The intrinsic value of a coin should not be judged by the images on its sides but by its purchasing power for a voluntary trade. Lonnie advocated that this is the best time he has experienced to get involved in the MH business. I categorically disagreed, while lacking his years of experience in the business, citing a substantial decline in general real estate and in the manufacture and demand of new homes. Further, I pointed out that investments in precious metals, physical and equities, and other commodities have and are producing higher returns than could be found in the MH business, save the classical Lonnie deals which are now being undermined by new regulations. I admitted that an outstanding deal could be cited, but is relative rare today. Also, I emphasized that the MH business means work.
If one’s savings are in a bank, a money market fund, in an ETF, in government bonds, or in most paper- based accounts, then one has only a piece of paper which readily can become wallpaper material overnight under certain conditions. Tangible assets, especially those that produce income, are immune from the creeping inflationary depressions and currency collapses and governmental mismanagement. Income- producing MHs will survive and thrive after any common man-made disaster. So will all valued tangible assets and the skills of an individual. Whether this is the best time to get involved, or whether it is the time of ‘High Noon’ to protect your wealth and to insure your economic survival, is immaterial. What is fundamentally logical is to get involved now in tangible, income- producing assets, such as the MH business, while it is still possible. As always, kudos to Lonnie.
Berndt,
I was considering quitting the business but realized I’d be throwing the baby out with the bathwater. Recently, I have been offered 3 deals, one home run, one triple with a potential sudden death, and a single. I bid them all heavily in my favor. I got the one home run with the truly motivated seller (a credit union).
I also recently cleaned up and reviewed my spreadsheet I’ve kept for the past 9yrs of LDs. I was shocked at the actual money I’ve made in this business. Why give it up, even if I only do it part-time. Which is a joke because it has always been part-time. Now I’m thinking part-part-time.
My new model is flip for a quick nickel rather than a slow dime OR do as Lonnie said in DOW: Sell for 0% interest.
You don’t make your money on the interest, you make it on the forced appreciation. So, keep the Feds’ Consumer Protection Fairy Godmothers out of your hair. If you sell your homes for a “normal” retail price (below NADA) have no origination or other fees, and charge 0% interest, aren’t you protecting the consumer? Let’s face it, the game has changed, so you can’t charge those high interest rates that were rarely realized anyway. You can’t charge exorbitant prices for your homes but thanks to motivated sellers, you can still make decent money with this business. You just have to recognize a motivated seller and be ready to swing. That means walking away from most of the “deals” you come up with and being truly ready to strike the real deal.
My youngest son is looking for a specific vintage car. One came up in excellent shape for half the expected price. First, it was a Sunday, no access to the cash in the bank. Second, he wanted to finish a video game. When we finally called that day, the seller had just sold it 5 minutes before. Lessons were learned in being prepared and striking immediately.
Steve
This is an interesting thread.
Perspective matters. Some of the time the structure you know and have experience with is better than switching to something new. A bit of time off can do wonders to clear the fog that burn-out brings.
Over the past 15 years, both Internet stocks and houses have demonstrated the extraordinary excesses that can be created by combining an initially sensible thesis with well-publicized rising prices. In these bubbles, an army of originally skeptical investors succumbed to the "proof " delivered by the market, and the pool of buyers – for a time – expanded sufficiently to keep the bandwagon rolling. But bubbles blown large enough inevitably pop. And then the old proverb is confirmed once again: “What the wise man does in the beginning, the fool does in the end.”
Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be about $9.6 trillion. Call this cube pile A.
Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?
Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. Buyers – whether ******* and industrial users, frightened individuals, or speculators – must continually absorb this additional supply to merely maintain an equilibrium at present prices.
A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil (XOM) will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons).
The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond.
Admittedly, when people a century from now are fearful, it’s likely many will still rush to gold. I’m confident, however, that the $9.6 trillion current valuation of pile A will compound over the century at a rate far inferior to that achieved by pile B.
I am curious. Where did the estimate of 170K MT total gold on the planet comes from? How certain is the number?
[QUOTE=John_Corey;883850]I am curious. Where did the estimate of 170K MT total gold on the planet comes from? How certain is the number?[/QUOTE]
Corey,
According to Wikipedia search for “gold”, as of 2009 an amount of 165,000 tons have been mined, i.e. 5.3 billion troy ounces.
[QUOTE=Bernd Hanak;883857]Corey,
According to Wikipedia search for “gold”, as of 2009 an amount of 165,000 tons have been mined, i.e. 5.3 billion troy ounces.[/QUOTE]
Thanks. The text on the page comes from the World Gold Council according to the reference. Here is their statement.
The best estimates available suggest that the total volume of gold ever mined up to the end of 2010 was approximately 166,600 tonnes, of which around 65% has been mined since 1950.
I find it interesting that 65% has been mined since 1965. I guess the improvement of the technology helps. I wonder how much gold has been lost (thrown away in the trash, lost at sea, etc). Anyway, I am drifting off topics.
I’ll add this statement to this discussion; Lonnie’s challenge to “create your own economy” is a literal statement not merely a catchy title.
With regards to the above posts. I see things as follows.
Income producing assets> precious metals > paper $$ > NO $$> consumer debt
With one caveat: paper $$ > precious metals if you invest it in income producing assets ASAP.
Steve
(1 yr. experienced Lonnie Dealer nine times over.)
[QUOTE=Dr B(OH);883901]With regards to the above posts. I see things as follows.
Income producing assets> precious metals > paper $$ > NO $$> consumer debt
With one caveat: paper $$ > precious metals if you invest it in income producing assets ASAP.
Steve
(1 yr. experienced Lonnie Dealer nine times over.)[/QUOTE]
A rather useful rule of thumb. Thanks Steve.