The Dow crashed 1.4 points yesterday, wiping out Monday’s 1.3 point moonshot. Desperate for something beyond these 0.014% “swings,” the market’s putting China in the driver’s seat today… and these guys still have quite a lead foot:

Chinese auto sales soared 34% in May, year over year. According to the China Association of Automobile Manufacturers, the Red Nation scooped up 1.12 million vehicles last month, outpacing any nation in the world. Consider the course of the last 12 months, and then look at this chart… is China even part of the global slowdown?

We don’t want to get too excited about this growth, as much of these sales are a product of Chinese government stimulus. But I.O.U.S.A. is certainly throwing a bunch of money at this crisis as well, and the same meausre of auto sales here fell 34% in May… so they must be doing something right over in Beijing.

Chinese property sales rose 45% in the first five months of 2009 compared to the same period in 2008, their National Bureau of Statistics announced today. Heh, notice a trend?

Again, these numbers are manipulated by government intervention… but 45%? That’s pretty big. We also note that real estate investment over the same period rose 6.8%, a rise the U.S. certainly can’t claim.

Thus, the market story today is “buy whatever China wants.” Namely, commodities. Oil’s up to $71, a 2009 high. Copper is at an eight-month high of $2.36 a pound. Aluminum, lead, zinc and nickel are all in the same boat.

Stocks like Alcoa and Exxon Mobil helped the Dow to open up 1%.

“Buy what China needs, but can’t make enough of for itself,” Chris Mayer urges, taking this investment theme to the next level.

“In other words, as an investor, buy what the Chinese have to buy. Conversely, don’t compete with China. Sell what the Chinese make plenty of. This next chart captures the idea. It shows China’s ability to produce a commodity against its demand for that commodity.

“You want to be in the lower left-hand part of the chart. In short, the very best places to be are in potash, soybeans, iron ore and oil. In these commodities, China’s share of world production is low. For potash, China represents less than 5% of global production, as shown by the vertical axis. It is also not self-sufficient. As the horizontal axis shows, China’s production of potash is little more than 20% of its domestic demand.

“As for soybeans, China was once the world’s largest exporter. In 1995, it flipped to a net importer and has been the largest importer of soybeans in the world since 2000. Much of its supply is in the hands of companies such as Archer Daniels Midland, Bunge and Cargill.

“More broadly, this speaks to China’s growing demand for food, and its growing dependence on foreign suppliers to keep its rice bowls full. This is why we see China in recent months making deals for food.”

And it’s also why Chris has selected a few worthy stocks in this tiny sector for his Capital & Crisis readers. Get the tickers, here.

Global oil reserves have fallen for the first time in a decade, says BP today, throwing another feather in oil’s cap. Reserves totaled 1.25 trillion barrels at the end of 2008, reads the company’s annual Statstical Review of World Energy. A year earlier, reserves totaled 1.26 trillion barrels.

Thus, at the current rate of consumption, production and supply the world has enough barrels in reserve to last 42 years, says BP.

American oil supplies declined by 4.4 million barrels last week, the Energy Department said late this morning. That’s yet another bullish indicator for crude today, as the Street was expecting an 800,000 barrel increase in inventory.

Higher oil prices helped bump up the U.S. trade deficit to $29.2 billion in April, the Commerce Department reports today. The deficit is up for the second straight month, this time by 2.2%. But the global crisis’ damper on international trade and U.S. consumption is still in full effect… the trade deficit is on track to exceed “only” $361 billion this year, about half of 2008’s.

“Sell bonds, buy energy,” is Dan Denning’s latest pair trade.

“It’s not technically a new decade yet. But if the trade of the last decade was to sell stocks and buy gold, then maybe the best trade for the next 10 years is to sell bonds and buy energy. Gas, coal, oil, conventional, unconventional, renewable, alternative. You have a whole portfolio of choices.

“Gold is no longer as low as it once was. But it’s still not as high as we expect it to go before it starts to look foolish. Meanwhile, today’s government bond market looks an awful lot like the stock market circa 2000. You’re seeing a generational high in bonds. It’s another version of the “high-low” strategy.

