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The Safest Investment In Town

Mar 13th, 2007 by Wealth Builder [This post is written and copyrighted by Wealth Building Lessons (http://www.wealthbuildinglessons.com).]

With global liquidity at an all time high, stocks and other assets aren’t trading at multiples of profit or revenue, but rather as a function of how much money is chasing that asset class. With investors borrowing insane amounts of money via the carry trade and Chinese “investors” borrowing money from pawn shops at 36%/year to invest in the stock market, there seems to be flight from safety and a frenzy to invest in just about anything thats hot.

This reminds me of the good old days in 1999. When hairdressers and car salesmen used to give us stock tips! This scares me and it should scare you too!

I think one of the most undervalued asset classes is Japanese Real Estate. Prices have been flat for over a decade. They’ve just started trickling up in the past year and half. Office rents in downtown Tokyo are supposed much cheaper than in London, New York and other comparable capitals. I think of all the asset classes, Japanese Real Estate has the most potential to appreciation and has the least risk attached to it. The Japanese economy is doing pretty well too. In fact its doing so well, the Bank of Japan may raise interest rates to a whopping 1.5% soon!!! (Thats high - it was ZERO just a few years ago).

On top of that, the Yen is incredibly undervalued and if the carry trade unwinds, we could see a nice rally in that too, which would add nicely to any appreciation we get.

However, if you think its too risky, there is a way you can play this opportunity absolutely risk free. There’s no downside risk but plenty of upside potential.

Its the MarketSafe Japanese REIT CD offered by Everbank.com, which is rated ‘Best of the Web’ by Forbes. Its a 3.5 year CD with a low $1,500 minimum, zero downside risk and the ability to get upto 100% of the upside performance of the Tokyo Stock Exchange REIT Index. Now, this is how I like going about creating my wealth. I think this will be a winner.

I wasn’t able to find the link on their website but you can call them up and ask for more info or you can just contact me and i’ll email you the application form.

But hurry, this window for investing closes on April 17th, 2007.

UPDATE:
The deadline has been extended to May 15th 2007. They’ll probably have a new CD open every 6-12 months so make sure you check back with them. You can access the forms from this Everbank link.

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17 Responses to “The Safest Investment In Town”

on 13 Mar 2007 at 8:32 am1Moneymonk

Here is the link

http://www.everbank.com/main.asp?affid=eb&idpage=pro_mscd&referID=11679

Good post wealth builder.
on 13 Mar 2007 at 2:03 pm2sJ

Are you aware about the returns in recent yrs ?
on 13 Mar 2007 at 4:36 pm3sJ

What kind of returns are we looking at ? Any idea ?
on 13 Mar 2007 at 5:24 pm4Wealth Builder

According to the link by Money monk, if you had invested in 2003 for 3.5 years, you would’ve made a cummulate 69% or 16.3% compounded.

Not bad.
on 15 Mar 2007 at 12:27 pm5jason

how did this index reit triple with real estate prices flat?
on 15 Mar 2007 at 12:50 pm6Adventures In Money Making

triple?
who said anything about it tripling?
on 15 Mar 2007 at 1:04 pm7Wealth Builder

First off it didn’t triple.

Secondly, its a function of money flowing into the sector. Goldman Sachs and other funds have been buying up properties and selling stocks.The stocks may increase even if the underlying asset does not.

So as more money chases the REIT, the index rises, and the yield decreases. This has no bearing on the underlying asset.

However, if the underlying asset increases in value, rents go up and the yen strengthens against the dollar, the value of the REIT will increase too.
This is what I like and why I think its a good investment.
on 15 Mar 2007 at 1:48 pm8jason

Clearly this chart does not look like a good entry point to me.

http://www.bloomberg.com/apps/cbuilder?ticker1=TSEREIT:IND
on 16 Mar 2007 at 5:31 pm9Adventures In Money Making

Clearly you’ve never bought anything and held on to it for 3.5 years.
on 18 Mar 2007 at 4:58 pm10jason

Your right, everything is rosy, buy away…

Stocks and trusts 96-01. real estate 01-06. turned 25k into 600k in 10 years. Conservative goal 1 million by age 40, 2011.

Too much $ chasing this horse in 06 and 07. If you counterpointed your article it may have not screamed so much for alternative view. Parabolic charts always pop. I hope the Yen saves you.
on 18 Mar 2007 at 7:22 pm11Wealth Builder

Japanese commercial real estate is currently undervalued when you consider the rents, vacancies and cost. This is because real estate value is a function of cashflow. Its been undervalued for over a decade and it will probably swing to the other extreme and become grossly overvalued, regardless of how it looks in the graph.

As someone who’s made money in real estate, i’m sure you’ve seen this.

The graph shows a 60-70% total increase in the past 3 years and not a 300% increase as you mentioned. this is only a 16.5% annual increase. Thats pretty reasonable. Its not like its gone up like Chinese stocks!

Yes, the yen should pop very nicely in the next few years. That will be icing on the cake.

Congratulations on your 37.5% annual return.

Not too brag, but my returns have been better! But i’m not sure if I can replicate them over the next several years. I’ll be happy if I can make 12-16% a year, which seems achievable to me.

But if you’re confident you can keep up your 37.5% yearly return, maybe you should apply for a job as Warren Buffett’s replacement!

happy investing! (or should I say trading)
on 18 Mar 2007 at 9:36 pm12Jason

Agreed on the non replication. As my equity goes up my risk has gone down a notch. We are entering the muddle through economy in the next decade, so we should be doing well to earn 25% or so. My returns are decent but I could do better if I didn’t love to run my business and take care of my kids. It doesn’t really float my boat. I have an hour or two at most a week to keep track of my investments and research new ideas, so to me investing is securing a future and not an end in itself. Life is for living.

I think we have a big recession that hits quarter 1 08. Good luck with your investing.
on 18 Mar 2007 at 11:23 pm13Jason

http://www.financial-planning.com/pubs/fpi/20030401101.html

“Principal Protection Funds Principally a Gimmick”
on 19 Mar 2007 at 3:47 am14Wealth Builder

why do you think so? for the average person who doesn’t understand how the world economy works, I think its a good investment. They claim it offers 100% of the movement with zero downside.

Much better than those other fixed-term products that lock you in for 10 years, are tied to some stock index, offer only a max of 11% and a minimum of 3%. They were very popular soon after the dot-com crash.
on 29 Mar 2007 at 5:23 pm15Adventures In Money Making

I just found out you can open an IRA account with Everbank and own this in it.
That way you don’t pay any taxes! since there’s a guarantee of principle, you definitely won’t have any losses to deduct!
on 25 Jun 2007 at 10:04 pm16Jason

Just to let you know I am keeping track of this bet…. trading down at this point.

Jason
on 01 Jul 2008 at 12:21 am17Jason

Ok now this index has been halved - there is very low likelyhood of making money on this trade. So basically you just lent money to someone at 0% interest for 3.5 years.

Still tracking - if they offered the CD now it might be a better time to buy.

Best,
Jason

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