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Old 04-17-2008, 02:43 PM   #41
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6 years? Now there's a track record!
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Old 04-17-2008, 02:50 PM   #42
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...my wife believes this stuff. She has no reason not to. How do I convince her that he's spouting garbage?
Why is the burden of proof on you? This seems backwards to me. If I'm looking at putting my HARD EARNED money into something, I start out believing it's a bad idea, and look hard for reasons why it might not be.

That said, I sense a larger issue here. You may be having a little bit of a power struggle here. I am the "slow and steady wins the race" investor and maybe you are too, but your wife seems to be looking for the big win.

Why?

Is she more of a gambler by nature? If so, it might make sense to have most of your investment money in a joint pot, but have seperate pots for each of you so you can play with it as you will.

Is she feeling some urgency to make money fast? Does she hate her job? Are you saving toward an important goal she really wants to reach and she's feeling you'll never get there?

Is she generally gullible by nature? Maybe you need to stand aside while she invests some (reasonable) amount in one of these schemes and loses it. Maybe then she'll be more cautious.

I'd take a little time out to search for the root cause of your disagreement.

As to whether this is a scam or not, I think there are other factors to consider. The first, of course, is continued marital harmony. The second is that you're in something you don't understand completely, but which is causing you to lose sleep and to doubt your own judgment.

If I were you I'd say the investment wasn't right for me on the face of it, scam or no scam.
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Old 04-17-2008, 02:54 PM   #43
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6 years? Now there's a track record!
A smart guy, a rich man, and along term survivor in the investment markets named Martin Whitman long had a policy of only investing in regulated securities markets.

We have recently discovered that this regulation is often not up to snuff, but there are filings to read, and the possibility at least of managers going to jail for certain types of lies.

I personally feel more comfortable with this type of investment.

But as you say, your situation might be just fine. "It could happen"!

Partly it is a matter of personality. Some are disposed to believe; others to disbelieve. Not Ha's role to try to tell you; you are many times more likely to know what is right for you and your wife than I ever could be.

Ha
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Old 04-17-2008, 03:02 PM   #44
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Ha, Marty is a god around here. Seriously. Go Third Ave! (well maybe not lately)

My 71 yr old boss just walked in here after doing some tinkering with a volatility model that came from a book by EO Thorpe (the famous card counting Wall Streeter), and said "I've looked at this stuff for a week now, and you know, I guess I'm just more for making money slowly than riding the volatility stagecoach". Wise words from a man who made his money with his hands and is still kicking!
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Old 04-17-2008, 03:47 PM   #45
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Just curious, did HEIRS also handle the refinancing of your home for you?
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Old 04-17-2008, 04:10 PM   #46
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This thread has reminded me of what psychologists call an "investment trap." (It's not about whether this investment is a good one or a bad one -- it's about how human brains function and lead us to make decisions the way we do.)

I don't know if that's what's going on here, but I'm going to take the liberty of using this situation as an example, in case this hasn't been discussed before:


First, you are asked to make small, incremental commitments. Initially, just a meeting with a rep. Then, $4000 to join. Then, monthly meetings. Each week, you are given new opportunities and asked to invest more.

Along the way, you get mixed in with a bunch of folks who are "eating up" the pitches being made to them, so there's the pressure of the crowd working on you also. The enthusiasm is infectious. In fact, you'd be a fool not to join in.

Not surprisingly, you invest -- who wouldn't like to pay off their mortgage -- it's a great goal! But you get to the point where you're starting to get uncomfortable. Small investments are adding up to an increasingly big number, or the promises are starting to sound too good to be true. You start to feel "cognitive dissonance" which means that you are holding two competing thoughts in your brain at the same time. "This is a scam," says one part of your brain, while the other is saying "I still believe this might pay off... the Better Business bureau thinks they're ok," etc. etc.