“This time around, though, we would add energy stocks to the mix, along with gold… There is probably some truth to the fact that oil’s latest move is driven by investment demand more than, say, demand growth in the real economy. But investors ARE looking for ways to profit from U.S. dollar weakness. Oil is liquid and popular. In the long run, it’s the smaller-than-expected oil supply growth that will drive the market.”

But before anthoer bull market in energy and commodites kicks in… don’t you think we’re due for a bit more pain?

“It’s the dumb money,” writes Bill Bonner, “that thinks you can correct a generation-long period of credit growth in 24 months…with less than 10% unemployment.

“Stocks have now been in a rally for three months. The longer this goes on, of course, the dumber money gets. People come to think the bounce is a permanent bull market.”

“Why would this be the recovery?” asked Goldman Sachs CEO Lloyd Blankfein this morning, clearly puzzled by the idea. “There is no reason to think this is it … So many things have to be sorted out.

“I think it’s going to be a long protracted recession.”

Thus, we’re surprised that traders in Chicago are now giving 70% odds that the Fed will raise interest rates to 0.5% by November. We suspect the Fed will be pumping nearly free cash into this economy into 2010, at least. Perhaps this is Chicago’s way of saying there’s just too much money floating around.

With that in mind, today’s the big day for the U.S. Treasury market. The Treasury will announce the results of its $19 billion auction of 10-year notes today at 1 p.m. Eastern. If it doesn’t go well, it could get ugly for the government’s stimulus plans, mortgage rates, stocks, the dollar, etc. Check us out tomorrow for the details.

Before the auction, the yield on a 10-year note rose to 3.9%, its highest level since November 2008

The dollar is nervously trading up today, along with stocks. The dollar index bottomed (for now) around 79.5 and trades just above 80 as we write.

Heh, and what’s with the dollar strength? Looks like China is controlling nearly every asset class this morning:

“Nobody is talking about dumping the dollar. I don’t think this is realistic,” said China’s Vice Foreign Minister He Yafei. The world’s largest holder of dollar reserves wants the U.S. to know it won’t be selling them… not soon, anyway.

Gold is just a bit weaker today, down $10, to $950 and change.

“I agree with the reader who wrote to you about outrageous executive salaries,” a reader writes, responding to yesterday’s inbox. “Your rather smug-sounding advice was to sell the stocks of companies whose executives’ salaries offended the reader.

“Come on, guys, not reasonable advice, although that’s probably the only remedy that came to your mind. It really is a vast old boys’ network. We outsiders rarely know the true scope of their ‘I’ll scratch your back if you scratch mine’ mutual aggrandizement system, and it’s hard in some sectors to find good stocks whose CEOs are not part of this piggish rip-off system. It’s a clever in-joke kind of thing, and it won’t be ended without punitive action from someone from outside who has serious clout, someone like the president. It certainly won’t be reformed because a few disgruntled stockowners sold their stocks… and it should be reformed. I too find these overcompensated executives arrogant, offensive, not worth what they are paid and assuredly not nearly so brainy as they pretend to be.”

The 5: We received many e-mails like yours. Sorry, but we still don’t get it.

If you don’t like the CEO’s salary in the first place, don’t buy the stock. If it changes for the worse, vote your proxies. Still bad? Sell the stock. If you rode a stock all the way down while the CEO cashed in, that’s a shame…and we can sort of understand you feeling cheated and outraged. But are you really going to go cry to Big Brother? We support initiatives for shareholders’ legal rights and activist investors that put shareholders first. But man… isn’t the government meddling with us enough already?

And we argue there are plenty — plenty — of great stocks out there with CEOs worth investing in. This morning we gathered some of Agora Financial’s long-term investing advisers for an off-the-cuff poll: How many companies in your portfolio are paying their CEOs so much that you feel like shareholders are getting screwed?

Chris Mayer: “I can think of two, but in both cases, the CEOs are exceptionally talented and bring a long-term track record of success.”

Jim Nelson: “Less than 40%. Some are barely making six figures.”

Greg Guenthner: “Since I deal with penny stocks, I really don’t have to worry about ‘fat cat’ CEOs. Most have very moderate salaries when compared to the big boys out there, and some are even paid what could be considered ‘working man’ money.”

