Alternative energy sources, especially solar and wind energy, are torn between economic reality and government spending. Where are they headed?

by Tara Useller

Baltimore, MD  – TFN: Does alternative energy have a future in a Depression?

With fossil fuels the cheapest they’ve been in a while, and an economy that’s grim at best, crunchy-granola, save-the-earth kind of investments are just sooo 2007! But before you skip on over to gold, guns, and bulk shipping, consider this:

The costs of solar and wind power have been steadily dropping. There’s good reason to believe cost will keep coming down as demand goes up, both due to more cost-effective manufacturing and the influence of government funding.

Solar and wind energy are benefiting from the current economic climate. Private investment may not have taken off. But the federal government is pouring more money into fossil fuel-chugging cars than Snoop Dogg pours into the Southern California marijuana market.

The costs of alternative energy has deterred many individuals, industries and utility companies for decades. For individuals, the tide is turning. Thanks to the bursting of the housing bubble, home buyers are forced to look at their homes as longer-term investments.

The influence of new federal and state tax credits and utility company incentives has substantially reduced consumer’s cost of a private residential solar power system.  A homeowner investing in a $20,000 solar system, when considering the increase, or stabilization of their home’s value, an average savings of $1,000 per year on energy costs, and the elimination of utility rate increases, can expect to recoup their investment in less then ten years.

In addition to direct-to-consumer tax credits, the latest round of federal stimulus has reduced those costs by supporting alternative energy installation and maintenance providers. All over the United States,. solar and wind power sales and installation companies, as well as municipalities are receiving grants to train recently laid-off individuals from all backgrounds in the tasks of installing and maintaining alternative energy systems. While it’s true that this money is not going directly to the manufacturers or distribution companies, it’s alleviating the need for those companies to provide paid training. They can expand their sales and installation teams without having to make that initial investment in the cost of qualified people.

Those stimulus grants aren’t limited to small companies, either. Communities have been investing their stimulus dollars (and providing their own grants) in the development of alternative energy programs. Not only are they providing skilled training and work for their own citizens, they are creating a demand for equipment.  Companies that can produce in higher volume turn a higher profit and the dozens of municipalities that are converting their energy supplies are ensuring that the demand exists for what supply will come.

But wait – there’s more!

The current economic climate has created an environment where private residential use of alternative energy is becoming a more realistic investment. Demand for equipment is being driven by communities as well as individuals and manufacturing, but the technology has advanced to the place where it can keep up with those demands.

The technology of production, including the accuracy of lasers used to cut channels for photovoltaic cells, has moved forward at an astonishing rate in the last few years.  In addition, the sourcing of affordable supplies and components has kept up the pace. Once more China proves itself our best frenemy: They’ve caused the outsourcing of tens of thousands of U.S. industries. But they’re also at the front of solar grade silicon production. Chinese companies are lead producers of multicrystalline silicon ingots and wafers, the vital ingredients in producing a solar cell.

In short, the future is bright for solar power, and for the companies that will bring the technology to a roof near you.

One of our favorite solar companies, SunPower Corporation (NASDAQ:SPWRA) just reported a second-quarter profit of $24.2 million, or 26 cents per share. The report triggered a tizzy in analyst upgrades. We had recommeded SPWRA in our free TFN Special Research Report: The Three Best Solar Companies to Buy Now on April 17.

TFN readers who took our sage (and even better: free!) advice saw their stock appreciate close to 20% We’re still expecting to hit our 30% gains target on this stock.

But there’s more where these picks came from. We’ll have a brand new report for you later this week: Stay tuned for the three best solar picks under $15 . . . . Similar Posts:

• The TFN Complete Guide to Solar Stocks between $1 and $15 – December 4, 2009
• Ocean Power Technologies: Harnessing the motion of the ocean – October 13, 2009
• Solar Penny Stock: Is Kender Solar (KNDR) a good investment? – September 22, 2009
• TFN eNews 09/22/2009: Check out this solar penny stock … and gainer #63! – September 22, 2009
• The future of Energy, Ethics and Green Investing – November 16, 2009

Article first published on Today's Financial News

Move over SunPower Corporation (SPWRA): What’s ahead for solar energy?

If you think the real estate industry is finally on the mend, you better check the data one more time. Now that interest rates are on the rise, home prices will have to drop once again. But prepare your portfolio and you will have nothing to worry about.

By Andrew Snyder, TodaysFinancialNews.com

Baltimore – (TFN): Investors better get used to a new theme on Wall Street. As the economy emerges from its defensive shell and money begins to flow to the areas of least resistance, reading and hearing the term “divergence” will be a common occurrence.

Anybody that has ever sat through a basic economics course knows money always heads to the areas that offer the most beneficial risk/reward structure. If two potential investments have the same risk, the choice with the highest return possibility will always be the winner.

The real estate industry is obviously not immune to the phenomenon.

As mortgage rates continue to climb – they’re up almost a full percentage point in the few months – investors will begin to rethink their plans. It is horrible news for a real estate industry that is praying it has seen the worst of the decline.

When mortgage rates were at or below historic lows, the risk/return ratio was the most attractive it has ever been in most of our lifetimes. With 30-year rates as low as 4.61%, Americans realized they had a great deal on their hands, even if home prices were still dropping.