Having two competing thoughts in your brain feels bad. You must make a choice. You can decide that yes, it's a scam, and you've made a mistake -- a VERY hard thing to do, (least of all because of the money). On the other hand, you can decide that everything is ok, that you're still a smart investor, and that your worries are groundless and should be ignored.

Because you've invested your money, your time, and your concept of yourself as a smart investor in this program, you really REALLY want to believe that the deal is a good one. Your human brain is wired to chose this alternative. Experiments in psychology have documented this over and over again.

Investment partners may find themselves at different stages in this process. One may not be at the cognitive dissonance stage yet, or may in the stage where she's escaping her worries by rejustifying and rejustifying her decisions. This feeling is so strong that she wants to invest MORE to justify what's already been spent. Your wife's statement "we've got to get our money's worth out of this" is classic. Good money after sunk costs.

I think it's instructive that the majority of folks who replied to this thread -- and who have not made the same incremental investments --immediately saw it as questionable.

I don't know how to get out of this trap myself -- in the past it has manifested for me by my hooking up with the wrong man and hoping he'll change somehow...

One way you might compromise is to say that you'll invest in new ideas using the profits from current investments, when they come in. Your wife isn't forced to choose between investing and admitting a mistake, and you're not plowing more into what might be a dubious enterprise.

It might be useful to do some reading to see if this model applies to the situation at hand, in addition to reading about investment principles. The alternative seems to be to continue to arge with one another and / or to put still more money into a program that's making you unhappy.

Whatever happens, good luck to you!
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Old 04-17-2008, 08:23 PM   #47
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There is nothing to lose by talking with a Canadian version of a securities lawyer. Do it.
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Old 04-17-2008, 08:40 PM   #48
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"How does a 50% rate of return sound to you? And since you're buying land, you own a hard asset, so you're protected, unlike the stock market."
Nevermind!
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Old 04-17-2008, 09:53 PM   #49
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We've participated in 2 "ventures." The first one is a land-banking program with "S&D International." We've purchased 2 half-acre shares of a lot of farmland just outside of Edmonton. They've claimed we can expect 15% CAGR, doubling our money in 5 years. This was 2 years ago. We're still in the waiting stage with this one. We're in this one for about $80,000, and so far (according to the newsletters) they haven't started anything with our project yet. Sometime this fall, they expect to "approach the city to discuss how the land could best be developed." I'm still optimistic that this one might pan out.
I have lived, worked, and invested in and around Edmonton all of my life. OK, a few words of encouragement and warning for you. I looked at the S&D website, and the properties all actually exist. The Saunders lake one is on my way to work, and does have the S&D sign planted on it. I don't see Edm. developing very many of them since most are in outlying counties where Edm. has no jurisdiction. That said, most of the areas that they have invested in are easily worth your $80K per acre, but let me know and I can tell you which are the areas that are most likely to see growth and why. Bear in mind that this rapid rise in land prices has made many farmers in the area into instant multimillionaires and there are lots of for sale signs on the farmland in the area, so plenty of choices for developers.

My business is just 15 min south of Edm. and bare land in the industrial park is selling at $300K per acre, 6 years ago I paid $62K per acre. (U.S. and Can dollars are pretty much at equal value right now). 10 years ago my home 3.5 acres would sell for about $10K per acre. Now it would sell at easily $80K per acre but of course farm land out where I live is somewhat less. It would be more like $20K zoned agriculture.

A big problem with Edm. expansion outward is that the mayor recently announced that Edmonton would attempt to grow "up" rather than "out". This is because land wise, Edmonton and its satellite communities are huge compared to most major cities and it takes a lot of $$ to build roads, but if someone builds a skyscraper the city still gets taxes from it, but they won't need to build and maintain a long road or get a vast infrastructure of electrical and plumbing in place.

Cross your fingers and hope that the land is south of the city. If it is, then you pretty much automatically win big. Edmonton is in a boom due mainly to oil, both the conventional, and more importantly, the Alberta Oil Sands. Edmonton is a 4 hr drive away from the oil sands, but it is the main supplier of services, and a staging area for the huge tanks etc. that need to be made for all of the billions of dollars of projects taking place.