Patrick Cox: “None.”

Byron King’s out in Colorado at the American Association of Petroleum Geologists convention… we suspect he’d say much of the same.

“Ultimately, stockholders are the voters who put the directors on the board,” writes our last reader. “Considering that they are also voters in national, state and local elections, is it any wonder that boards of directors screw the stockholders as they do?! Rule by sheeple.”

Cheers,

Ian Mathias

Source: China Leads the Way, The Trade of the Next Decade, CEO Pay and More!

In the case of the government and Goldman Sachs Group Inc. (GS), a decision on whether Goldman can repay government bailout money and be freed to pay its employees whatever it wants, may determine the winners and losers coming out of this financial collapse, and what kind of government Americans will end up with.

In her extraordinary 1999 book, “Goldman Sachs the Culture of Success,” Lisa Endlich vividly chronicles the “history, mystique and remarkable success of the world’s premier investment bank.” That same year, the storied partnership structure of Goldman was junked in a wildly successful initial public offering (IPO).

I still keep three pages of notes distilled from Endlich’s book on how to create and foster a culture of success, a la the Goldman model. They now seem quaint in light of the winner-take-all at the expense of the shareholders mentality that eviscerated the old-school standards.

That’s not to say that Goldman isn’t still wildly successful. On Monday, Goldman pre-announced first quarter net income of $1.81 billion. Record net revenue of $6.56 billion from trading fixed income, currencies and commodities was offset by losses in stock trading, real estate, investment banking and money management. Nonetheless, earnings were almost twice analysts’ expectations.

Yesterday (Tuesday), on the heels of its good performance, Goldman announced that it had priced a public offering of 40,650,407 shares of common stock at $123 per share. Goldman will be its own sole underwriter and total gross proceeds are expected to yield approximately $5 billion.

Ironically, $5 billion is what Goldman needs to pay back the U.S. government in order to escape the salary and bonus caps imposed on bailout recipients.

A brief history.

On the remarkable day of September 15, 2008 Lehman Brothers Holding Inc. announced its intention to file a Chapter 11 bankruptcy petition. On the same day, venerable investment bank Merrill Lynch disappeared into the waiting arms of Bank of America Corp. (BAC). Six short days later, on a Sunday afternoon, the U.S. Federal Reserve announced approval of expedited applications by Goldman Sachs and Morgan Stanley (MS) to change their status from investment banks to bank holding companies. The rapid approval of their applications would, the Fed said, “provide increased funding support” allowing both banks to borrow directly and permanently from the Fed’s Discount Window and its other capital liquidity enhancing facilities.

But that wouldn’t be enough. As the crisis mounted, on Sept. 23, Goldman raised $5 billion from billionaire investor Warren Buffet’s Berkshire Hathaway Inc. (BRK.A, BRK.B). And with the storied investor now onboard, Goldman rushed to raise another $5.75 billion in a common stock offering.

On Oct. 14, with the mushrooming cloud of the crisis enveloping seemingly every major bank in the country, then-Treasury Secretary Henry M Paulson (formerly Goldman Sachs’ Chairman and CEO) and Federal Reserve Chairman Ben S. Bernanke summoned the nine largest bank chief executives to Washington where they were told that they would each take a piece of government capital. Only Wells Fargo & Co. (WFC) is on record as saying it didn’t need the money, but the handout was forced on it too. Goldman itself took $10 billion.

On Wall Street, and nowhere more so than at Goldman, it’s about compensation. But recipients of bailout money are now facing the full disclosure of their executive compensation deals, as well as having to obtain nonbinding shareholder voting on compensation issues.

The Treasury is advocating a salary ceiling for recipient senior executives of $500,000 and any additional compensation to be paid in restricted stock that vests only when government funds have been entirely repaid. And there are restrictions on golden parachutes and threats that Congress will impose a 90% bonus tax.

It’s enough to make Wall Street quake in its canyon.

With the public backlash against the taxpayer-funded bonuses paid to executives and traders at crippled firms, banks are desperate to return government bailout money so they can be freed from government salary and bonus oversight.

