alternative investments

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theironhorse's picture
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Joined: 2007-03-03

Anyone here ever done alternative investments at all?  My new B/D does a ton of them and from what I have seen they can be great tax deductions as well as good investments, and I am wondering if anyone here has much experience with them.I am referring to Oil & Gas, 1031's, and REIT's.  I spoke with about 10 vendors at our annual meeting(s) and definitely see where they could fit into the affluent marketplace.

Billyclub's picture
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Joined: 2007-04-26

I know nothing about alternative investments except that REIT's are likely to be popular enought to be considered main stream investments.

AllREIT's picture
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Joined: 2006-12-16

theironhorse wrote:Anyone here ever done alternative investments at
all?  My new B/D does a ton of them and from what I have seen they
can be great tax deductions as well as good investments, and I am
wondering if anyone here has much experience with them.I
am referring to Oil & Gas, 1031's, and REIT's.  I spoke with
about 10 vendors at our annual meeting(s) and definitely see where they
could fit into the affluent marketplace.

Private REITs are a scam, as are most private offerings in general. If it was any good, they would take it public.

The new Bearlinx ETN that tracks the Alerian MLP index (BSR) looks like
a good way to get exposure to MLP's without all the issues of K-1 forms
etc.

Indyone's picture
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Joined: 2005-05-30

It's sweeping generalizations like this that cause you to lose credibility. Plenty of private deals are done because their size makes the necessary filing fees cost-prohibitive. That hasn't stopped investors from making a lot more money than they would have with an index ETF.

You'd be wise to post less and research more in the future. When you post on almost every subject, including those where your knowledge is limited, you get to the point where no one listens. I think you're fairly intelligent, although perhaps not as intelligent as you believe yourself to be. Use that intelligence to know when not to post...

aldo63's picture
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Joined: 2006-09-11

i own managed futures for myself and for clients. take a look at the asset allocation of the harvard pension fund

AllREIT's picture
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Joined: 2006-12-16

Indyone wrote:It's sweeping generalizations like this that cause you
to lose credibility. Plenty of private deals are done because their
size makes the necessary filing fees cost-prohibitive. That hasn't
stopped investors from making a lot more money than they would have
with an index ETF.

That's a strawman argument, private offerings are not comperable to
broad market indexes. If you have good arguments use them,but if thats
the best you can do....

You're probably too young to remember all the scandals in the 1980s and
early/mid 1990s involving LP and other private offerings. Sufice it to
say that alot of deals are done for the purpose of charging hefty
management fee's (notice how almost all of these deals are externally
managed) and heavy underwriting comissions (who pays the GDC?).

Indyone's picture
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Joined: 2005-05-30

AllREIT wrote:Indyone wrote:It's sweeping generalizations like this that cause you to lose credibility. Plenty of private deals are done because their size makes the necessary filing fees cost-prohibitive. That hasn't stopped investors from making a lot more money than they would have with an index ETF. That's a strawman argument, private offerings are not comperable to broad market indexes. If you have good arguments use them,but if thats the best you can do....  I think I did...see above.  Many private offerings are simply too small to warrant filing fees.  Did you miss that line the first time?  My point on referencing the index fund is to remind you that there is a world beyond broad market index ETFs and TIPs...and not everything else is "bad".You're probably too young to remember all the scandals in the 1980s and early/mid 1990s involving LP and other private offerings. Sufice it to say that alot of deals are done for the purpose of charging hefty management fee's (notice how almost all of these deals are externally managed) and heavy underwriting comissions (who pays the GDC?). Bad assumption (and patronizing to say the least).  I remember what you're talking about, but again, you are painting with a very broad brush and it makes you look foolish.  You might want to take a closer look at today's alternative investments before you start comparing them to the 1980's style limited partnerships.

ebsusee's picture
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Joined: 2007-06-21

For tax deductions using Oil & Gas private and public placements, investors can claim non passive losses in the first year. For this Oil & Gas firm produces a schedule K-1 and during tax filing clients report the losses to the IRS through Schedule E. For deductions ,status as a General Partner provides the filer the opportunity to offset the losses against passive and non passive income. It is a long term investment and due deligence by the firm is very important to weed out the bad ones. 

troll's picture
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Joined: 2004-11-29

All I can say about private REITs is that the guy came in to pitch me on his REIT (with a big company that could very well have been doing public deals) he had no credible way of explaining how they worked. (This was a while ago now, and I will admit to being dense so my recollection is sparse.)
Something about "Your client buys $10,000 worth and it pays a growing dividend as rents go up. This deal is about to close and the dividends have risen so you'd better buy fast."
"So, how long is the holding period?"
"10 years but this has been open three years already so you're only in for 7 years. Of course if things are the way they are we might close it early and you client gets out in only three years.!"
"So my client is buying how many first day dollars worth with his $10,000?"
"$10,000."
"But real estate has been up for the past 3 years, and you said the dividend is way up, why would you let my client buy at 2001 prices in 2004?"
"That's the way it works!"
"So if my client bought in 2001, what would his investment be worth?"
"Much more, I can't tell you exactly because we don't do mark to market calculations, we find them to be misleading."
"But everyone has the opportunity to buy your fund on the opening, get a smaller dividend for the first three years and then at the end of 10 years wind up with a windfall. Why would anyone do that when they can get the same windfall in 7 years?"
"Here have a nice shiney mug!"
"Thank you, and you have a nice shiney day." (Yes I took the mug, and if I were at that location I'd tell you what the name of the company was.)

AllREIT's picture
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Joined: 2006-12-16

Whomitmayconcer wrote:"But everyone has the opportunity to buy
your fund on the opening, get a smaller dividend for the first three
years and then at the end of 10 years wind up with a windfall. Why
would anyone do that when they can get the same windfall in 7 years?"
"Here have a nice shiney mug!"
"Thank you, and you have a nice shiney day." (Yes I took the
mug, and if I were at that location I'd tell you what the name of the
company was.)

Lol, of course doing Mark-to-Market would be misleading. It would show
the effects of the 8-10% paid in underwriting commisions in the first
quarters report .

These are usually sold on an open offering basis, so even if you get it
early, you can get diluted by the constant issuing of fresh equity.
Given the heavy underwriting commisions plus asset based management
fee's there is every incentive to raise capital and bloat the balance sheet.

As always, If it was any good it would be publicly traded.

troll's picture
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Joined: 2004-11-29

AllREIT wrote: Whomitmayconcer wrote:
"But everyone has the opportunity to buy your fund on the opening, get a smaller dividend for the first three years and then at the end of 10 years wind up with a windfall. Why would anyone do that when they can get the same windfall in 7 years?"
"Here have a nice shiney mug!"
"Thank you, and you have a nice shiney day." (Yes I took the mug, and if I were at that location I'd tell you what the name of the company was.)
Lol, of course doing Mark-to-Market would be misleading. It would show the effects of the 8-10% paid in underwriting commisions in the first quarters report .These are usually sold on an open offering basis, so even if you get it early, you can get diluted by the constant issuing of fresh equity. Given the heavy underwriting commisions plus asset based management fee's there is every incentive to raise capital and bloat the balance sheet.As always, If it was any good it would be publicly traded.
Being paid by the hour, you SHOULD hate these. What else CAN you say to people who pay you?

vbrainy's picture
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Joined: 2006-07-26

Are you including some of the larger private REITs like Hines?

AllREIT's picture
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Joined: 2006-12-16

vbrainy wrote:Are you including some of the larger private REITs like Hines?

Yep, they don't have any advantages over internally managed public REITs, while having many disadvantages.

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