The latest non oil related mega dollar project that may directly impact your investment is something called "Port Alberta". Alberta is inland, but once the freight from China is offloaded from ships on the west coast it will travel by rail to a vast area to the immed. west of the Edm. International Airport which is 15 min. south of Edm. It is apparently the most logical spot in North America for freight from Asia to be dispersed by road or rail or air. It is also to be the air hub for items from China because they fly over the N. pole to get to North America, and Edm. is already set up with the runways that are needed for these huge transport planes.

Overall, I'd say that you likely have not been taken in on this one. Although it looks much like the types of gains that the U.S. housing markets had prior to that bubble burst, these ones aren't based on crazy lending or anything suspect. Here's the warning. Pay close attention and always remember this. The value of land in Alberta is going fluctuate exactly in parallel with oil and natural gas prices. It always has and always will. The current lull in price appreciation of your investment land is directly due to the low conventional drilling activity in the province since the price of natural gas is low and nobody is drilling for it right now.
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Old 04-17-2008, 10:15 PM   #50
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The current lull in price appreciation of your investment land is directly due to the low conventional drilling activity in the province since the price of natural gas is low and nobody is drilling for it right now.
$10.33 /mmbtu, basis Henry Hub. This is low?

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Old 04-17-2008, 10:32 PM   #51
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$10.33 /mmbtu, basis Henry Hub. This is low?

ha
good point. I should have said that it has become uneconomical since partially due to the recently strong CDN dollar making it pricey for the U.S. to buy our nat.gas, and partially due to insane boom mentality rises in drilling and production costs it is tougher to make a buck exploring for the stuff here.
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Old 04-17-2008, 10:49 PM   #52
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good point. I should have said that it has become uneconomical since partially due to the recently strong CDN dollar making it pricey for the U.S. to buy our nat.gas, and partially due to insane boom mentality rises in drilling and production costs it is tougher to make a buck exploring for the stuff here.
Thanks for the clarification. I had noticed that recently NG drilling has been much stronger in USA than in Canada.

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Old 04-17-2008, 11:43 PM   #53
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I live in Edmonton also and I have heard of S&D before. They certainly have made lots of $ on all their developments, but let's face it anyone in real estate in Alberta the last 5 years has made a tonne of money without doing much of anything. They have 5 or 6 projects going at any given time...one thing I have never understood about them is what happens if their current projects don't sell? Does the company simply wind up and disappear. That gives the impression of a ponzi scheme in that once the new money drys up, they head for the hills. Like you mention, all S&D land owners do actually own the land so you do have an asset that is worth something, but it is illiquid and would likely be difficult to sell immediately if you ever had to. How well this particular project does depends on how the Edmonton RE market ends up doing. As you may know, Edmonton home inventory is at record levels and prices have declined since summer of 2007. If you drive downtown you will also know that a glut of condos are going to be completed in the next year and a half. Who will buy all these properties? If real estate weakens, then any residential development will also suffer. It's not clear from the SD site if this is a residential or commercial property.
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Old 04-18-2008, 07:02 AM   #54
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Get out, get out, get out. If not, this club sooner or later will ruin you.
In the world of shady finance business the sales guys know well that those people who have already burnt some money are the best targets for new sales attempts:
because they want to make up for their loss they are not as careful as new investors and they have already proven that they are dupable.
The addresses of such victims are even SOLD!

