Great places to be. How even dumb people can be smart.


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GBIOTECH WEDNESDAY:

THE FOREVER INVESTMENT -- LAND

by Dave Lashmet

Wednesday, August 28, 2002



THE "FOREVER" INVESTMENT -- LAND



WorldCom CEO Bernie Ebbers was a notoriously bad business manager. By claiming

staff expenses as capital investment, WorldCom over-stated its earnings by $2

billion in the last three years, and more than $7 billion over-all.



So now the country's second-largest long distance communications carrier is

bankrupt. And paper billionaire Bernie Ebbers might be looking at triple damage

financial penalties, personal bankruptcy, or more. . . . Ironically, Bernie

Ebbers was a GREAT individual investor. For his personal portfolio, Ebbers

invested in some of the best very long term assets in the world. With the

hundreds of millions he skimmed from shareholders over the years, you can bet

Ebbers planned well for his retirement --though he might never enjoy it now. . .

.



The key prize is a 500,000 acre working ranch: The Douglas Lake Ranch, about 200

miles outside of Vancouver, BC in Canada. With 11 stocked trout lakes, a

substantial timber business and 22,000 head of cattle, the Douglas Lake Ranch is

well worth the $68 million Ebbers paid for it. That's only $136 an acre, and

$3,000 per head of cattle -- again, not counting the timber business.



I raise this twice because Ebbers had a HUGE interest in timber -- another

460,000 acres of prime timberland in three U.S. states: Tennessee, Alabama and

Mississippi.



This cost him nearly $1,000 an acre. For forested land in the middle of nowhere,

without outbuildings on the property, that seems a lot. Because what happened to

the three rules of real estate, "Location, Location, and Location?" (see our

past message about timber at http://www.garyascott.com/worldreports/266/)



Apparently, these rules are changing. So what do Bernie Ebbers' financial

advisors know that YOU do not? What's the deal with a million acres of vacant

land?



The answer is simple, and centuries old: WEALTH =PRODUCTIVE LAND. This land

doesn't have to have tenancy. It doesn't need offices, houses, or location.



It doesn't need friendly neighbors, or a view. All it's got to do is generate

more income than the taxes cost. So timber, cattle and winter wheat -- this all

counts in your favor. A 4th story condo on Key Biscayne does not.



In fact, you're more likely to LOSE money on Key Biscayne property these days.

It's not a matter of location, but demand. Too many of these condos were built -

- despite the balmy ocean breeze -- and too few people who can afford these

places want to move. Without a market, these "false estates" are money pits.

You'll never get back from them what you put in.



The common sense about real estate is still SLIGHTLY valuable: Land for land's

sake is worthless -- not inherently, but because governments will take it away

from you. Indeed, unless you're a member of a royal family, unproductive land

(like your vacation home) is a forfeiture waiting to happen.



The Windsors -- Britain's Royal Family -- have known this for centuries. They've

owned most of downtown London --a.k.a. "The City" -- since New York was called

"New Holland." So they were unaffected by real estate's depreciation, or by

fires, floods, or earthquakes, for that matter.



That the Windsors also controlled the government helped them avoid

expropriation, taxes, and any troubling shift in the value of location: special

financial laws apply in The City in London -- that's why the British financial

community retains its ties to this land.



For most of us, of course, these sweetheart deals are impossible. We have to

FEND OFF big governments, not have tea with them. That's why Bernie Ebbers

bought timber in three different states, and two different countries. Yet in

most other respects, Ebber's investments are exactly like the Windsor's, not

least, since it all revolves around land.



See, timber's been the most stable investment asset in the last 400 years.



And if you want to have a personal dynasty -- whether your name is Ebbers, or

it's Queen -- you better



own an asset with value that no one can take away. Some of my colleagues -- like

Bill Bonner -- are pressing gold investments instead. But gold's a curious

thing: it's not really money, and it's not quite a real asset, either. If

anything, it's a commodity, built on a fraudulent paradigm of scarcity. Just

like diamonds, there's more gold, if we really need it. But you'll be hard

pressed to find more land.. . .



Sure, it sometimes happens. There's the whole Dutch thing. And Disney just

swapped thousands of acres with the State of Florida, trading wetlands it wasn't

allowed to develop for farmland that it could. Yet if anything, productive land

has been DECLINING over the last century. That makes land the MOST valuable real

asset you can own. Cheers, Dave Lashmet"

I could not agree more as you can see in the message below I wrote early year about great places to be:

PROFITS IN SMALL TOWN USA

I can trace most of my profits (and those of my readers) to just a handful of incredible tips over the years. In the early 70s I wrote about getting out of the dollar into Japan, Australia, Switzerland, Germany and silver-gold. Profit increases were about four times.

