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What’s Driving the Boom in 1980s Classic Cars? The Male Midlife Crisis

The Financial Times published a good piece this week on the boom in 1980s “classic cars.”  Yes, I put “classic cars” in quotation marks because, frankly, everything to come out of that decade is horrendously ugly and best forgotten.

The FT writes:

The 1980s, often recalled as fashion’s ugliest decade, is back in favour when it comes to sports cars.

Collectables such as the Ferrari 308, driven by Tom Selleck in the Magnum PI television crime drama, are rapidly rising in value as a new generation of buyers enters the classic car market to purchase the cult supercars of their youth.

Average prices for signature wedge-shaped models including the Lamborghini Countach have doubled or tripled in the past year on both sides of the Atlantic. Even the cost of a humble Ford Capri Mk 3 has risen more than 80 per cent…

A Lotus Esprit car converted into a submarine and taken underwater by James Bond in The Spy Who Loved Me in 1977, was listed on eBay this week for $1m – in the region of the price Tesla chief Elon Musk paid for a similar model last year.

What’s driving the boom?  Ian Fletcher of IHS Automotive calls it “bedroom wall syndrome.”  The boys that used to hang posters of these cars on their bedroom walls are now middle-aged men with the disposable income to buy them.

Doc's time machine would be worth a lot of money today.

Doc’s time machine would be worth a lot of money today.

Men are predictable.  Most of us, while we age physically, never really mature much beyond our teenage years.  So might buying broken-down old sports cars be a viable investment strategy?

Yes, but pay attention to demographic trends.  A man who is 50 today was born in 1964, just a couple years past the peak of the post-war baby boom. He would have been sixteen years old–and fantasizing about exotic sports cars as much as exotic women–in 1980.  The demand you see today for early 1980s cars are from men born at the very end of the baby boom.

But think about what came next.  After 1961, U.S. births went into a long decline that didn’t bottom out until the late 1970s.  It wasn’t until the late 1980s that Americans really starting having babies at anything close to the levels of the 1950s and 1960s baby boom.

What does this mean?

It means that we shouldn’t expect a repeat of this next decade with 1990s classic cars.

Why?  There will be a shortage of middle aged men buying 1990s cars next decade because there was a shortage of teenage boys in the early to mid 1990s to lust after them.

If you want to play the long game here, start shopping for hot cars from the mid-to-late 2000s in another 10-15 years.  The boys born in the “mini baby boom” that peaked in the early 1990s were car-crazed teenagers circa 2006.  They will be 40-something professionals with disposable income to burn by the early 2030s.

Charles Lewis Sizemore, CFA, is the chief investment officer of the investment firm Sizemore Capital Management. Click here to receive his FREE weekly e-letter covering top market insights, trends, and the best stocks and ETFs to profit from today’s best global value plays.

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Maybe Germany’s Stodgy Conservatism Isn’t So Bad After All…

The Economist ran a piece over the weekend prodding German Chancellor Angela Merkel to “Build Some Bridges and Roads” as a way of jolting Germany’s slowing economy back into growth.

My response:  Who’s going to be driving on them in another 10 years?

Take a look at the following chart, which comes from the United Nation’s Population Division.  All estimates are using demographic data as of 2012.

line-276-1-TPV

Germany is in the midst of a multi-decade baby bust.  Its population peaked in the mid 2000s and has been in decline ever since.  The average estimates (i.e. “medium variant”) shows Germany losing nearly 10 million people by 2050, or roughly 12% of the population.  Another 10.4 million Germans–or nearly 14% of the then-living population–will be aged 80 or over.  So roughly a quarter of Germany’s current population will be either dead or too old to do a lot of driving in another 35 years.

So I repeat the question: Who’s going to be driving on all of the roads and bridges The Economist is prodding Germany to build?

Germany has consistently resisted looser monetary policy by the European Central Bank and calls from the rest of Europe for Germany to spend more as a way of keeping the Eurozone economy afloat.  On the first count, I’d say Germany is dead wrong.  The German obsession with inflation looks more ridiculous every day as the Eurozone inches closer and closer to outright deflation.  But on the resistance to run government budget deficit, the Germans are taking the only course of action that makes sense.  Running up debts today to build infrastructure that no one will be around to use makes no sense, particularly when you figure that there will also be no one around to pay it back.

Charles Lewis Sizemore, CFA, is the chief investment officer of the investment firm Sizemore Capital Management. Click here to receive his FREE weekly e-letter covering top market insights, trends, and the best stocks and ETFs to profit from today’s best global value plays. 

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More Americans Retiring Abroad Than Ever Before: Here’s Why

More Americans are retiring abroad than ever before, motivated by lower costs of living, cheap transportation and communications, affordable health care, and–perhaps most importantly–a sense of adventure.