If my husband would insist to stay in such clum and make such investments I would rather split all our assets once and for all with him and let him do with his part what I cannot stop. This will at least protect my 50%.
By no means I would get into debt for such "investments".
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Old 04-18-2008, 07:05 AM   #55
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Just curious, did HEIRS also handle the refinancing of your home for you?
They brokered the new mortgage, yes. The mortgage itself, of course, is held with a bank (First National, 5.35% 5 year fixed), not HEIR. I've no doubt they picked up broker commissions for brokering the new mortgage.
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Old 04-18-2008, 07:13 AM   #56
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Overall, I'd say that you likely have not been taken in on this one. Although it looks much like the types of gains that the U.S. housing markets had prior to that bubble burst, these ones aren't based on crazy lending or anything suspect. Here's the warning. Pay close attention and always remember this. The value of land in Alberta is going fluctuate exactly in parallel with oil and natural gas prices.
Wow, thanks Grizz, I appreciate the first-hand perspective. Our land is in the "Royal Links Point" development, which is actually in Leduc, just south of the airport. Our property is just west of highway #2, and just south of the Leduc Golf and Country Club, in the kink of the highway there. Here's a link to the region on Google maps.

I'm not necessarily counting on "big gains." At this point, I'd be ecstatic if we even just broke even. Based on the commentary in this thread, I'm now afraid that this whole thing is a scam, and that S&D is going to close up shop and disappear with our money, and it will turn out the deeds we have are bogus, and we'll be left with literally nothing to show for our $80k. That's pretty much my "worst case scenario," and the other posters here have got me feeling that it's now the most likely.
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Old 04-18-2008, 07:28 AM   #57
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They have 5 or 6 projects going at any given time...one thing I have never understood about them is what happens if their current projects don't sell?
From the way it was explained to us, S&D doesn't actually develop the properties. Here's how it was presented to us:

1. S&D studies hundreds of properties and makes an educated guess at which ones are the best candidates for development, based on urban trends, environmental aspects, projected growth, and whatever. They then buy these properties from their current owners (farmers or whoever).

2. S&D chops up the property into "units" and sells those units to a pool of investors, keeping about 30% of the "units" for themselves. This money allows them to go and find other properties to invest in for future projects.

3. Once the development has been sold out to investors, S&D then goes to the city to determine the best use of the land (residential, commercial, or a mix).

4. S&D applies to have the land re-zoned appropriate to the intended type of development.

5. S&D then hires a development company to draw up plans for a community on the land, including roads, drainage, housing lots, right down to the placement of streetlights and fire hydrants. Everything is up to code. They work with the city to ensure the development is approved.

6. S&D then opens the property up to bids from local developers. By this point, a few years have passed and the land would've (hopefully!) appreciated in value, all on its own. But since it's already been re-zoned, and a complete development plan has already been created, and all the developer has to do is build it, it should be substantially more valuable.

The developer bids on the land, and the landowners/investors vote on whether to accept or reject the offer. A 2/3rds majority is needed.

The idea is that since the red tape has been taken care of, and all the developer has to do is build it, then the land is now substantially more valuable. S&D's newsletters report the status of all their properties on a quarterly basis. Each newsletter mentions a couple properties that have been sold recently, including how much the selling price was per unit, how much the investors originally paid for their units, and how much profit the investors made. They typically double their money, which isn't entirely unreasonable in my opinion (that's about a 15% CAGR - ambitious, but it is real estate after all, in Canada's hotbed of oil activity).
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Old 04-18-2008, 10:13 AM   #58
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Wow, thanks Grizz, I appreciate the first-hand perspective. Our land is in the "Royal Links Point" development, which is actually in Leduc, just south of the airport. Our property is just west of highway #2, and just south of the Leduc Golf and Country Club, in the kink of the highway there. Here's a link to the region on Google maps.

I'm not necessarily counting on "big gains." At this point, I'd be ecstatic if we even just broke even. Based on the commentary in this thread, I'm now afraid that this whole thing is a scam, and that S&D is going to close up shop and disappear with our money, and it will turn out the deeds we have are bogus, and we'll be left with literally nothing to show for our $80k. That's pretty much my "worst case scenario," and the other posters here have got me feeling that it's now the most likely.
Firstly, you are sitting on a very juicy piece of real estate indeed. I would even suggest that it is the best of S&D's properties.

