain, according to our friend and colleague Ronan McMahon, editor of Real Estate Trend Alert.
Like many stock markets in Europe, many real estate markets have become much, much cheaper than at any time in recent history. Add to that the fact that a dollar packs 20% more firepower than it did last summer... and voila, you've got a very enticing opportunity.
European real estate is not cheap in every single location, of course, but in the select locales Ronan has identified, opportunities are abundant. That's Ronan's métier, as editor of the Real Estate Trend Alert: to canvass the globe for the next, great places to invest in real estate. (You can learn more about this investment letter here.)
He logs thousands of airline miles every year - along with thousands more train, taxi and flip-flop miles - to identify and vet opportunities. But every once in a while, the best opportunities pop up right under your nose, as Ronan explains in today's edition of The Non-Dollar Report.
Have You Ever Seen a Lightning Strike?
There's a rare event happening in the stock market...
And its "Lightning Strikes" are the exact reason certain stocks are handing investors fast and easy gains:
190% on Pharmacyclics... 148% on Hartford Financial Services Group... and 307% on Auxilium Pharmaceuticals... each in less than six months!
Click here and we'll show you how to find the next Lightning Strike... before it happens!
| |
European Dirt Is Dirt Cheap
European real estate is on sale... at least in a few select locales.
Here's the backstory... In the early and mid-2000s, Europe's real estate markets embarked on a massive tear. Just like what happened in the U.S. when cheap credit was dished out. Values rose. People refinanced, often to buy a vacation home or make a speculative investment in Europe's sunnier locales.
It became a gold rush. A mad frenzy not to miss out. Values rose and rose... until everything stopped.
Europe's economy slowed before unraveling. Credit dried up. The market imploded and real estate owners found themselves deeply underwater.
The psychology of a distressed real estate market is a lot like a grieving process. There are various stages of denial and anger until acceptance is reached - acceptance that your real estate is worth only what someone is willing to pay for it.
Psychologists have clocked this cycle at nine years. So... nine years since the start of Europe's crisis, at what stage do we find the continent's real estate markets and where are the opportunities for profitable real estate investing?
By 2009, with a small number of exceptions, Europe's real estate markets had stopped. Not crashed. Transactions simply stopped. Markets went "no bid." The gulf between sellers' expectations and what buyers were willing to pay was so great that there was nowhere for them to meet.
Now markets are moving again. An added plus is the current strength of the dollar. Your dollars buy 21% more euros than in March 2014. Now, I'm not a currency guy, and I'm certainly not making a call on future euro-dollar exchange rates, but the strong dollar makes European opportunities all the more attractive today. For example, a 100,000 euro property that would have cost you $138,000 last March will cost you $109,000 today based on currency exchange rates alone.
Ireland: Yields Reaching Double Digits
Europe doesn't have a quick, clean bankruptcy process. Foreclosures are difficult legally. And banks can be slow to foreclose even when they legally can because there's a lot of public resistance. This means that it takes a long time for the distress to be reflected in prices.
When real estate transactions just stop, something needs to happen to bring activities back to the market - a liquidity-triggering event. For example, in the case of Ireland, that was the arrival of distressed real estate auctions in 2011. This was quite the price-discovery process. Sellers finally realized how little buyers were willing to pay. It brought liquidity to the market.
Ireland was the first of Europe's real estate markets to slide into crisis. After a decade in which prices rose by as much as threefold, prices peaked in mid-2006. The market stalled as word spread that the government might be set to reduce stamp duty (the transfer tax paid when buying in Ireland). Everyone sat back and waited. Then, in 2008, confidence in the economy plummeted and unemployment rose. In 2009, the economy dramatically unraveled, culminating in a massive bailout.
Ireland was then the first market to show signs of liquidity... and recovery. The real estate market in Ireland stayed "no-bid" until fire sale auctions came to the market in April 2011. We were there.
I recommended condos close to central Dublin's financial services center and city center. The case was compelling. Ireland was in crisis, but these locations were still attracting companies like Google, LinkedIn and Airbnb. Some sectors were losing jobs, but this mobile multinational sector continued to show strong growth.
Employment in Dublin's financial services center, which enjoys tax incentives, remained robust. Dublin was still a vibrant university and capital city. Real Estate Trend Alert members who acted have done well. Values on the condos I recommended at 140,000 euros have risen by 60% or more. Rents have increased from levels that already commanded double-digit yields.
Dublin Housing Crisis - A New Opportunity?