But now that rates are back above 5.5% and rising, the situation has changed dramatically. Even a 100-basis point surge has had profound effects on the mortgage market. Potential buyers lost an estimated 10% of their buying power. Instead of looking at a $200,000 house, now they can afford a home worth $180,000.

Refinancers have come and gone

The folks with fixed mortgages in the 6%, 7% and even 8% range were the ones truly taking advantage of the historic-low rates. When rates dipped towards Obama’s 4% target (still a pipe dream) homeowners lined up to refinance at the low rates.

But now that rates have gone higher, the gush of activity has dried up. The Mortgage Bankers Association’s refinancing index recently slumped by 11% to a seven-month low. Even with the slowdown, refinancing makes up nearly 60% of all mortgage activity, proving the real estate market is nowhere close to healthy.

While rising interest rates are bad for the folks buying, building and selling homes, it is great news for other folks. Commodities, international investments and even select banking stocks will surge as interest rates fall.

For some I-told-you-so proof, the Treasury just finalized an “awful” bond auction, selling 10-year notes at 3.99%. The market dropped nearly 70 points on the news. Meanwhile, a recent recommendation to TFN Strategic Trader subscribers designed to take advantage of the situation is up 236%.

The next six months will be a fight between the “haves” and the “have nots.” Investors positioned to take advantage of rising rates will do well. But on the opposite end of the divergence spectrum, folks that took the Feds word and said rates would remain low are going to be wondering what in the world just happened.

It is not over yet. The real estate industry is going to take it on the chin once again. If this nation is truly dependent on home values rising, this recession is not going anywhere anytime soon.Similar Posts:

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Article first published on Today's Financial News

It’s official, divergence is the new norm

The recession is changing the way many companies do business. As they slash headcounts, close factories and walk out of warehouses, the self-storage industry is booming.

By Andrew Snyder, TodaysFinancialNews.com

Baltimore – (TFN): Businesses across the globe are in conservation mode. While layoffs and headcount reductions are the headline makers, savvy managers are doing much more to protect their bottom line, from cutting inventories to slashing office space.

As firms off all sizes work to boost their fundamentals and prop up their books, many smaller companies are taking a unique approach. They are utilizing the cost-saving advantage of self-storage.

Companies like Sovran Self Storage (NYSE:SSS), Public Storage (NYSE:PSA) and Extra Space Storage (NYSE:EXR) are reporting an increase in revenues thanks to the recession’s nasty impact on small businesses.

Instead of risking their business by expanding too quickly, many companies are making timid advances and renting on a month-by-month basis. Foreclosures, bankruptcies and downsizings are good news to an industry that promises to safeguard your assets until the economy rebounds.

The trend is adding more pain to the already horrific commercial real estate industry, but is creating a great opportunity for savvy investors. The self-storage industry offers a rare shot at revenue growth even in the teeth of one of the nation’s fiercest slowdowns.

Their pain, your gain

Out of the three companies mentioned above, the one worth taking the closest look at is Extra Space Storage. With a market value of about $710 million, it is larger than Sovran by about $200 million, but drastically smaller than Public Storage and its $11.3 billion market value.

One of the most appealing aspects of the company is its exposure to some of the nation’s weaker real estate markets. As the value of its properties rebounds, its shares price will follow.

Don’t forget, as a REIT the company must give back 90% of its income to shareholders. The company’s current dividend stands at 12% of its $8.34 share price.

As the markets begin to level off after a big plunge and the ensuing correction, fundamentals will be key. Not only does the self-storage industry have a strong business model, with growing revenues, its books will only get healthier as the nation’s economy rebounds.

The industry helps to prove there is always a silver lining in even the darkest of storm clouds. All of those bankrupt businesses and foreclosed homeowners have to put their junk somewhere.

Might as well let them put some profits in your pockets.Similar Posts:

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• Buy oil. Sell natural gas – October 26, 2009

Article first published on Today's Financial News

Where to “store” your money now

The real estate sector has been considered off-limits to most investors during the last year. But according to recent data and indicators, REITs are worth a look.

By Andrew Snyder, TodaysFinancialNews.com

Baltimore – (TFN): Now that winter is over and it is officially lawn-mowing season here in the Northeast, it is much easier to determine which homes are in foreclosure.

On my way home from the office, I pass at least half a dozen homes with grass so high and so out of control it is going to take a hay baler to get things back to normal. On their front door is a little sticker explaining the situation.

But if today’s economic data is any indication, it may not be much longer until a new set of mortgage-paying owners are zig-zagging their shiny, new lawn mowers across the yard.

According to the National Association of Realtors’ pending home sales index, which jumped an unexpected 6.7% to a reading of 90.3 in April, the pre-owned home market may be finding a bottom. The latest reading shows the strongest surge in over eight years.

This is good news for investors wanting to take advantage of the growing profit opportunity.

REITs: Investing in the “danger” zone

For some of the potential contained in the REIT market, all we have to do is look at the overall market. In March, investors oversold equities in a major way. Since the lows, the major indices are up by 36%, with many stakes doubling or even tripling in value.