But unfortunately for many of these banks, oversight is mandated for any recipient of “exceptional assistance,” which is defined as assistance of more than $5 billion.

No wonder Goldman wants to pay back $5 billion of the $10 billion it got.

I have nothing against the free market setting compensation benchmarks, or private companies paying successful executives whatever their shareholders vote to be acceptable. And I’m not singling out Goldman Sachs. But, nowhere else in the U.S. economy – or at the highest levels of government – is there anything like Goldman’s visible and invisible hands at work. And they’re working in the open and more insidiously, behind the scenes and through lobbyists, to make themselves a lot of money.

There is simply not enough space in any book, let alone any article, to list the power, placement and influence of current and former Goldman Sachs alumni pulling the levers of hedge funds, corporations, politicians and governments. If you want to enlighten yourself about what you don’t know about these players, simply Google: “List Goldman Sachs alumni.”

Goldman, as much as any investment bank, got its hands dirty in the subprime securities business and the credit default swap business. As to its influence and its claim to premier bank status, the first question that comes to my mind is: Would Goldman even exist today if Hank Paulson hadn’t had Goldman’s current CEO Lloyd Blankenfein in on meetings about saving American International Group Inc. (AIG)?

Out of the $185 billion that AIG received from taxpayers, Goldman got $12.5 billion for exposure it had to credit default swaps written by AIG. I’ve been told by some of my hedge fund and investment banking friends that Goldman deserved that money and that the entire counterparty structure related to almost every credit default swap was a risk.

But I like to point out that Goldman is only smarter than its peers because its trading desks are lighter on their feet. I remind them that Goldman stuffed the pipelines with toxic structured collateralized debt obligations (CDOs), and then was nimble enough to cover themselves better by buying credit default swaps to hedge their exposure to their own toxic slime and institutions that are too-big-to-fail, exactly like AIG.

What happens now with Goldman Sachs will set the precedent for everything else that the government will do or allow in the future with bailout recipients and industries. Will Goldman be freed up to overpay its risk takers and to make greater wagers as it also seeks to become too-big-to-fail? Will impositions be made on the corporate level, industry level, systemic level? Will free markets be free to leverage taxpayers indefinitely?

The argument, most recently made in yesterday’s Wall Street Journal op-ed page by Jonathan Macey, a law professor at Yale, that “demonetizing executive pay will also drive the best managers out of private companies and into hedge funds and other boutique investment firms” implies that there is a limited amount of talent available in America, which is a supposition that I find myopic, at best.

Besides, aren’t these the same people that got us into this mess?

And while letting public companies be run by shareholders – as Macey suggests – is supposed to work in principle, shareholders have been marginalized by the same Wall Street system that protects the institutions whose stocks and bonds they sell, trade and profit from.

All eyes should be on the curious relationship between government and Goldman for clues as to what shape the landscape will take when we eventually exit this calamity.

I don’t want our companies, our institutions or our economy socialized any more than Adam Smith would. But I do want to see the public tail wagging the dogs of Wall Street and government.

Source: Is Goldman’s Share Offering an Attempt to Further Ensnare the Government?

Apartment rentals are down for the first time in six years and nearly 96% of renters surveyed said they would be moving this year. Most said it was due a desire to be in a new neighborhood or city, but many simply wanted more for their money.

Then there’s the real cost-saver of rooming with another and splitting the bill. Listings for roommates on craigslist.org increased from 255,900 in 2007 to 421,000 in 2008.

A quick look at the Dow Jones Equity All REIT Total Return Index shows REITs crashed right along with the market in September.

These Trusts used to lay the investor’s golden dividend egg. If REITs distribute 90% of their income, they are not required to pay corporate taxes… so pay out they did.

But this profitable goose is cooked…

None of the following multifamily REITs have reclaimed anywhere near their Fall of 2008 share price. A quick snapshot of some of the bigger players since Oct. 1, 2008 is telling…

- American Campus Communities, Inc. (NYSE:ACC), Equity Lifestyle Properties, Inc. (NYSE:ELS), and Senior Housing Properties Trust (NYSE:SNH) are down over 30%…

Read the full article here at TFN: Avoid Apartment REITs

Builders followed the trend, doing what comes naturally to them, until there seemed to be an off-plan Spanish condo for every man, woman and child in Great Britain. The nice thing about real estate is that demographics can be counted on to resolve any supply and demand anomaly, even if painfully.

