Invest in Timberland

Invest in Timberland: Australia Money Trees
by Steve Sjuggerud
The Rude Awakening
Wall Street, New York
February 21, 2006

Steve Sjuggerud suggests a way to invest in timberland: an Australian company called Great Southern Plantations.

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Joel Bowman, racking up the long distance phone charges,
reports...

"It's on fire mate," an Aussie friend enthusiastically
reported on the phone recently. "They can't get enough of
us it seems."

"Sounds great. Doesn't really do anything for me though
mate...I'm earning American dollars right now," I exclaim.

"Well, maybe it's time you put some of your greenbacks to
work down here. I'm telling you, it's on fire."

My mate was referring, of course, to the raging commodity
market in Australia right now. Conveniently situated just
below China and India, Australia is perfectly positioned to
feed these heaving giants the natural resources they so
desperately need to continue their rapid growth.

You probably already know about BHP Billiton and Rio Tinto.
You may even have a few of the smaller mining companies on
your watch list. But I can almost guarantee you haven't
heard of the company in today's Rude Awakening.

Today we bring you part one of a story that is going to be
big news for investors. A short while ago, investment guru
Steve Sjuggerud decided he'd had enough of watching the
commodity explosion in Australia from a comfortable chair
in the U.S. He decided to pack his bags and head to the
Great Southern Land to see what all the fuss was about. As
you'll see below, he has not been disappointed.

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-------------------------

Australian Money Trees
By Dr. Steve Sjuggerud

Cheap timberland may be the world's best long-term
investment. Otto von Bismarck figured that out more than
100 years ago. His investment advisor, Gerson Bleichroder,
did a fantastic job managing Bismarck's investments,
delivering Bismarck about 10% a year over 25 years – in a
time of no inflation. According to a story by Barton Biggs:

"Bismarck was perfectly satisfied with this return, but he
always withdrew his profits and invested them in land and
trees. He was convinced that investing in paper securities
was a fine and quick way to get richer, but that the
repository of true wealth should be land on which you could
grow trees.

"Bismarck's appetite for timberland was insatiable. His
theory was that the price of land would gradually
appreciate in line with population growth, or about two
percentage points annually. His studies had convinced him
that... his real return from timberland would be around
4.75% per annum, because inflation at the time was
virtually zero... He thought that with very little risk,
this was a spectacular compounding of wealth."

"Bismarck was absolutely right. Over the next half century
in Germany of war, inflation, surrender, and depression,
timberland held value far better than anything else."

Invest in Timberland: Just Like Bismarck

Thanks to a very unique Australian stock, Great Southern
Plantations (GTP.AX) investors can own timberland just like
Otto von Bismarck.

Here's how Great Southern operates:

For A$3,000, Great Southern sells individual investors in
Australia the rights to the harvest of 1/3 of a hectare of
timberland, ten years into the future. The important thing
here is, the Australian buyer of this investment does NOT
get the land. They just get the earnings from the sale of
that timber once the trees are cut.

A full hectare of timberland may cost Great Southern up to
A$6,000 per hectare. But remember, they're selling the
timber harvested from 1/3 hectare plots for $3,000 each...
So Great Southern pays A$6,000 per hectare, but receives
A$9,000 per hectare from investors in the timber.

Great Southern plants eucalyptus on that hectare of land.
Eucalyptus trees are ready for cutting in roughly 10 year's
time. So in 10 years, Great Southern pays the investor his
portion of the timber sale, and that investor is done.

Now here's where it gets good... Great Southern still owns
the land. And it can "resell" that 1/3 of a hectare for
A$3,000, even though its incremental "cost" of that land is
now zero. Great Southern can do this over and over again.

Great Southern sold its first chunks of timberland to small
investors in 1994-95. So right now, we're just entering the
time when the first plantations are maturing. That means
they're just starting to "resell" that same land for
planting – land that now costs Great Southern nothing.

Better still, Australian tax laws encourage investment in
sustainable forestry. For Australian citizens, therefore,
100% of their investment in this kind of timber deal is tax
deductible. This is some amazing stuff... consider this:

The top tax bracket in Australia is 48%. So an Australian
in the top tax bracket could invest A$30,000 in one of
these projects for and receive a tax deduction of
approximately A$15,000.