Looking at the REIT sector, the same sort of earning potential is on its way. There is no doubt the real estate industry has been oversold. Prices may temporarily take a small dip, but over the long-term, today’s prices must rise.

In fact, real estate is one of the few long-term investments worth making today.

As the pendulum begins to make its swing in the opposite direction, there are several investments worth taking a look at, but I will give you two freebies to get your search started.

First Potomac Reality (NYSE:FPO) offers exposure to the Washington D.C. and Northern Virginia area, one of the strongest and least-risky growth markets in the country. If you do not mind a lack of diversity and a slightly smaller-than-average profit potential (the D.C. market has remained fairly strong), this REIT is a good choice.

For more diversity and a larger exposure to risk (and therefore profits), take a look at Simon Property Group (NYSE:SPG). As a mall owner with properties across the country, it provides exposure to several major markets, but limits investors to the risky retail industry.

If you have followed the recent demise of General Growth Properties, you have probably heard of Simon, a chief competitor. As long as the retail industry does not make another backslide, the REIT is able to claim it has made it through the worst of the storm.

Wall Street has never been very good at predicting exact bottoms. As investors analyze the latest data, there will be opportunities to rack in some short-term gains. But in the real-estate sector, long-term is the only way to go.

Buy shares now and sell them the next time you say, “They want how much for that property?”Similar Posts:

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• Three Monday morning movers – October 19, 2009

Article first published on Today's Financial News

Take advantage of the “tall-grass” indicator

Fannie and Freddie may be in trouble, but their more-conservative cousin is doubling investors’ money today. Now if it could just do something about that ethanol industry.

By Andrew Snyder, TodaysFinancialNews.com

Baltimore – (TFN): We have all heard of Fannie Mae and Freddie Mac, the two government-created entities at the heart of the mortgage meltdown. The mortgage buyers have been filled with controversy, scandal and, most recently, tragedy.

But how about their hillbilly cousin, Farmer Mac? What’s he been up to?

Well, if you happen to look at today’s action from the Federal Agricultural Mortgage Corporation (NYSE:AGM), or Farmer Mac to fit the name game, you will like what you see.

Shares of the company, which buys loans from farmers, ranchers and other rural real estate buyers, are soaring by over 125% today on news the firm somehow managed to record a profit.

This time last year, the company reported a loss of $8.3 million. Today it announced a net income of $33.5 billion. Not a bad turnaround. But I would not get too excited.

The profits were mostly made from trading and positive shifts in derivative prices. The fundamental mission of the company, profiting from mortgage cash flows, remains risky.

“Alternative” risks

In fact, the company had to set aside an additional $3.5 million to cover potential future bad loans in the ethanol sector. (Is there even an ethanol sector left?) About 65% of the Farmer Mac’s past-due loans, $58.5 million worth, were related to the ethanol industry.

I hope the company is not making any wind, solar or geothermal loans.

Today’s surge in share price is certainly good to a handful of investors fortunate enough to grab shares while they were bouncing off scary-low prices. But for the folks that bought back in September for over $30, today’s news means their loss went from 87% of their principal to just 73%.

Not enough to dry many tears.

Going forward, however, Farmer Mac looks quite stable, unlike its wild and reckless cousins, Fannie and Freddie. The rural markets are full of potential as the nation re-thinks (or re-brands) its energy industry. And rural land prices are drastically more stable than the McMansions dotting suburbia.

It will be away before Farmer Mac’s crop is ready to harvest, but the time will come. Now is certainly a good time to be planting some seeds.Similar Posts:

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• IPO Strategy: Perfect timing for A123 – September 24, 2009
• TFN eNews 09/24/2009: Will the market bounce back? – September 24, 2009

Article first published on Today's Financial News

Farmer Mac: All’s great but the ethanol

The housing market is considered the antagonist to this global financial mess. But inside all the hate is a well-balanced company that has had no problem beating the market.

By Andrew Snyder, TodaysFinancialNews.com

Baltimore – (TFN): Here is an interesting question for you. Over the last year, the worst in post-war history for investors, what would you rather own, Toll Brothers (NYSE:TOL) or a sample of the entire market like the S&P 500?

Off the top of their heads, most investors would likely want to own the market. After all, how in the world would a homebuilder be able to “beat the market” during a horrific crash in housing prices?

Here’s the surprising answer…

If you went with the S&P, you would have lost double what you would be down in Toll Brothers. Yes, the nation’s most prominent homebuilder, a company that helped us get into this financial fiasco, beat the pants off the market over the last year.

Toll’s shares are down 16%. The S&P is down 35%. It is even beating the index over a five-year range:

The gap between the two is only going to get bigger as the economy and the real estate sector recover. Toll’s future looks significantly brighter than most publicly traded companies.

Don’t hate me because I’m beautiful

One of the most interesting facets of the current economic downturn is the horrific impact it has had on the nation’s builders. In this world, it is true only the strong survive. The notion is especially poignant in the housing industry.

Toll Brother’s recently issued debt with a coupon rate of just 8.9%. That figure is less than many folks are paying for a used car loan and is indicative of an extremely strong balance sheet.

The company will be able to use this sort of leverage to overpower its competitors. In the high-end construction business, few builders are able to get construction loans. Even fewer can do it as cheaply as Toll.