The pain in Spain is mainly on the coast; 2007 was a tough year, and in hindsight, 2008 will likely have been tougher. The price appreciation of real estate in Andalusia was at its peak in 2003, with 18.5%. By 2006, it had whittled down to 9.1% growth, and in 2007 turned negative; in fact, the market has since gone “no bid” in many places.

This is bad news for the coastal communities because, other than real estate, tourism, and the container port in Algeciras, there is no real economy in southern Spain. Mainly they sell sun, homes, and stuff to fill homes. And judging by the vacancies, more people are choosing sun over shade. This is worse than Miami, the other bubble-busting, sun-drenched prairie of empty homes. At least southern Florida has an attractive tax regime and modern infrastructure that lure new businesses and jobs. Not so southern Spain, where the tax code and infrastructure were both conceived in an era of donkey riding and windmill charging.

How Did This Happen?

Everywhere you wander from Malaga to Cadiz, you’ll find empty apartments and apartment projects left half-built. As Simon would say, “The only person making money in this real estate market is the guy who paints the ‘Price Reduced’ signs.” It seems like there’s an idle “overseas property specialist” on every street corner.

Most of the real estate agents are British because, for the last twenty years, most of the buyers in coastal Spain were British, with a smattering of Germans and other northern, sun-starved Europeans. About four years ago, the buyers became a bit more eclectic. Or did they?

What really happened was the builders became more eclectic. In particular, Russians converted their commodity wealth from U.S. dollars to Spanish property… as developers. In what could be a Monty Python comedy, the British property promoters turned this into, “The Russian BUYERS are coming. They are going to buy only the best. And they don’t care about the price.” The story wasn’t a huge leap for the average Brit, since Russian billionaires and their newly affluent nephews are a force to be reckoned with in London. Known for their conspicuous consumption, the Russians are seen as the flashiest and most gauche of the nouveaux riche.

After a decade of skyrocketing property appreciation, the thought of price-agnostic Russkies fleeing from the cold winters of Moscow warmed the hearts of speculators from Birmingham to Bristol — many of whom had already made small fortunes flipping Costa del Condos. The promoters brought in a slew of new “investors” to build the inventory the Russians were supposed to buy. This birthed a creative scheme that would make Carlton Sheets, and the rest of the late-night, no-money-down TV gurus, salivate if not hyperventilate.

Developers could sell condos, townhouses and villas “off plan,” which means people would purchase property that was, at the time they plopped down their deposits, nothing more than a piece of Spanish dirt and an architectural drawing. In many cases, the banks in Britain and Spain were so eager to turn plumbers and schoolteachers into property moguls, they would give non-recourse loans for up to 90% of the sales price foretold by the developer. Yes, that means no personal guarantee by the buyer. It mattered not whether he drove a lorry in Liverpool or was a doctor in Dorsett, the property “underwrote itself off-plan,” which is banker talk for “I believe in fairies.”

The promoter and the developer, often one and the same, saw an opportunity to take this concept out for a real spin, so they started offering incentives for people to buy before construction. One of the most aggressive teasers was a €20,000 “decorator’s credit,” allowed if a buyer signed the contract and paid the deposit before the project broke ground.
Following the laws of Ponzi thermodynamics, it worked perfectly if you started in 2000 and had the mind to quit in 2004. We know a couple of hourly-wage earners who now drive Aston Martins, but for everyone who drove his Vanquish into the sunset, there are quite a few more who kept rolling those decorator’s credits and condo profits into the next deal and who are now wondering when the repo man will come knocking.

What happened? That silly supply-and-demand thing combined with the fact that the Russians never came. We met with a flashy Brit promoter who actually went to St. Petersburg and hired two very attractive young Russian women in anticipation of the wave of Russian buyers. He and his wife, a Russian-Estonian, spent tens of thousands on visas and real estate training only to have his fine Russkies sit around the office, chain smoking and talking about shopping. In Russian.
The State of the Market Today

As we mentioned above, the market is now at that uncomfortable “no bid” stage. Developers and owners are scrambling. One condo we visited came with a brand-new car and an offer to carry the first year’s mortgage payments. Another came with six months of groceries and two weeks in the Canary Islands. In our property speculating experience, the “no bid” stage is often followed by the “any bid” stage. It will be just the same here, in a massive way.

