The Next Hot Income Investment: Toll Roads?
In focus this week; the Middle East is hot, owning your own toll road for income and the SITFA.
The Gulf Cooperation Council (GCC): Saudi Arabia, Qatar, Oman, Kuwait, the United Arab Emirates, and Bahrain are very hot! Literally and figuratively!
I know, all of the news in the Middle East seems to be bad, but these six are the stable element of that part of the world, and they are really on fire.
Barron’s reported this week that Dubai is up 13.7% this year, Abu Dhabi 14.7%, Saudi Arabia 6% and Qatar 3%, while the emerging market index is down 2.1%.
All of these countries boast strong government spending, very low to no debt and huge oil revenues. That’s a nice combination.
They are almost doubling the US’s growth rate, they hold somewhere in the area $1.5 trillion in their sovereign funds and Julie Dickson, of Ashmore Investment Management in London says they have the most stable and best capitalized banks in the world.
And, these economies are underpinned by petro dollars that are immune to inflation and just about anything else. The GCC’s average dividend yield is 4%, versus 2.7% here at home and this all adds up to solid growth prospects.
The problem, you know there had to be a catch, right? These markets are closed to individual investors, but you can get in using mutual funds.
The Barron’s article mentioned two funds, Franklin Templeton Frontier markets, TFMAX has 30% of their assets in the Middle East, and T. Rowe Price Africa and Middle East Fund, TRAMX with 35% in the region.
The few existing ETF’s are very small, only $15 million in assets in the Wisdom Tree Middle East Dividend Fund (Nasdaq: GULF). But it has 63% of that $15 million in the UAE and Qatar. If you are in the mood for some risk this could be interesting.
Take a look at the Middle East, the GCC specifically…
The Next Hot Income Investment: Toll Roads?
Next up, in an income starved world, how about a nice toll road of your very own. Think of all the quarters…
The Wall Street Journal reported recently that uber wealthy families are buying into infrastructure projects more so than traditional investments.
Most are in the developing world but some are here at home.
Since the 2008 collapse, the trend for this type of extremely wealthy investors is to own things you can hold, walk on or see; gold, art, wine, and now, toll roads, water projects and docks.
In San Francisco, there is a six-lane toll expressway between the city and the Golden Gate Bridge that will likely be funded by private investors. There’s a $220 million dollar energy project in Chicago and docks and piers projects in Djibouti that will all be funded by private money.
According to The Journal, since the whooping everyone took in 2008 the ultra-wealthy aren’t interested in hedge funds or traditional securities but are looking into long-term projects that can create income and return principal, and at the same time, gain exposure to emerging markets.
The emerging world is in desperate need of infrastructure development and these long term investments can be very lucrative, but require very deep pockets.
One U.S. family is eight years into a multi-country water project that has yet to pay a one cent in income.
Now, I know most of our members are not in this income or risk category, but if this proves to as profitable as the numbers now indicate, an ETF or mutual fund of some sort that will allow the small investor to get into the action can’t be far behind.
India alone is so badly in need of roads projects that their estimated time to ship an item is two to four times longer than in the United States because they can’t get products to the docks and then can’t get them out of the port. Much of the rest of the EM’s are in the same boat.
This will be a huge opportunity at some point in the future and the incredible amount of capital mutual funds can generate would be the perfect solution for many of these emerging market infrastructure needs.
Keep your ear to the ground about this one. It will take some time, but in the early stages this could be a very promising new growth and income play! Infrastructure!
Slap-in-the-Face Award: ‘It’s Complicated’ Edition
And finally, the sitfa
This week it goes to all those people out there who have made our lives so incredibly complex. Here’s how crazy our lives have gotten.
Did you know that in 1980 there was an average of 400 words in a credit card agreement? Today there are 20,000, it takes 90 minutes to read 20,000 words.
There are 45 different Medicare options to choose from.
There are 800,000 apps to choose from for the IPhone.
240 choices on the Cheesecake factory’s menu
On one website alone there are 135 mascara’s, 1,992 fragrances and 437 different lotions to choose from. Are you kidding me?
According to the Southern Medical Journal, a dermatologist has to sign his name 30,000 times a year.
And how about those incredibly long click-through agreements on line. No one reads them. In fact, one company had a $1,000 prize listed in the last few paragraphs of one of them. It took 3,000 sales before anyone read it and sent in for the prize.
The average supermarket has 40,000 different items to choose from. Do we really need as many different cereals as there are? One whole aisle at my food store has nothing but cereal.
But fear not, Trader Joes, the specialty food store, is leading the way to a simpler life. They only have 4,000 items in a store and their sales double larger specialty food stores with virtually unlimited choices.
Trader Joes says trying to be everything to everyone is a stupid business plan.
How did we get to this point of every business being everything to everyone and being so complex? According to The Journal; the internet, lawyers, government regulations and frivolous lawsuits.
Sure blame the lawyers, again. They’re easy! Lol
About Steve McDonald
Somewhat of a renaissance man, Steve worked as a professional broker and has been an active trader of bonds for more than two decades, specializing in ultra-short-maturity corporate bonds. But before entering the investment industry, Steve was a naval aviator, flying fixed-and rotary-winged aircrafts, and also served as a surface warfare officer. Steve’s regular video series featured on Wealthy Retirement called “Slap in the Face” Award is some the most amusing investment content we republish.