Hello Pezz, Today’s Final Trade:
I decided to participate in a Japan-focused Real Estate partnership after much pondering and a bit of agonizing.
Pondering because:
· The deals that has been lined up for the partnership yield north of 10-11% per annum gross (net 7-7.5%), because the fund set its sight on everyday everyman type of properties, and not the trophies desired by Goldman Saches and Morgan Stanley
· The fund has arranged to leverage our equity by greater than 10:1 with non-recourse bank financing and at large positive carry (i.e. low-low rate in American language)
· The positive carry (difference between rental income and interest + expenses) will be paid to the partners via a Singapore shell (enjoying 5% tax treaty benefit with Japan) and paid in hopefully soon-to-de-couple-and-sharply-appreciate Japanese Yen
· Asymmetric risk / reward: should Japanese real estate appreciate 20% within the next 6 years, and taking dividends into account, the partners will gain by 200+%; but should the same real estate depreciate by 20%, the partners will still gain by 17+%, and all without taking Japanese Yen appreciation into account
· I understand from the latest second-hand report that local Japanese tycoons are beginning to buy real estate – a bullish sign, and before the everyman of everyday gets wise
· The above projections are possible because of what I term ‘speed of light’ financial physics: absurdly low interest rate, obscenely high rental yield, in combination with ridiculously easy bank limitations
· I need the ‘speed of light’ financial physics to work for my Erita’s achamchen.com education, exotic travels, first car, and perhaps an interview outfit for securing a position as a wealth management girl at a heavy duty investment bank, or starting up a resort somewhere nice
Agonizing because:
· I like cash
· Cash is flexible, for lightening raids and for speedy retreats
Anyway, in for a penny in for a pound, cash is cheap and getting cheaper, and so must be put to work.
Chugs, Jay
P.S. My hedging moves in the US market space is based on the conviction that deals such as above could be just around the awfully scary corner in the USD-homeland. |