A valuable portfolio of high-quality land assets is also not hurting the company’s long-term chances. While competitors are forced to turn to the faster-moving low-end market, Toll is sitting on top-notch properties that are bound to pay off in as little as a few years.

Toll is not the kind of investment short-term speculators want to mess with. This company is a long-term winner that will become even more dominant in an industry that is slowly but surely rebuilding.

Granted, Toll will never be the fast-growth wealth generator it was just a few years ago, but that industry is gone. In its place is a more secure, dare I say more conservative, industry where fundamentals matter and a strong market stance will propel a company towards healthy long-term revenue streams.

It goes against much of what mainstream investors believe these days, but the housing market is not the death trap so many folks believe it is.Similar Posts:

• Bad news from the housing market – November 18, 2009
• Options strategy: Buy the house and put the odds in your favor ! – September 18, 2009
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Article first published on Today's Financial News

Don’t hate me because I’m beautiful

The commercial real estate industry has traditionally been a lagging indicator. If that remains true, we could be in for much more pain.

By Andrew Snyder, TodaysFinancialNews.com

Baltimore – (TFN): It will go down as the eleventh largest bankruptcy in nearly thirty years. Bigger than Delta Airlines. Bigger than Adelphia’s failure. It is only a hair smaller than the losses when Global Crossing went belly up.

When my wife and I walked into a mall this weekend, I pointed to a sign that said General Growth Properties (NYSE:GGP) owns the property.

“Not for long,” I said. The problems facing the nation’s second-largest mall owner were obvious, just by studying this single property. Stores were empty. Competitors were building all around it. And few shoppers had bags in their hands.

It is no surprise to hear the company has filed for Chapter 11 bankruptcy protection this morning. With few lenders willing to hand the company the concessions it needs to stay afloat, court-led protection was its last resort.

Now, the company must reorganize its $29 billion or so in assets to cover its $27 billion in liabilities.

Mall for sale

The news could not have come at a worst time for the nation’s commercial real estate industry. If you thought the pain in the home market was bad, take a look at this mega-dollar sector.

Just this morning, JP Morgan’s (NYSE:JPM) CEO, Jamie Dimon, told the world to brace itself for “rapidly rising” commercial real estate losses.

According to Deutsche Bank, commercial property values are down by 35% to 45%, which means many of the $154 billion in mortgages due between now and 2012 will not be eligible for critical refinancing.

One analyst at the bank said, “”Real estate fundamentals are softening dramatically. Over the next 12 to 18 months, we expect to see pretty significant deterioration.”

In other words, expect plenty more tales similar to General Growth’s woes. Consider it Round 2 of the real estate crisis.

Commercial real estate has traditionally been a lagging indicator. As workers cut headcounts, less office space is rented. And as those laid-off workers cut their spending, retailers close shop and abandon their stores. We are merely seeing the beginning of the industry’s pain.

What does this all mean for investors? It should be a clue to stay away. Keep your exposure to commercial real estate to an absolute minimum.

Simon Property Group (NYSE:SPG), one of General Growth’s largest competitors, is holding fairly steady today, even with news of an intra-industry bankruptcy.

That does not mean shares of the retail-REIT will climb out of this mess. Shares of Simon have plunged from over $100 to around $40 during this financial fiasco. As the commercial sector deteriorates over the next 12 to 18 months, its shares are likely to get even cheaper.

Do not get suckered into believing a near-term economic rebound will solve the industry’s problems. It could be years before the commercial real estate industry catches up with its peers.Similar Posts:

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Article first published on Today's Financial News

General Growth’s failure will not be the last

As much as real estate investors would like to see the worst of the industry’s problems in the past, the outlook remains bleak, especially for the commercial sector. With the threat of bankruptcy slamming General Growth Properties (NYSE:GGP) and its investors, the entire industry is at risk.

By Andrew Snyder, TodaysFinancialNews.com

Baltimore – (TFN): It is amazing that it hung on this long. After pushing back critical bondholder concession deadlines several times, missing multi-million-dollar interest payments and watching the courts take control of several of its assets, the company refuses to throw in the towel.

General Growth Properties (NYSE:GGP), the nation’s second-largest mall owner, is hanging tough, but all the stalling and begging will not keep the company out of bankruptcy court. At this point, it looks as though nothing will.

This time last week, I was writing about General Growth’s decision to push its bondholder concession deadline back for a second time as it hoped it would get approve to defer payment for five of its outstanding bond series. The third, and presumably final, deadline has come and the company still does not have the votes it needs.

General Growth continues to stall for time and look for any concession it can get, but today’s news is surely an indication of what is to come. After losing 98% of their value, dropping to the price of a pack of pencils, shares of General Growth are going to lose their remaining worth as investors prepare for bankruptcy.

A big stone in a little pond

While the threat of General Growth filing for bankruptcy is certainly nothing new, the ripples of a filing would be felt throughout the commercial real estate industry.

Major competitors like Simon Property Group (NYSE:SPG) and CBL & Associates Properties (NYSE:CBL) are both down by close to double-digit proportions today on the news from their competitor.

As property values continue to drop, stores close and retail revenues dwindle, the vice will tighten around the commercial real estate industry. The chances of a widespread successful turnaround will vanish.