What does this mean to you? Right now, properties are still in the hands of reality-challenged people who are either not yet desperate enough to sell at a significant loss or are still hoping that “the market will pick up again this summer.” Is this possible? Not unless half of Russia comes with their checkbooks. New housing starts in 2005 were the highest since they started keeping tabs shortly after Hemingway left the ambulance service. Even if sales returned to 2005 levels, there would still be too much supply. This is how a business cycle works. This is why Las Vegas makes money. The lesson for the players at the Costa del Table will be costly, and there are no more free drinks.

What to Do? How to Profit?

Things will get worse before they get better. But incredible bargains and profits are coming from this.

Because most of the loans were non-recourse, many speculators, in effect, bought options on the property market. Their losses are limited to the cash they put into each deal. They will hang on as long as they can, but eventually there will be too much month left at the end of the money. They will walk away from their condo/townhouse/villa before it’s being repossessed. The banks will be stuck with a lot of this property, and developers will be sitting on finished or nearly finished projects they can’t afford.

The banks that will be hurt the worst are the local Spanish banks, not the British banks that kicked off the mania or even the national Spanish banks. It will be the little “Cajas,” something akin to the old savings and loans, that will be feeling the most pain. If the worldwide credit crisis becomes a full-blown monetary crisis, the bottom could fall out soon. If more banks are going under because of the goofy paper on or off their books, they will be happy to get any cash they can. When you start hearing about the local banks going bankrupt or some sort of “government solution,” hop a plane and check out the offer.

So where to start once the time is right? The high end. The highest end. In percentage terms, the very high end falls the furthest when things get ugly and rebounds the most when the cycle turns. Our recommendations are Marbella and Sotogrande. Marbella has long been the haunt of Europe’s rich and famous, and Sotogrande commands a premium because it is Sotogrande. When we think the time has come, we will be buyers.

***

As many pundits – and President-elect Obama – expect, “Things will get worse before they get better.” In an economic crisis like this, prudent investors are well advised to diversify their portfolio… ideally, some of it in global stocks and real estate. And, as Casey Research Chairman Doug Casey likes to say, you may prefer to expatriate and “watch the crisis on TV instead of through your living room window.”

Without Borders is your go-to guide for the soundest international investments and the most beautiful (and cheap) places to live. Get the inside scoop from two ex-CIA agents with privileged connections around the globe… learn more by clicking here.

Source: Spanish Coastal Property – “The Russians are Not Coming. The Russians are Not Coming!”

This from Today’s Financial News:

Wish you had a time machine? I just might be able to help you out with that!

Back in the early 1980s, International Living recommended buying real estate in northern Costa Rica. Readers who took this advice reaped big rewards.

This part of Costa Rica became the No. 1 destination among foreign retirees and investors who wanted to buy land that would increase dramatically in value. These buyers made very wise decisions, as the prices for beachfront property along the Pacific coast increased six-, eight-, tenfold, and beyond throughout the ’90s.

Your chance may have passed in this part of Costa Rica, but I can tell you where to find another pocket of opportunity… a place where prices have stayed low. Why? The area I’m talking about has been difficult to get to. That’s set to change — giving you the opportunity to position yourself ahead of the Path of Progress.

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

In a country with an established real estate market like Costa Rica, this sounds like just the type of place that would attract a lot of fervent investors. Difficulty getting there has kept it under the radar in terms of development and kept prices far lower than areas to the north.

The Costanera Highway is unpaved between Quepos and Dominical and the airports are small, local affairs. The airport in Palmar Sur is a one-woman show — she issues tickets, checks baggage, and answers queries, while you sit on a wooden bench overlooking the small strip, alongside your co-passengers… all 11 of them. No duty-free shop or airport food here.

These are exactly the kind conditions I look for when scouting for a good real estate opportunity… especially when plans to improve the infrastructure are in place.

