Buying

Only time will tell how smart I am, but I added to my GG 2014 LEAP position today.  Couldn't nab what I wanted for EGO.

Pick Your Title

In the past I've harped on about the importance of getting the macro right when it comes to real estate investing.  But, once you've figured out your market and why you should be there, you move to the next level.  What are the more micro elements that distinguish properties within your chosen market and create the opportunities - the home runs versus the bond deals.  And a few off the top of my head...

-proximity to transportation hubs
-lack of amenities in an area that calls for them
-complicated liability structures
-unique floor plans
-pending zoning changes to surrounding areas
-constraints on new development
-discounts to reproduction cost
-unique legal issues to resolve
-condo exit strategies

Etc, etc.

As to the macro again, specifically for multifamily, I have spent some time recently contemplating the opportunities that exist at home (I've said before that I like frontier markets, but I'm not up and moving to Myanmar).  So where will the growth happen here?  Well, a resource boom is taking place in North Dakota, but that's no secret.  In a more under-the-radar sense, I think the other boom that will come is derived from the expansion of the Panama Canal.  Face it, this country is stagnating, jobs are a precious commodity.  The more goods coming into a port, the more economic activity likely to follow in its surrounding environs.  So, between warm weather, more favorable tax rates, and growing populations, the key port cities on the Gulf and southeastern seaboard are probably a good place to look.  And, at that, focus on the downtowns -- don't get cute out in the hinterlands.

The other thing on my mind lately is how to monetize all the reading that I do. Because, to be honest, some of the stuff I take on is pretty arcane. And the conclusion I've come to (and hopefully it's not just a rationalization for what would otherwise be deemed a waste of time) is that it can give me an insight into the prevailing trends. A lot of my reads are about the economic theory of the dominant school of thought. And if you have a clue about what they're planning to do, you can try and plan accordingly. More to the point, every slice of mainstream economist is pushing for some form of greater stimulus and inflation, through deficits, money-printing and the like. If you see that, then you know greater liquidity is eventually going to come and should naturally benefit hard assets.

Now, you tell me, what would've been a clever title for this post?

Mid-Year Report Card

Back on the last trading day of 2011, I wrote the following.  While technically a bit past the mid-point of the year, I wanted to take inventory of how I've done so far.

1) Passing grade.  The sun has shown up each morning as expected.

2) Europe's central planners are not doing a great job of managing this situation and giving the market what it wants, which is more liquidity.  But, at some point, I expect them to relent.  In the most literal sense, it is coming to a head.

3) The Yen has held up pretty well, but my view is that the crack is starting to form, hence the new position that I took last week.

4) The gold market is not for the faint of heart.  I don't think the bull market is over, but recent price action has made the call for $2,000 look very questionable.

5) While it might end being just barely, it appears the market will end the year higher than it started.

6)  Treasuries have done well, like I thought.  In fact, even better than I thought.

7) 2013 appears to be right on schedule.

Offseason Update

The Knicks have been busy.  I like the Kidd and Camby additions, both come cheap and fill holes (they probably need another 2-guard, with Fields likely going to Toronto and Shumpert still out for a bit, but that's not a huge problem going into the season).  I'm glad that Novak and Smith got re-upped.  I can handle matching the Lin contract, as it became a foregone conclusion after Nash went to the Lakers.  Nevertheless, none of it addresses the existential problem that this team faces -- Carmelo and Stoudemire do not mesh very well.

Add to the mix, with Dwight Howard likely headed to Brooklyn, it's possible that the Knicks won't even be the best team in New York.  A lot of it boils down to how the Anthony / Stoudemire project can work itself out.  I expect Carmelo to be a much better player this year, as it sounds like he is using the summer to get into great shape (playing on Team USA probably helps a lot).  I don't know what Amar'e  has been up to, other than getting engaged, but he tends to be a workout warrior (that is, when his body isn't breaking down).  Still, I am hesitant to put myself out there with a prediction again.  At least, not yet.

Another interesting reality to consider: Anthony, Stoudemire, Chandler, Lin, Kidd, and Camby will all be free agents following the 2015 Finals (and Shumpert will be a restricted free agent).  In other words, this group has 3 years to get it done.  If they don't, the front office will likely be pressing the reset button that summer.

Leisure Reading

You may have picked up on the fact that I typically read books that hit on investing or economics. I’ve taken a break from that lately with the following...

Rigged by Ben Mezrich (2008). Based on true events. Specifically, about the twenty-something who went to work at the NY Merc out of HBS and spearheaded the creation of the oil trading market in Dubai. Very light and quick. I didn’t get the impression that the author was terribly well-versed on the oil markets, the trading that goes on at the Merc, or Dubai. Nevertheless, it was fun.

Sin in the Second City by Karen Abbott (2007). The story of the infamous Chicago madams of the early twentieth century, Ada and Minna Everleigh, and the cultural and political battle that took place with regards to the red light district in that city. Some interesting factoids: (1) Chicago’s name comes from the Native American word “Chicagoua”, meaning “striped skunk”, for the indigenous wild leek which is very smelly; (2) the “Windy City” nickname is not about the weather, but a journalistic creation in reference to the “blustery talk of civic leaders” in the late nineteenth century; and (3) the men who frequented the Everleighs’ brothel would say that they were “everleighed tonight”, a refrain that stuck around, but was eventually shortened to eliminate the first half of their name.

Urban Appeal

I mentioned the Alan Ehrenhalt book a few months ago, which investigated the trend of a population move back to city centers, particularly for the younger generation. Well, the 2011 Census data seems to confirm that idea exactly. There are obviously reasons related to the recession that have contributed, but, at least part of it, is that people in their twenties and thirties want to be close to job centers and the amenities and conveniences that come from a more urban setting. I think there are implications for my business, one of which is not to create a justification for buying when the deal simply doesn't work.

New Positions

Today I purchased some October '12 expiration call options for Goldcorp (GG). My belief is that the stock will be closer to $50 at that point, relative to its current position at $39.

In addition, I have an open order to buy some FXY put options with a January '13 expiration. I'm finally ready to dip that toe when it comes to shorting the Yen.