But there is at least a glimmer of hope. Macerich (NYSE:MAC), which own nearly 100 mall-related properties, remains fairly strong today as investors digest the news the company was able to get $446 million worth of debt refinanced. The company now has $223 million worth of debt due this year.

Certainly, the worst is not over. As much as the markets were hoping for a quick rebound, the fundamentals simply are not there. Until companies like General Growth can find the capital they need to survive, investors are going to be looking at an awful lot of red.

If your portfolio needs some exposure to the nation’s real estate markets, stick with the retail sector. With low interest rates and a government willing to force homebuyers into houses, it will be the first indicator of an industry-wide rebound.

The commercial real estate market has yet to see the worst of the downturn. Steer clear of this potential disaster. You will be able to buy shares much cheaper in just a few weeks.Similar Posts:

• Three picks for a weak dollar – October 15, 2009
• Fat Americans versus lean China – October 15, 2009
• Hype thrills… and kills – October 2, 2009
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• Bad news for YRC Worldwide – December 17, 2009

Article first published on Today's Financial News

Has the fat lady sung for General Growth?

A new middle class in Brazil means more people are going on vacations. It also means food consumption will go up, and not just in Brazil–some reports suggest a 50% increase in global food demand by 2025.

By Ronan McMahon, Executive Director, Pathfinder International

Increased wealth and a new middle class in emerging economies (combined with population growth) means something else, too–all of a sudden, people become image conscious. Gadgets and labels are important symbols of their new buying status.

Global demand for wine is driven by these same trends. A new middle class wants to (and be seen to) drink more wine.

The Russians and the Chinese are leading the charge; demand for wine is expected to grow by 24.4% and 36.6% respectively over the next four years.

In the meantime, changing tastes and savvy marketing is driving the demand for wine in the U.S. Consumption here is growing and is expected to leapfrog France and Italy to the top of the league table by 2012.

This is good news for Argentina and the province of Mendoza in particular.

Few places on earth are suitable for quality wine production. The climate and soil need to be right, and vine cultivation and wine production expertise (ideally the experience of many generations) should be available locally.You also need a production and marketing infrastructure.

Mendoza has all of these in abundance.

Mendoza sits at the foot of the Andes 600 miles west of Buenos Aires. Soil and climate is perfect here for wine production. Argentina’s wine industry began here nearly 500 years ago.

First developed by the Spanish, the French and Italians followed a couple of hundred years later. They came with vine cuttings and expertise from their home regions. Italians brought bonarda. The French came from the Bordeaux region and brought malbec (for which Mendoza has become famous).

Today there is a third wave of pioneers setting their sights on Mendoza. They are coming from all over the globe.

The reason is simple: U.S. dollars buy 30-40 times more vineyard here than in Napa Valley.

In fact, $5,000 will buy you an acre of vineyard in Mendoza. Big label vineyards are coming… joining the small local and gringo wineries. With the bigger wineries comes wine tourism. Boutique hotels are opening up to cater for high-end wine tourists.

They call Mendoza “The next Napa.” Time will tell. Today however the real estate values here are amazing.

In the March issue of the International Living Magazine, one of the property picks is for a 12.5-acre vineyard (planted with malbec) with a house, a caretaker’s cottage, and wine making equipment…total price: $239,000.

It’s usual for small vineyards to come with a house on the property. Perfect for surveying your domain. If you prefer not to get your hands dirty, local co-ops will tend your grapes and produce your wine. All you need to do is make sure you have suitable space for storage. Maybe you’ll want to design a label to put on the bottles you give to family and friends.

Buy a little vineyard here and you might like it so much you hope Mendoza doesn’t become the next Napa.

Editor’s Note: Ronan McMahon is a regular contributor to the International Living newsletter. Find out more here.

Article first published on Today's Financial News

Is Mendoza the Best Place to Retire?

The most beautiful beaches in Uruguay lie between the famous resort of Punta del Este and Uruguay’s border with Brazil. And thanks to its natural beauty and reasonable prices, an ever-increasing number of Americans are deciding to buy on this part of the coast.

By Lee Harrison, Roving Latin America Editor, International Living

The most beautiful beaches in Uruguay lie between the famous resort of Punta del Este and Uruguay’s border with Brazil. And thanks to its natural beauty and reasonable prices, an ever-increasing number of Americans are deciding to buy on this part of the coast.

In this Uruguayan department of Rocha, and the beaches here are wide, natural, and mostly-empty. The sand is powder-fine, and the water is a deep blue, topped with sparkling white-capped breakers. Gentle dunes with sea grass lend a feeling of isolation and privacy. (Take a look at this photo and see for yourself.)

Rocha is home to the town of La Paloma, which is the last seaside town equipped to support a tourist trade of any size as you approach Brazil. Lying about 50 miles from Punta del Este on Bahía Grande, this little beachfront town of 5,000 people was a small, charming outpost when I first went there. But recently it has come into its own. The first low-rise condos have arrived, and the tourist infrastructure is growing each time I visit.