For now, pricing here is among the lowest in Costa Rica. I found 1.25-acre lots close to Ojochal for as little as $65,000. Construction costs are roughly $90 per square foot.

So for $245,000, you can own your own piece of this tranquil setting in a custom-built, 2,000-square-foot house on a large lot.

That really is a good-value buy, considering that in Manuel Antonio, near Quepos a 2,200-square-foot condo averages $595,000 and a 1.25-acre lot is listed at $325,000.

The important news for investors is that road improvements on the Costanera Highway are underway and scheduled for completion next year. This should cut the 90-minute trip from Quepos to Dominical to 25 minutes.

An international airport is planned for Palmar Norte. Due to be completed in 2010 (the government has already allocated funds), the airport is planned to open in stages; the first, in 2010, will allow international flights with a maximum capacity of 50 passengers.

Eventually, the plan is to have a runway capable of accommodating even the world’s largest passenger plane, the Airbus A-380. An airport of this scale needs to be close to a hospital and one opened last year in Cortes, just 10 minutes from the airport.

I have been bullish about the opportunity in Costa Rica’s southern zone for the past six months. Today I got word of a government policy decision that makes this opportunity even more exciting.

The Costa Rican authorities have tightened up the regulations for developing land in this area. They are committed to controlling the pace of change, and prevent destruction of primal rainforest. This limits the number of future projects, and sets out to preserve the raw beauty of the landscape.

That all points to one thing if you get into this market today… the value, like northern Costa Rica in the ’90s, will soar in value.

Source: Another Chance to Make Big Profits in Costa Rica… But You Must Act Now

This from Today’s Financial News:

It is a great time to be buying a house, but an absolutely horrible time to be selling one. Potential buyers are scared off by the financial crisis. Mortgages are tough to come by. And buyers that do get qualified for a loan cannot sign a contract because they have no buyer for their own house.

That is why smart homeowners are not selling, they are renting. Instead of selling their houses today, when they are worth a pittance of what they were just a year ago or a fraction of what they will be in a year or two, savvy would-be sellers are renting.

By renting a house, homeowners with no mortgages receive enough cash flow to keep them afloat until the market rebounds. They can take advantage of a once-in-a-generation buyer’s market, purchase a home at a fantastic price and collect enough income from rent to help them get by until the crisis weakens.

Money may be tight over the next few years for these folks, but pulling a few extra hundred dollars out of a monthly budget to meet mortgage costs for a year or two is certainly better than locking in a huge loss by selling your home at today’s prices.

****** Oil at $70 a Barrel — Gold at $500 by Christmas? ******

With stocks as volatile as nitroglycerin, gold should be trading above $2,000 an ounce! But the dollar insurrection has shaken up the commodities markets. Some experts now put gold’s downside at $500… even $400.

What if they’re right?

TFN’s options strategist Andrew Snyder has developed a gold hedge strategy that could make you money on your gold position either way. Find his Special Report on the Members Only Reports section of HotStockConfidential.com. To become an instant member, click here…

———–

When the market rebounds in a few years, renters can once again put their homes on the market, hopefully selling them for $30,000, $50,000 or even $100,000 more than they could have today. Pinching pennies for a couple of years does not seem all that bad when those kinds of profits are available.

Forget the open house

There is a house just down the road from mine that is a perfect example of how profitable this strategy could be. Earlier this fall, the quaint rancher was listed for $209,000. In a normal market, the house is worth every penny of that price. At the peak of the market, it was likely worth closer to $275,000.

I talked with a realtor friend and she said, right now, the owner would be lucky to get $175,000 for it. So it was no surprise when she said the house was taken off the market. Instead, the owner rented it for $1,100 a month.

Now, I have no idea what the owner originally paid for the house, but I do know in just a few years it will be worth significantly more than what he could get today. If he gets his original $209,000 for it, he will receive $34,000 more than what he could get today, plus he would have received $1,100 in cash every month in between.

Obviously, this situation does not work for everybody and renting comes with its own set of hassles, but for a lot of folks forced to move during this crisis, or for those that simply want to take advantage of a fantastic buyers market, this is a money-making strategy.