In the mid 70s I recommended London real estate for an eleven times increase. Writing about Hong Kong shares brought us to the top performing stock market in the world for a decade.

Then shares on the Vienna and Turkey bourses exploded upwards. In the early 90s I wrote about borrowing yen and investing in higher yielding currencies. This has been a profit spinner for a decade. Finally I recommended buying land in Ecuador and this has been one of my better tips. Ocean lots that my readers bought just over two years ago at $2,500 are selling at $17,500 now. They are still cheap, but those readers have already increased their investment by seven times in just two years! At the beginning of this millennium I also recommended investing in Ashe County when I wrote about investing in the area around Merrily Farms. In the 2 years since, the price of land in the area has just about doubled. I reckon I have tripled or quadrupled my investment here by investing right. However on my return from Ecuador this Spring, I realized that opportunity in Ashe County was just a small reflection from a much bigger picture.

WHY YOU CAN CASH IN ON SMALL TOWN USA

The picture began to unfold while I was in Ecuador. This tiny Andean nation is heading for what I believe will be its four or five richest, best years. The Ecuadorian economy is growing faster than anywhere else in Latin America. Things are looking good. "Time for me to get out, I began to think." Ecuador is a great place for me to visit and I will always be attracted there for its spiritual values and to be with our many friends there, but when it comes to investing, I am a pioneer. Prices are now losing their competitive edge. The first clue came when I took two friends and a guide to the Crater restaurant and the bill was over $80. The handwriting was on the wall (the price per person last year was $5). Prices are not so much lower as elsewhere. When I tried to buy a house in Imbaburra and was beat out by a local who offered over the asking price, I saw that the bargain basement real estate sales were gone. Safety has become a much greater issue as well as you have seen in this and my last two messages about Ecuador.

So I was already asking myself, "Where next?", after we had flown into Miami and were driving north. A second clue arrived when we visited our daughter in Naples (and our first grandchild, Garren Shawn Hall, born April 18!) when I saw that our old house there had recently sold for $3.2 million. This I promise you is much, much more than we sold it for just three years ago and is too much for a (albeit charming) 90 year old house. The third clue came when we decided to get off the freeway and roam through the small, friendly towns that dot Florida, Georgia and South and North Carolina. Somewhere around Avon Park, Florida as we rode through an oak lined boulevard with Spanish moss hanging over clean sidewalks, in a traffic free zone, I got the message. Small town America is one place where the action is going to be. These small towns can be safe, the people friendly, real estate is exceedingly inexpensive and in global purchasing terms will fall even lower as the U.S. dollar falls, (for awhile). I can now eat a hearty breakfast in Jefferson, North Carolina (our nearest town of any sort) for less than most places in Quito. And although the Ecuadorians are sweet so are these small town people. Also we came home to a house with doors unlocked and cars, trucks and jeeps parked with the keys in them.

9/11 changed people's values. Family, friends and quieter, more peaceful life is more important than before. Having these fine qualities is harder to achieve in downtown Manhattan or Central Chicago or in the heart of L.A. We could be in for some difficult economic and social times. This means that the value of these small towns and their honest core values will grow. If the economy doesn't falter, and the world comes up roses instead; small towns will still not lose their appeal. The world's population continues to grow and as we look for an escape; small towns offer freedom from crowds, traffic jams, pollution and the hassle of city life. I believe these qualities will grow in value.

Until next message may where you are be great!

P.S. As you also know I consider Ecuador a great place to be and hope you will join me at our next Ecuador course. You should also look at real estate bargains in Cumbaya, one of Ecuador's hottest real estate markets. Check this out below.

"Just a 20-minute drive from the heart of downtown Quito, the valley of Cumbay· feels like a quiet and expansive world away. And because it's several hundred feet lower than Quito, Cumbay· is warmer and dryer to boot. Cumbay· has become the location of choice for a growing number of English, German, American, and other expats who want good quality of life yet need to be close to Quito for business or access to services. Because of this, construction is booming and prices are rising, meaning Cumbay· is not only one of the area's most desirable places to live, but an excellent area to invest in real estate as well."

For more, see "Cumbay·–Beautiful, Idyllic, Peaceful Alternative to QuitoÖand One of Ecuador's Hottest Real Estate Markets to Boot" here:

http://www.agora-inc.com/reports/IL/WILVCB50/


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