La Paloma is a “walkable” town, with a few hotels, markets, and a number of shops selling everything from cell phones to souvenirs. There are several nice restaurants providing diverse menu offerings. It’s not big, but La Paloma is just what many readers I meet are looking for. The beaches are great, relatively uncrowded, and there’s enough to do to keep most people busy in the summer.

I looked at a number of homes in the area, and found them to be a real steal when compared with much of the Uruguayan coast.

For example, there is a 2,044-square-foot, three-bedroom, three-bathroom home directly on a beautiful, sandy beach. It has a panoramic sea view, and a view to the port at La Paloma. The asking price is just $95,000. The best price I found for a two-bedroom beachfront home in town was $160,000, while a small, attractive thatched home in a wooded neighborhood outside of town is going for $76,000.

This was a sleepy little area. But now, international developers and property buyers are realizing the potential here, and it’s attracting people from elsewhere in Uruguay, as well as Argentina, Brazil, and North America.

Just last Sunday, I was at a barbeque at a planned residential community (near one of the nicest beaches I’ve seen) where 17 of the properties were bought by International Living readers.

On your exploratory trip to Uruguay, make sure you have the department of Rocha on your itinerary. You’ll be visiting an area that’s on the move, with great natural beauty, an appreciating market, and plenty of room to grow.

Editor’s note: Lee Harrison is a regular contributor to the International Living newsletter. Find out more about International Living here.

Article first published on Today's Financial News

Americans Flock to Uruguay’s Best Beaches

Along the southern Pacific coast of Nicaragua are rocky outcrops and pounding surf. Although frequently compared to the coast of Southern California, this doesn’t do Nicaragua’s Pacific coast justice in my mind.

By Ronan McMahon, Executive Director, Pathfinder International

The premier master planned resort community in Nicaragua is Rancho Santana and the latest phase (called the Seagate Village) is worth your attention.

Here, lots are available from $35,000 and $65,000 builds you a little casita-style beach house. In other words, $100,000 buys you a little beach house in this high-end luxury resort.

If you’re not familiar with Rancho Santana, it’s a stunning 3,000-acre reserve located just 50 miles north of the border with Costa Rica. It boasts more than two miles of Pacific Ocean coastline and five distinct beaches.

Rancho Santana is a fully-functioning resort community set on rolling hillsides and dramatic cliffs rising away from the water, allowing amazing ocean, mountain, and valley views; 600 acres have been set aside as nature reserve and for residents to hike, bike, and experience nature.

The lots in this new phase range in size from a third- to a half-acre. The gently sloping topography makes these lots perfect for building.

The clubhouse and Rancho Santana’s amenities (tennis, surfing, horse riding, convenience store, spa) are a five-minute stroll away. The beach is less.

These are exciting times at Rancho Santana. The resort is buzzing with residents and visitors. Rentals are in short supply. Demand almost outstripped supply for most of January. When the rainy season comes there will still be demand for rentals.

This is surf season and the surf along this stretch of coast is world class.

Investors and homeowners here include International Living’s Founding Publisher Bill Bonner and most of Agora’s (International Living’s parent company) Executive Committee.

It is now 10 years since they first surveyed this magnificent property from horseback. Today, Rancho Santana is something they are proud of…and with good cause.

There has never been a better time to buy at Rancho Santana. The low prices of this latest phase reflect neither the beauty of the coast nor the standard of the resort.

In the medium term I expect prices to converge with those across the border in Costa Rica (today, prices in Rancho Santana are one-fifth what you would pay across the border). Long-term, I expect prices here to increase much further.

If you’re interested in one of these $35,000 lots, contact Marc Brown: marcb [at] ranchosantana [dot] com.

Editor’s note: Ronan McMahon has been an active real estate investor since his early 20s, he is the executive director of Pathfinder. Pathfinder’s mission is to scour the globe to find the most unique and value-oriented real estate opportunities the world has to offer. Ronan is a regular contributor to the International Living newsletter. Find out more about International Living here.

Article first published on Today's Financial News

A Home in This Premier Beach Resort Costs $100,000

The nation’s top builders give us one vantage, while our lawmakers give us another. No matter how they spin it, the real estate market is not bouncing back anytime soon.

By Andrew Snyder, TodaysFinancialNews.com

Baltimore – (TFN): The real estate industry is like a dog chasing its tail. Good news follows bad news in a never-ending cycle. The American consumer, like most dogs do when they finally give in, has laid down and refuses to move.

Until they have proof that the downward spiral is over, potential buyers are not signing any contracts, no matter how weak our legislators have made the timeless legal principle.

For proof of the industry’s malaise, we have two options. We can either look at the companies at the heart of the housing market or we could see what our elected officials are cooking. We’ll start with the private sector. There is more of a chance of actual facts.

Shares of Toll Brothers (NYSE:TOL) are jumping in value today after the company released its fiscal first-quarter results. While the figures would have caused wailing just two years ago, under current economic conditions they look better than most expected.

The company reported a loss of $89 million for the past three months. Bad, but not as bad as a year ago when that figure hit $96 million.

The reason for the difference? Fewer write-downs.

After writing down the value of its land and purchase options by over $245 million this time last year, the company only had to scratch out $156 million from its assets this quarter. Without the write-downs, the company would have made $9.6 million.

