When owning a pine plantation, which is a very good timberland investment, thinning is an essential tool to maximize growth and consequently total return on investment. When thinning, the target is to eliminate the inferior trees leaving more room to grow for the bigger quality trees. The remaining trees and shrubs shall have significantly more sunlight and available nutrients. The vigor is increased by it on the remaining trees and because they are more healthy, they are more resistance to episodes and disease from pine beetles.
I lately inspected a harvesting procedure on a property where I am working with the landowner to insure the thinning is implemented properly. Please, have a look at the following short video clips and photos. The picture shown below shows a loading deck where the logging contractor is almost finished in this field. You start to see the small piles of tops. He has pre-staged these tops to allow them to be sent by him all as one weight to the pulpwood mill. This shows a very efficient use of the resource.
The next photo shown below shows the trees as they are being sorted in the loading deck. The trees and shrubs on the still left in the foreground will be sold as small pine saw timber. The trees on the still left in the trunk will be sold as pine chip-n-saw and the trees and shrubs and the right will be sold as pulpwood. An adequately managed thin provides for a healthy forest in the future. Proper marketing and separation of the various products will provide for maximum revenue to the landowner.
If you have negative nominal interest rates, why do you ever lend money out, since you have the choice of just holding on to the money as cash. Historically, that has led many to believe that the floor on nominal rates should be zero. As rates go below zero, it’s time to reexamine that belief. One way to reconcile negative rates of interest with rational behavior is to introduce costs to holding cash and there are clearly some to factor in, especially in the current economies.
The first is that while the proverbial stuffing cash under your mattress option is thrown around as a choice, you increase your exposure to theft and may have to invest in security procedures that are costly. The second reason is that there are some transactions that are extraordinarily cumbersome to have finished with cash; imagine buying a million dollar house and counting out the money for the payment.
The Danish, Japanese, and Swiss governments are getting into a grand test, perhaps, of how much savers will be prepared to cover the convenience of keeping cashless. In effect, the low bound has shifted below zero but there continues to be one. When central banks in these currencies strongly signal their intent to operate a vehicle rates of interest to zero and below, what may be the motivation?
So, why has it not worked well? This is all hypothetical, you might say, but there is certainly evidence that marketplaces have become significantly less trusting of central banking and more willing to go their own ways. For example, as the risk-free rate has lowered during the last few years, note that the expected come back for stocks has remained around 8% during that period, leading to higher and higher collateral risk premiums. While bond markets did not see this phenomenon initially, calendar-year default spreads on bonds in every ratings class widened last, even as rates dropped.
- 58 Sec. 705
- Realty trust
- Journal of Economic Perspectives
- *Trust is inserted in the system*
Interestingly, the newest ECB announcement that they might push the rates they control lower was followed by news that they would enter the connection market as customers, wishing to keep the default spreads down. That is a fascinating experiment and I have a feeling it shall not end well.
My interests in negative interest rates are primarily in the context of valuation and corporate finance. In both arenas, the hurdle rates we use to choose investments and value businesses build off a long term without risk rate as basics and having that bottom become a negative value is disconcerting for some.