How good of a con artist was Lamar Adams? Lamar Adams was so good that he sold timber investments promising 12% returns during a timber bust. As Lamar shoveled phony timber deeds by the bushel to gullible investors, the timber market in Mississippi was in a ten-year depression. CALPERS lost more than $500 million on a ten-year investment in southern timber while Madison Timber investors enjoyed phony 12% returns, The Institutional Real Estate website reported in 2018:
The $351 billion California Public Employees’ Retirement System reported it lost more than $500 million on timberland investments as part of its Lincoln Timber LP investment, according The Financial Times.
CalPERS exited the remainder of this investment in June with the sale of 1.1 million acres in east Texas, for $1.39 billion, a loss of $355 million on the purchase price. Combined with losses on disposals of previous portions of the holding, the total loss was more than $500 million.
CalPERS purchased Lincoln Timber in 2008 for $2.38 billion.
CalPERS’ return on the investment was a negative 0.5 percent over 10 years, underperforming its benchmark, the NCREIF Timberland Index, by 497 basis points during that time.
The Financial Times reported, “Many pension funds and endowments were lured into woodland in the past decade by the alternative asset class’s high returns and lack of correlation with other markets. But the CalPERS consortium wound up buying land in the southern United States just in time for a construction slump that has depressed log prices in the region to this day.” Article.
The article illustrates the real story of the whole Madison Timber fiasco: Lamar Adams was able to pull off his scheme during a timber depression. Timber prices crashed in 2008 and proceeded to crater even more for the next ten years while Adams promised 12% returns on timber investments. The Wall Street Journal reported in October 2018:
A glut of timber has piled up in the Southeast. There are far more ready-to-cut trees than the region’s mills can saw or pulp. The surfeit has crushed timber prices in Mississippi, Alabama and several other states....
It has been a big loser for some financial investors, among them the country’s largest pension fund. The California Public Employees’ Retirement System spent more than $2 billion on Southern timberland, and harvested trees at depressed prices to pay interest on money borrowed to buy. Calpers sold much of its land this summer at a loss. A spokeswoman for the pension fund declined to comment.
It has also been tough for the individuals and families who own much of the South’s forestland, and who had banked on its operating as a college fund or retirement account. The region has more than six million owners of at least 10 wooded acres, say academics and forestry consultants. Many of the owners were counting on forests as a long-term investment that could be replenished and passed on to heirs.
“If you work and you didn’t want to put all your money in the stock market, you’d buy 40 acres and plant trees and they’d be ready to cut by the time your kid went to college,” said Skip Steed, a timber broker in Lincoln, Ala. “It’s like a 401(k).”
The housing crash 10 years ago worsened the developing timber glut by depressing lumber demand and prompting woodland owners to postpone harvests. Mills closed....
In the South, timber prices haven’t stopped sliding. Adjusted for inflation, the price of Southern pine is down about 45% since 2007, according to Daowei Zhang, an Auburn University professor of forest economics. So-called saw timber, for making lumber, is at a 50-year low, adjusted for inflation....
Some timber harvests are barely worth the effort after the expense of logging, hauling, taxes and replanting. In some areas, there is hardly any margin for the imperfect pines that are pulped for paper and particleboard.
Waiting for better prices carries its own risks, because after a certain age, trees, like people, become more susceptible to disease. Hurricanes can lay down entire tracts. The Southern pine beetle can alter financial plans in days....
A crush of maturing trees arrived just as U.S. housing markets collapsed in 2007 and 2008, creating a supply imbalance that in some places has never ended. Even with increased demand from the housing recovery, there remain about 25 years’ worth of softwood supply in the Southeast, said Brooks Mendell, chief executive of Forisk Consulting, which advises timber investors.
In parts of Mississippi and Alabama, the glut is even worse. “It’s unclear we’ll ever have timber prices like we did 10 or 20 years ago,” Mr. Mendell said.... Rest of article.
Kingfish note: Not bad, Lamar, not bad at all.
10 comments:
Of course he had some of he best con men selling to investors that trusted them. These guys had to know the investment was a sham.
Our entire economy is a confidence scheme of global magnitude. Debt based fiat currency printed from thin air and propped up by OPEC as the de facto global reserve petrodollar. (Much to the chagrin of Russia and China)
Unfortunately for Lamar Adams, the perpetrators of the fractional reserve banking scheme own all 3 branches of our government, media, and academia. They shield themselves while absolutely roasting small fry like him.
Still better than living in North Korea.
I'm not sure this scam indicates superior sales abilities as much as it indicates the degree of cluelessness and greed of the marks and their crowd. It was likely this ecosystem of people thinking they were smarter than their peers, and the 'investment advisors' who 'help them manage and grow their wealth' for fat 'commissions' which created the opportunity of all those funds waiting to be separated from the holders.
All the organizers needed to do was construct the scheme and put the bait on the hook.
Pro-tip: If you are told it's an 'exclusive pitch', then it's a pitch and it ISN'T exclusive. Govern yourself accordingly.
Pro-tip: When your 'investment advisor' tells you 'it's a great opportunity' you need to already know what is in it for them.
"Everything will be fine. There is plenty of collateral. The promissory notes will be secured by an un-filed timber deed."
TP manufacturing and sales is HOTTTTTT right now. By TP futures.
The old saying is “if it sounds to good to be true, it usually is.” Why on earth people would think they could make 12% is mind boggling. You can guarantee that if there were investments offering these kinds of returns, they wouldn’t be available through the local country club. Big time sophisticated investors would have sucked up the opportunity way before it would ever have gotten to the small time occasional investor.
Too many pine trees hardwood in demand until Carona!
I thought I recognized the article as I read it. It’s a very good read, and anyone looking to buy property should read it. Land not used for farming is best as recreational use only. Pine is useless, and hardwood will take more than a generation to grow. Enjoy the outdoors for what it is and provides. It’s not an investment any more.
We need Lamar to run for Governor. At least he could scam corporations into building here with a less than desirable educational system and lie to the potential new businesses that we have people already trained to work since our vocational and technical system is a model to be compared by. Oh wait....that’s already been done. My bad.
Last one leaving please turn out the lights.
You lost me at 'pine is useless'. Are you aware of the home construction industry? Maybe your knowledge is limited to baseball bats.
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