It gets even crazier... Without putting up a penny, the
average investor in these projects can still receive the
full tax break.

Great Southern, for example, can lend investors the money
to buy their interest in a plantation. Great Southern can
make a A$30,000 loan to an investor, and the investor can
still cut his taxes by A$15,000. (Great Southern charges
12% interest on these loans. And importantly, it sells
these loans, to get rid of most of its risk. It sells them
to Adelaide Bank, who has to chase the customers down if
necessary.)

The deal sounds almost irresistible to taxpayers... Not
only do you save A$15,000 in taxes, but you also get into
an investment that has a good chance of making you money.

The whole thing sounds too good to be true. And it was...
What happened was a lot of shady companies tried to take
advantage of these tax laws by creating illegitimate tax
shelters. In the late 1990s, the Australian government
cracked down on these abuses.

People would "buy" into a tax scheme, only they'd put down
no money. The scam was just to get a tax rebate check from
the government. The "investors" would collect checks for
A$15,000, but they'd never spend the A$30,000 they
promised. They were just scamming the government.

Invest in Timberland: Great Southern Comes Out a Winner

In 2001-2002, the Aussie government passed a ruling on
this, calling many of these deals fraudulent. A lot of
Aussies got stung. In the end, not only did the Aussies who
invested in these shady deals have to come up with back
taxes on all the shady deals they got a tax benefit from,
they had to pay stiff penalties as well.

As you might imagine, sales of these tax-related schemes
completely fell apart after this. Investors were scared
off.... They didn't know which firms were real and which
were phony. And investors didn't trust that the government
wouldn't just change its mind someday.

Great Southern came out of the scandal a big winner... None
of its investors had to give back a penny in tax benefit –
they were all fine.

Better still, Great Southern's competitors fell apart.
Great Southern was even able to cherry pick its competitors
assets. "We would have paid more than we did for some of
them," a representative at Great Southern told me as I
visited them yesterday in Perth.

The thing is, the general public in Australia is still a
bit skeptical of these tax-saving timberland investments,
after the rulings of 2001-2002. But it's all changing fast.
Check in tomorrow for more details about this unique
company.

[Joel's Note: If you want the inside run on the latest
investment opportunities, it seems to me that you want
someone on the ground, at the epicenter of the action.
Steve Sjuggerud's hands-on approach to investing has kept
him ahead of the herd and his readers in the profits. You
can check out what Steve is calling "the two best
safe commodity plays right now" from down under by looking
right here:

Sjuggerud Confidential:
http://www.stansberryonline.com/redirects/ESCFG216.html

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Matt Badiali has been keeping an eye on developments and
has rushed out a special Oil Report detailing his findings.

Read on below and discover how you can take advantage of
this black gold opportunity:

The S & A Oil Report
www.stansberryonline.com/stansberry/OIL/oilreport.asp?pcode=EOILG108&alias=launch 

-------------------------

[Joel's Note: Be sure to tune in to part two of Steve's
exploration of the great land Down Under in tomorrow's
issue of the Rude Awakening. If you have any of your own
investment ideas, whether from the sun burnt country or
not, you can email them to:

aussiejoel@the-rude-awakening.com

I'll be on the lookout this afternoon for the pick of the
bunch and will endeavor to publish a select few in
tomorrow's issue.

Cheers,

jOEL

And the Markets...

	Friday	Thursday	Year-to-Date
DOW	11,115	11,121	3.7%
S&P	1,287	1,289	3.1%
NASDAQ	2,282	2,295	3.5%
10-year Treasury	4.54	4.59	14.00
30-year Treasury	4.51	4.57	-3.00
Russell 2000	731	732	8.6%
Gold	$552.10	$547.75	6.8%
Silver	$9.44	$9.43	7.0%
CRB	326.15	322.60	-1.7%
WTI NYMEX CRUDE	$59.88	$58.90	-1.9%
Yen (YEN/USD)	JPY 118.22	JPY 117.69	-0.3%
Dollar (USD/EUR)	$1.1931	$1.1891	-0.8%
Dollar (USD/GBP)	$1.7412	$1.7382	-1.2%