The economy may have handed us a bushel full of lemons, but there is always an opportunity to make some great-tasting lemonade. Instead of putting up a “for sale” sign, look for a good set of renters. In an economy like this, there are plenty to choose from.

Source: Moneymaking Strategy: Don’t Sell, Rent

A California man who has defaulted on nine homes and expects banks to foreclose on all of them, forcing him into bankruptcy, says he now considers it “a mistake” to have invested in the real estate market.

Shawn Forgaard, a 37-year-old software company project manager, bought one home for his family to live in and nine more as investments. He stands to lose all the investment houses in the mortgage meltdown but says he has come away wiser from the experience.

Frogaard’s modus operandi, it turns out, was to put 10% to 40% down on negative amortization (’neg-am’)loans — the kind where the payments do not cover the interest so that a borrower’s balance grows over time.

At least the now bankrupt project manager is philosophical about his losses. Apparently, he knew he was “sitting on time bombs,” with the loans. He even knew “the market was going to go soft and I knew that property values would decline.” Froggard’s only miscalculation, by his own account was that he didn’t anticipate a downturn “of epic proportions.”

While residential real estate is in the dog house, Brian Hunt in DailyWealth says the market likes commercial real estate market again.

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At last week’s Jekyll Island meeting, our friend and fellow publisher Doug Casey made a convincing case for buying real estate in… Burma. Sure, a military junta is in power, but it won’t be there forever. Meanwhile, Burma’s beachfront land is every bit as pretty as Thailand’s but it costs about a tenth as much. All you’d have to do is ingratiate yourself with the generals in power, something that shouldn’t cost more than a few million dollars.

Doug also likes cattle land in Argentina and, along with partners, has recently purchased more than 250,000 acres in Salta.

The real estate meltdown hypothesis holds the economy will radically slow and sink into a recession (or even the worst depression since the Great Depression) as subprime losses lead to prime real estate defaults and then a decline in commercial real estate, too. I see two glaring problems with this hypothesis…

First, “Dr. Copper” hasn’t gone along with the global recession predictions. Copper, and base metals in general, have remained strong, even hitting new highs. Second, the commercial real estate collapse doesn’t seem to be materializing. In fact, after suffering late last year, several commercial real estate investment trusts seem to be rebounding strongly.

Our best commodity recommendation? Get long heroin. According to sources in Afghanistan, farmers there have replaced their traditional poppy crop with wheat. Inflation is looming – even for junkies. While we suspect we’re a long way from a top in commodities in general, it does give us pause when wheat is a better cash crop than poppies…

I believe the trade of the next decade will be shorting long-dated U.S. government bonds…

With the amount of inflation the Fed is producing and with the global economy showing signs of strength (oil and copper prices), it’s a sure bet the yield on the long-dated government bond will, sooner or later, spike much higher. Right now, yields on the 30-year Treasury bond are bouncing off their lows, at just over 4%. Considering inflation, as officially measured, is higher, there’s simply no way these low rates are sustainable.

ConocoPhillips and BP are spending $25 billion to $30 billion to build a pipeline to carry Alaska’s gas to Canada and the U.S. The pipeline will move about 4 billion cubic feet of gas per day. The first destination is the Alberta oilsands in Canada – the biggest proven reserves outside Saudi Arabia.

Alberta needs enormous amounts of natural gas to get oil out of the ground. Companies are currently pumping 825,000 barrels per day. That number is expected to quadruple by 2025.

George Soros, the billionaire you love to hate, told reporters the U.S. administration “failed to perform their job… This is a man-made crisis and it’s made by this false belief that markets correct their own excesses. It will take much longer for the full effect of the decline in the housing market to be felt.”

Soros sounds like he wants to ride the “government-has-to-do-something” bandwagon. When times get tough, the “public” will clamor for the government to “do something.” Whatever it does, it won’t be good.

What’s Buffett buying now? Well, his most recently disclosed new position has been built up over the past six months. Buffett has bought a million shares of reinsurer Munich Re Group, according to a German newspaper report. Buffett bought 3% of Swiss Re in January.

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Regards,

Porter Stansberry and Dan Ferris