The most important statement in the company’s report today, however, was not a financial figure. It was the Toll Brother’s announcement that it has yet to make any new land purchases, but is getting closer.

That statement pretty much wraps up the dog chasing its tail analogy. Builders are waiting until prices stop falling, yet prices won’t stop falling until builders start to buy.

How much lower will prices have to go before buyers return to the market?

If President Obama’s plan works, Washington may be able to tie a parachute to the industry in freefall. But as anybody who has ever jumped out of a plane knows, no matter how big your parachute, you always fall to the ground. Sometimes it just takes a bit longer and hurts less.

Go ahead and jump

After a horrific debut, a speedy return to the drawing board and a tea-party inducing official unveiling, Obama’s foreclosure solution is finally available and open to all… or at least the folks paying mortgage payments of more than 38% of their monthly gross income.

Under his plan, the federal government and mortgage lenders will work in tandem to reduce a “troubled” homeowner’s mortgage payments to just 31% of their monthly pay.

That’s great. Combine the $200 that they will save each month with the $13 weekly pay increase Obama gave all of us middle-class workers and now they can afford that big-screen, high-def TV they have been wanting.

Problem solved.

Well, there are a few problems remaining, but only if you believe in contract law and a free market. If not, we are in the clear. The government is picking up the check for our sloppy habits.

The way I figure it, as long as the taxes come out of my paycheck before I ever get to see it, it is like money I never even had… right?

If only more people felt that way, Obama’s job would be so much easier.

But don’t worry, he is getting closer by the day. Soon, that dog will catch his tail.Similar Posts:

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• OshKosh vs Cat: Not much of a fight – October 20, 2009
• Where would you rather have your money? – November 20, 2009
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• The puppet master is at work once again – December 9, 2009

Article first published on Today's Financial News

The housing market: Pennies where there was once dollars

The Mexican government is investing $1.5 billion in a stretch of Mexican coast. This is a real estate opportunity you could profit from. 

by Ronan McMahon

Baltimore—TFN: Infrastructure improvements are one of the biggest drivers of overseas real estate values. I’m talking airports, roads, bridges, and cruise ship ports. Anything that improves the accessibility of a piece of real estate makes it more desirable.

The development of a viable tourism infrastructure also drives values. Golf courses, hotels, man-made beaches, boutiques, restaurants, and marinas all bring visitors. Visitors spend money, which creates jobs. And jobs in turn heat up real estate values. Of course, it helps if the infrastructure improvements happen in a place with a great climate and a short flight from major affluent population centers. 

Just north of Puerto Vallarta, along a stunning stretch of coast know as The Riviera Nayarit, the Mexican government is investing $1.5 billion to improve accessibility and develop tourism infrastructure. 

The section of government responsible for this is called the “National Trust Fund for Tourism Development.” Founded in the 1970’s, its task is to create jobs and increase foreign revenue by backing tourism resorts. They think big: These are the guys who set their sights on a coconut plantation as the site for their first major project. Only known by a few local fishermen back then, you’ve probably heard of it today…

Cancun. 

Resorts backed by this agency dramatically outperform other beach resorts in terms of visitor numbers, room occupancy—and appreciation in real estate values. 

The Riviera Nayarit runs along the Pacific coast north of Puerto Vallarta to San Blas. By 2020, the government expects 14,000 hotel beds and 1 million annual visitors. 

Nayarit won’t be a carbon copy of Cancun. Although Cancun was a huge success, its development wiped out any trace of traditional Mexican charm or authenticity. In Nayarit, height restrictions, density regulations, and stricter zoning will help make the resort more sustainable than Cancun. 

Many development groups make bold promises about infrastructure and amenities. But this branch of Mexico’s government get it done. They bring the tourists. Jump into their slip stream, buy early-in pre-construction, and kick back while they do the work. Before you know it the piece of Nayarit you bought will be part of a mega and high-end resort. Hopefully you’ll be sitting on a tidy profit. 

Editor’s note: Pathfinder Ltd.’s mission is to scour the globe to find the most value-oriented real estate opportunities the world has to offer. Ronan McMahon has been an active real estate investor since his early 20s. Ronan is a regular contributor to the International Living newsletter. For more information on how you personally can leverage opportunities such as Riviera Nayari as a real estate investor—even on a small budget!—contact International Living here.

Article first published on Today's Financial News

Mexico is About to Create a Mega Resort: Here’s How You Can Profit

Ronan McMahon is always on the lookout for opportunities in international real estate and this time, he’s produced 3 that we thought of interest to TFN readers.

By Ronan McMahon, Pathfinder International

In this time of stock market meltdowns and economic crisis, the question asked most often is, “Where can I put what I have left?”

Here are three profit plays that have my attention. They’re all outside of stocks and outside of the States.

And they come with incredible upside potential.

Make Money Pick # 1: Fortaleza, Brazil

Brazil’s domestic economy continues to grow. Foreign investment is up and gaining momentum. Direct-flight access from the U.S. is increasing. Brazil–and Fortaleza in particular–is getting serious about marketing to foreign tourists. Fortaleza is already one of the biggest domestic tourist destinations in Brazil. The World Cup is coming to this country in 2014, with Fortaleza likely to be a host city. Multibillion-dollar infrastructure projects are underway.