It is, of course, those restless Baby Boomers leading this trend.  I shared my thoughts with MarketWatch’s Quentin Fottrell:

The Baby Boomers have always been a little more adventurous that the generations that preceeded them. This is, after all, the generation that gave us Woodstock and the counter culture movement. Technology and cheap international travel also help a lot; these days, with social media, cheap phone calls, and even Skype, retiring Boomers can watch their grandkids grow up from thousands of miles away and visit them regularly too.

But the single biggest factor for the increased interest in international retirement comes down to simple demographics. There are a LOT more Boomers than there were of any previous generation, so even in a world in which demand for international retirement stayed constant as a percentage of the retired population, demand would be surging due to the enormous size of this generation.

To read Quentin’s article–and I highly recommend you do if you’ve ever considered living abroad–see 5 Reason Not to Retire in the U.S.

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Blockbuster Sequels: How Their Profits Compare to the Originals

Research site Panjiva compiled some good data on three of this year’s blockbuster movie sequels–Transformers: Age of Extinction, X-Men Days of Futures Past, and the Amazing Spiderman 2.

All of these movies have one thing in common: each was based on a comic series or toy originally intended for children or young adults.  As such–like Disney cartoon movies–all are uniquely well positioned to benefit from merchandise and toy sales.
Panjiva Movies
The Transformers franchise has seen steadily growing merchandise shipments even while box-office performance has been a little more lumpy. The X-Men franchise too has seen good growth in merchandise–and a huge jump in opening-weekend ticket sales.

Spiderman has been less successful on the merchandise front, though these stats do not tell the full story.  Total sales of Spiderman merchandise is likely far higher than the numbers seen here, which only include items specific to the movie.

Is there a story or common theme here?

Yes.  There was a mini baby boom that peaked in 2007, just before the financial crisis hit.  2007 was actually the biggest birth year in U.S. history–even bigger than the post-war boom years of the 1950s.

All of those baby boys born in the early and mid 2000s are now old enough to run around the neighborhood wearing super hero capes and to pretend that their dad’s car is a Transformer.

The bad news?  American births went into sharp decline after 2008 and only look to have bottomed out by last year.  This means there are fewer super-hero-idolizing little boys coming down the pipeline in the years ahead.

So, Marvel and Hasbro (HAS) should enjoy this fantastic merchandising boom now and for the next couple of years.  Because once these boys reach their pre-teen years, the good times are over for a while.

Charles Lewis Sizemore, CFA, is the editor of Macro Trend Investor and chief investment officer of the investment firm Sizemore Capital Management. Click here to receive his FREE weekly e-letter covering top market insights, trends, and the best stocks and ETFs to profit from today’s best global value plays. 

 

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Long-Term Care as an Investment

LTC Properties, Inc. (LTC) is a real estate investment trust that invests primarily in the long-term care sector of the health care industry, including long-term care provider properties, skilled nursing properties, assisted living properties, independent living properties and memory care properties.  LTC also invests in first-lien mortgages secured by long-term care properties.

A little over 80% of LTC’s portfolio is invested in properties with the remainder in mortgages.  And among properties, skilled nursing is the biggest single segment, at 55%.  Assisted living comes in second at 37%.

LTC is backed by absolutely fantastic macro trends.  As the Baby Boomers age, there will be unprecedented demand for long-term services—and thus unprecedented demand for long-term care facilities.

But then, of course, there is Medicare.  It’s no secret that the U.S. government is short of funds these days, and Medicare cutbacks have been an unfortunate outcome. But that is what makes LTC such an attractive way to play the trend of Boomer aging.  LTC is a landlord, not a care provider, so Medicare cutbacks will have little impact on revenues.  And even better, as with Realty Income (O) and American Capital Realty Properties (ARCP)–two other popular monthly-pay dividend stocks–most of LTC’s properties are leased under triple-net leases, meaning the tenant covers taxes, insurance and maintenance.

LTC’s monthly dividend works out to a current yield of 5.2%, making it competitive with other medical REITs.  LTC is also a relatively small REIT with a market cap of just $1.37 billion.  I like that, as smaller REITs can generally grow their portfolios—and their dividends—at a faster rate than their lumbering large-cap cohorts.  And with a debt-to-equity ratio of only 46%, which is half the level of many of its peers, LTC has a lot of room to borrow. This too gives it flexibility to grow that its competitors do not have.

Action to take: Buy LTC Properties at market.  Plan to hold indefinitely for total returns of about 15% per year (I expect the S&P 500 to return no more than 5% annually over the next 5-7 years).  Use a 25% stop loss as risk management.

This post first appeared on TraderPlanet.

Charles Lewis Sizemore, CFA, is the editor of Macro Trend Investor and chief investment officer of the investment firm Sizemore Capital Management. Click here to receive his FREE weekly e-letter covering top market insights, trends, and the best stocks and ETFs to profit from today’s best global value plays. 

 

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