Now there's a new crisis in Dublin. There aren't enough homes for people to buy or rent. At the heart of the problem are supply shortages and supply constraints. The supply constraints are permitting and protection regulations. Dublin's desirable areas are typically wide, tree-lined streets dotted with protected period housing that you can't knock down. And, there are limited opportunities for infill. Secondly, where you have green field sites, development can be challenging. The permitting process is long, drawn out and expensive.
There's a lot of land around Dublin that has permits. But, the land is tied up in bankruptcy processes post the crisis. Or the permitting includes a mix of homes and condos. The market is looking for homes. According to the permitting, you can't build the homes if you don't build the condos. With strong demand chasing limited supply, Dublin is well on track for another period of fast-rising values in the more desirable locales.
Is this an opportunity for us? I expect prices will rise further. But, it's not a market I want to play. I don't like chasing real estate with a bunch of other folks who are emotionally and practically attached and invested in making a deal. These folks will bid things up too high. We might see short-term gains. But, I prefer shopping in the hidden places - even hated - but where the underlying fundamentals are still strong.
Play the "Hated Sector"
I still see an opportunity for profit in Ireland. But, it's far off the radars of the mega-groups buying up in Dublin. The big idea surrounds apartment rentals in secondary cities and big towns. It's a hated sector - a sector that's still licking its wounds.
Investors lost their shirts as values tanked by 80% or even more. Banks got burnt. The quality of tenants lowered as supply increased. Rents fell and became more difficult to collect. A whole generation of landlords, beaten down, gave up or retreated to managing what they had. No one wants to be in this business now... so no one is taking their place.
But we can... Rental markets are back on a tear in secondary cities and big towns, particularly near major hospitals, universities and colleges. Buy really cheap, play this market and you could do well.
Last year, for example, I alerted the readers of my investment letter, Real Estate Trend Alert, about a property that came up for sale at fire sale auction. It was a little block of eight apartments and duplexes that sold at auction for 475,000 euros. Replacement cost for a building like this would be in the region of 1 million euros. The units are close to the University of Limerick and Limerick Institute of Technology, and about 10 minutes from Limerick regional hospital. They would rent for 62,000 euros per year as is. Spend another 100,000 euros to upgrade them and they could throw off 80,000 euros a year. So you can see what a steal that was.
You won't have competition from new rentals until developers can build and sell them at a commercially viable price. I'm seeing the early stages of strong recovery for this type of opportunity. The yields are just too strong to pass up. The best deals come up at auction and sell fast.
I am also finding some terrific opportunities in Portugal, Greece and Spain. I don't expect this window to remain open for a long time. But it is open right now... and the strong dollar makes today's investment opportunities in Europe even more enticing.
Good investing,
Ronan McMahon
Editor, Real Estate Trend Alert
Eric's Note: Ronan is one of the hardest-working lads you'll ever meet. He makes about 15 scouting trips a year to investigate properties with the potential for profit. This due diligence process is very labor-intensive and time-consuming. Ronan doesn't simply examine potential properties, he rejects them... often. Ronan sees about 200 potential deals for every one he actually brings to the attention of his Real Estate Trend Alert members. As the saying goes, he kisses a lot of frogs before finding a prince. But over the years, Ronan has found many, many "princes" for his subscribers. If you'd like to learn more about his unique and insightful investment letter, click here: Worldwide Real Estate Opportunities.
The days of stressing about money are finally over.
Alexander Green has crafted a surefire technique that could end all financial worries...
Nineteen triple- or quadruple-digit recommended winners... potential gains as high as an extraordinary 2,682%...
And for the next few days only, we're offering you six months of his recommendations FREE.
Discover how Alexander Green accrued these mind-blowing gains on 51 of his recommendations: Click here.
| |
|
|
| |
|
RECENT ARTICLES
| |
Circle September on your calendar. That's when the world you know might change forever... and not in a good way. September is when China plans to roll out the China International Payment System. As a result, the yuan will officially become a global trading currency. Read On... | |
|
| |
Broadly speaking, investors want to steer clear of pricey stock markets and allocate to lowly valued ones. Right now, Russia gives you the most value you can get. Read On... | |
|
| |
Have you noticed that some of the most successful natural resource investors in North America don't seem very concerned about the current behavior of gold? While the price remains weak and range-bound, these guys don't seem worried about it at all. Do they know something we don't? Read On... | |
|
|
|
|
© 2015 The Oxford Club, LLC All Rights Reserved
No comments:
Post a Comment
Keep a civil tongue.