The "Port Alberta" project is going to draw in a lot of people to the area. Even without that, the airport is going to do yet another massive expansion due to the huge and much faster than expected rise in air traffic. You are located only a mile or 2 from the airport property next to some very nice upper middle class residential developments. I'm pretty sure that you aren't under any flight paths either. There will be a major interchange built very near you as well, and a large powercentre anchored by Wal-mart, Rona (like Home Depot), and Canadian Tire (think department store for automotive, recreation, gardening, and tools)is still being built very near your property. The Nisku industrial park which is where my business is located is a 5 or so minute drive from your place and is absolutely exploding with new developments (it's oil country after all), and lucky you, your place is only a 15 min. drive from my house, stop in for coffee some time.

You bought at about the time that the land prices levelled off around here, but as long as S&D are on the up and up, I would definitely not attempt to get out of this one. Not sure how S&D structures things, or how unruly it might get, but if you would like to sell 10K or so of it, I'd be very willing to take a good look at it.

That said, I looked at the S&D news section of their website, and it says that they have, within the last few days donated a million dollars to go toward construction of the new Beaumont Aquatic centre. Beaumont is another absolutely booming bedroom community to Edmonton and is located about 15 min NE of your property. If their news report is true, I'll be seeing it in the Beaumont weekly paper probably today. I would think that a donation of that size would give you some comfort that these guys aren't some shady back room operation. I'll let you know what I find.
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Old 04-18-2008, 10:18 AM   #59
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4. S&D applies to have the land re-zoned appropriate to the intended type of development.
That I see as one of the biggest threats to your gains. I too own raw land in the vicinity of a large, growing city (in Europe though). The land is actually located in a small town adjacent to the big city. As the big city expanded outward and the suburbs moved closer to my lots, the price of my land steadily increased over the years from about 10 euros per square meter in 1995 to about 80 euros per square meter in 2003. Then, the small town got a new mayor. He decided to put a freeze on all new constructions, all land that could have been developed was re-zoned as farmland overnight, and the price of land plummeted to about 3 euros per square meter within 1 year (so much for the safety of hard assets!). In the past 5 years, the price of land has increased to about 100 euros per square meter in neighboring towns while it has hovered around 3 euros for our town. We are now fighting to get the freeze lifted and have the land re-zoned but we might have to wait until the mayor is ousted to succeed.

As Grizz mentioned, policy changes by the city of Edmonton could have a major impact on the potential value of your land.
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Old 04-18-2008, 10:31 AM   #60
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That I see as one of the biggest threats to your gains. I too own raw land in the vicinity of a large, growing city (in Europe though). The land is actually located in a small town adjacent to the big city. As the big city expanded outward and the suburbs moved closer to my lots, the price of my land steadily increased over the years from about 10 euros per square meter in 1995 to about 80 euros per square meter in 2003. Then, the small town got a new mayor. He decided to put a freeze on all new constructions, all land that could have been developed was re-zoned as farmland overnight, and the price of land plummeted to about 3 euros per square meter in 1 year (so much for the safety of hard assets!). In the past 5 years, the price of land has increased to about 100 euros per square meter in neighboring towns while it has hovered around 3 euros for our town. We are now fighting to get the freeze lifted and have the land re-zoned but we might have to wait until the mayor is ousted to succeed.

As Grizz mentioned, policy changes by the city of Edmonton could have a major impact on the potential value of your land.
It's a good point that you make, and if I didn't know this area, I'd assume the same. Edmonton has no jurisdiction in the area where Kombat's land is, and farm land is definitely not in short supply. He's located in a sweet spot right on a very major corridor between Edmonton and Calgary. Leduc city and county councils are very accustomed to, and pro-development. I just can't see that piece of land not being developed.

Oh, I forgot one more thing. There is once again serious talk of a high speed train to connect Edmonton and Calgary. Kombat would be near that as well.
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