First Venezuela; Is the U.S. Next?

A few years ago we wrote about Venezuelan President Hugo Chavez seizing privately held land and redistributing it for political gain. Did anybody think he would just stop there?

In subsequent years Chavez has all but eliminated private property rights in this once prosperous country. In addition to stealing acreage, he has taken control of major companies in metals, materials and energy, including food plants owned by U.S.-based Cargill earlier this year.

Just this week, Chavez seized the nation’s two largest coffee-processing plants and revoked the broadcast license of 34 radio stations. Lawmakers are discussing a bill that would give out punishments for as-yet undetermined “media crimes” on broadcasters who publicly oppose Chavez’s policies.

The net result of his “socialist revolution” has been a collapse in production coupled with widespread unemployment. Shortages of basic commodities are commonplace and inflation now rests north of 27%. This is in a country sitting on 7% of the world’s proven oil reserves, more than Russia, Brazil, the U.S., Norway or Qatar, yet nearly 38% of the population lives below the poverty line.

Turns out a country’s prosperity – for all citizens – has nothing to do with their natural resources, but their political philosophy. As demonstrated by the widely-followed Index of Economic Freedom, the most free and capitalist countries are always the most successful.

The United States isn’t Venezuela…yet. Because as our own country embarks on an effort to own and manage private industry devoid of the profit motive for “the public good” it’s unlikely we’ll achieve any better result than Hugo himself.

Left off of this week’s profile of world real estate plays was DWS RREEF World Real Estate & Tactical Strategies Fund (DRP), an actively managed global real estate closed-end-fund trading at a weighty 20% discount to its underlying NAV and sporting a 7% dividend yield.

Been Around the World

DWS PREEF World Real Estate & Tactical Strategies Fund Inc (NYSE) – 1 year

Its largest holding is the Link REIT, owner of $3.3 billion of Asian real estate, including 180 shopping malls and parking lots formally owned by the Hong Kong government. It’s the first and largest REIT listed in Hong Kong, and one of the biggest property firms in the world. Seventy-five percent of the fund is made of up of non-US firms.

If you’re interested in DRP you should be aware that it’s poised to have a reverse stock split on Aug. 10. That means for every two shares you own today you will have one share after Aug 10. The price will look like it has doubled in value, but really, you’ll still own the same percentage of common shares as you did before. Assuming the price doesn’t change much between now and Aug. 10, instead of owning two shares of the fund with a value of about $7 each, you’ll own one share with a value of about $14 after the reverse split.

Competition is benefiting investors when it comes to precious metal ETFs, where European fund provider ETF Securities recently launched its first U.S. product – ETF Silver Trust (SIVR), a fund that holds silver bullion. Not only is the fund cheaper than incumbent iShares Silver (SLV), boasting an expense ratio of 0.30% vs. SLV’s 0.50%, but a daily report lists the exact bar numbers held in the fund, a benefit not matched by iShares that will satisfy even the most suspicious conspiracy theorists.

The housing slump has affected everybody, even Hugh Hefner. The Los Angeles Times reported Hefner, the founder of Playboy Enterprises (PLA) and his wife Kimberley (1989 Playmate of the Year) have sold their California mansion for $18 million, nearly $10 million less than it had been listed for since early March.

As stocks have rallied to new highs, the value of the U.S. dollar has sunk to yearly lows, trading at levels not seen since last fall and continuing a pattern we noted earlier this summer.

PowerShares DB US Dollar Bearish Fund (UDN) offers constant and unleveraged short position in the U.S. Dollar Index, and is ideal for those uninterested in specific currencies and would prefer an index approach to FX exposure.

Pocket Change

PowerShares DB US Dollar Bearish Fund (UDN) – 2 year