The domestic mortgage market is opening up and Fortaleza is becoming increasingly popular as a retirement destination for people from southern Brazil and Europe. Condo prices are up by more than 20% since last April and continue to rise. The short-term rental market is running at close to 100% occupancy for the next three months.

The Play: Buy prime preconstruction with as little as 1% down from some of Brazil’s biggest developers. Proximity to the boardwalk is key.

Make Money Pick # 2: Panama City, Panama

“Thank you for your enquiry about an apartment – due to high demand, all of our apartments are fully booked through September 2009,” reads the auto reply I received last month from a group that manages short-term rentals in Panama. Rentals through this group cost up to $500 per night.

Well-managed and presented rentals are running at higher than 80% occupancy. Rental rates and occupancy have continued to skyrocket. There is a chronic hotel bed shortage. In the meantime, newly completed condos are selling for substantially less than preconstruction prices of 18 months ago. A buying opportunity.

The Play: Buy a recently completed preconstruction condo in a prime location and make it available for short-term rentals.

Make Money Pick # 3: Costa Rica’s Southern Zone

Some of the most amazing scenery in Costa Rica is in the southern zone, in an area that runs south of Quepos to the border with Panama. Landscapes here are dramatic–panoramic ocean views… lush tropical rainforest… and sheer jungle-clad slopes, rising sharply away from pristine stretches of sandy beaches.

Prices here have stayed low as this area is difficult to get to. However, this is set to change and that’s why I like this play…

The Costanera Highway is unpaved between Quepos and Dominical, and the airports are small, local affairs. But road improvements on the Costanera Highway are already underway and scheduled for completion in two to three years. This should cut the 90-minute trip from Quepos to Dominical to 25 minutes.

Combined with plans to construct an international airport in Palmar Norte — due to begin this year and to be completed in 2010 (funds have been allocated by the government) — it all adds up to one thing: Property prices are almost certain to climb.

The Play: Buy land whose accessibility is set to improve.

Editor’s note: Ronan McMahon has been an active real estate investor since his early 20s, he is the executive director of Pathfinder. Pathfinder’s mission is to scour the globe to find the most unique and value-oriented real estate opportunities the world has to offer. Ronan is a regular contributor to the International Living newsletter. Find out more about International Living here.

Article first published on Today's Financial News

Three Top Real Estate Profit Plays for 2009

The government cannot stop itself from creating new bailouts and emergency programs. Absolutely nothing has been remotely successful so far, yet it continues to pump out more garbage. The latest homeowner solution looks great on paper, but so did communism.

By Andrew Snyder, TodaysFinancialNews.com

Baltimore – (TFN): I do not know whether I should be shocked, worried, or mad that I did not see this news coming. If the federal government is subsidizing America’s farmers, its automakers, its banks and its energy producers, why in the world should we be surprised to learn that it will now likely be subsidizing homeowners?

In news that broke late yesterday afternoon, which was strong enough to quickly and violently turn the equities markets around, we learned the Obama administration is working to pump out legislation that would allow the government to step in and aid underwater borrowers before they fall into arrears on their mortgage payments.

The idea makes great sense. It keeps the troubled banks from getting involved and ensures homeowners get the help they need before it sends their financial lives into a downward spiral. But as is always the case with the American government, the devil lies in the details.

How in the world is a government that can barely run itself going to run a program that involves so many homeowners and nearly as many bankers? The problems start jumping off the page almost immediately.

A magic act

First, we still have no idea what the magic benchmark level will be. Will it be the typical 38% of a homeowner’s gross income or will it be a more “liberal,” and much more expensive, figure like 30%. Either way, Washington is going to have more applicants than it ever imagined.

When American homeowners learn there is even the slightest chance to take advantage of Washington’s addiction to handing out money, they will lie, cheat and con their way into free money. I am not saying you or I will do it, but we all know somebody that will.

That leads us to the question of just how the government will appraise houses and qualify homeowners. We all know home appraisals are subjective and are shaky at best and downright fraudulent at worst.

I have a good friend that could not get a 110-acre tract of land appraised because somebody had dumped an old trailer onto one corner of it. The county appraiser told him because there are no similar pieces of land with a trailer on them in the area, an accurate appraisal is impossible. Apparently, an old rusty Airstream makes it a subdivision.

Simple dilemmas like these appear to be easy fixes, but we all know no government, especially our current one, understands the definition of simple.

The news may be enough to create a one-day pop in the equities market, but once federal appraisers start carrying clipboards and calculators through American neighborhoods, few folks are going to be happy.

The simplest solution to this mess? The free market.

If we take a deep breath and let the free market do its magic, we will be out of this hole in no time. Until then, our government will pull all sorts of tricks out of its magic hat.

Just remember, magic is not real, no matter what they promise.Similar Posts:

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• Backward logic: Demand sinks, production rises – October 28, 2009
• TFN eNews 11/16/2009: Other than that, things are fine! – November 16, 2009
• The puppet master is at work once again – December 9, 2009
• TFN eNews 09/22/2009: Check out this solar penny stock … and gainer #63! – September 22, 2009

Article first published on Today's Financial News

Mortgage subsidies: Homes for everybody