EVERYBODY’S BUSINESS

Recently Salomon Brothers of New York published an interesting bit of research about what types of investments have fared the best during the past ten years. Topping the list is Chinese ceramics, which brought an average annual appreciation of more than 23 percent. Not bad if you can figure out how to invest in Chinese ceramics. To no one’s surprise stocks finished last, returning a scant 2.6 percent a year, pretty miserable when one can buy a riskless certificate of deposit which pays six or seven percent annually. However, the survey concludes, because of stocks’ weak performance, they are the only real investment bargain left. Here are the survey’s results:



Compound Annual Growth 1968-1977

Chinese ceramics 23.2 percent

Gold 16.0 percent

Old Master’s Paintings 13.0 percent

Oil 12.5 percent

Coins 12.3 percent

Farm land 1 1.1 percent

Housing 8.6 percent

Bonds 6.4 percent

Consumer Price Index 6.2 percent

Stocks 2.6 percent

There are some knowledgeable Dallas people working in these areas, so I checked with a few of them for advice on how to invest wisely in a few of these fields beside stocks and bonds, which any brokerage house covers adequately.



Oil: The price of oil has risen dramatically since 1974, and is likely to continue upward. Perhaps even more fertile investment ground is natural gas, which is bring-ing excellent returns. Because owning wells or investing in drilling funds excludes all but the wealthiest investors, oil and gas stocks are the best practical bet for capitalizing on the energy crunch.

There are two very important factors in buying oil and gas stocks. How much oil and gas does the company have in the ground? Is the company steadily increasing its reserves? Don’t be alarmed by earnings – in the oil and gas business it’s what’s in the ground that counts.

Two of Dallas’ best energy research departments belong to Rauscher Pierce Securities and Schneider, Bernet & Hick-man. Here are their energy stock recommendations.

Jack Hyzer and Sam Bright Jr. of Rausch-er Pierce: For quality investment in companies with large proven reserves – Southland Royalty, General American Oil and Sabine Corporation. For aggressive investments in companies having notable success in finding new reserves: McMoran Exploration, American Quasar and Houston Oil & Minerals.

Alan Edgar of Schneider, Bernet & Hick-man: All factors considered, favorites in order are Mesa Petroleum, Coastal States Gas, Lear Petroleum, American Quasar, Southland Royalty and Houston Oil & Minerals.



Gold: Although gold finished second in the survey, its price per ounce rose significantly only during a three-year period, 1971-74, when it shot up from $41 an ounce to more than $159 an ounce. Today gold sells near $150 an ounce. Gold can be bought in several different forms – actual bullion, coins, or gold mining stocks.

Gold bugs are hard to find, so I checked with Houston’s Doug Johnson, a longtime gold investor and writer. Johnson suggests buying gold stocks because they pay dividends and don’t have storage costs associated with holding bullion or coins. Johnson says the best gold stocks are from South African miners, particularly those which extract uranium along with gold. His two current favorites are Vaal Reefs and Harmony Gold Mines, both sold over-the-counter. Johnson is an unabashed optimist and thinks gold might hit $200 an ounce within a few months, because of a recent change which allows central banks around the world to buy and sell gold freely.



Art: Salomon’s 23 percent annual appreciation in old master paintings is impressive, but other genres of paintings, such as impressionist works, have appreciated even more. Undoubtedly one of the surest hedges against inflation is owning one of the finest works of a world-renowned artist. But these works, which generally sell for hundreds of thousands of dollars, are out of most investors’ leagues.

Despite its potential riches, art investing is a tricky business made even trickier by the entrance of sentiment into one’s investing. Donald Vogel, a fine artist and well-known Dallas art appraiser, gives this advice to a person with five or ten thousand dollars and a desire to invest in art: Look at hundreds of art works, searching for the sort of art which most pleases you. Once you decide what types of fine art you like, select a reputable art dealer who then will advise in finding the best investment within the bounds of your taste. For a little risk, try acquiring a work produced by an artist who seems bound for top art circles, and hope he makes it. Buy only for artistic quality, not celebrity-based fads. Like movie stars, celebrity artists in time will fade, and so will the value of their work.

Art is expensive to get into – gallery commissions are high and insurance will add to the cost of maintaining the work. Collecting fine art is strictly a long-term investment, but one that can bring everyday pleasure and perhaps pro-fit, a combination that’s hard to beat.



Farm land: At a glance farm land looks like a sure-fire investment. During the first half of the Seventies, farm land in Texas appreciated 70 percent, and in some midwestern states, closer to 150 percent. Although it’s possible prices of farm land may continue to spiral upward, so might other sorts of real estate investments which are far more practical.

I talked with Ken Shulman of Henry S. Miller Companies, who deals in shopping centers and in agricultural land. The problem with buying farms or ranches is that the agricultural operations won’t pay off land debt. Typically, agricultural land sells for 20-29 percent down and the remainder is financed. There’s no way ranch land returning about one percent on the investment or farm land returning three or four percent can begin to pay off land debt. In short, Shulman says, the only practical reason for buying a spread is “pride of ownership,” and then a buyer better be prepared to pay all cash or be ready to feed the operation gobs of money. Buy a shopping center instead, he quickly adds.



Housing: Although the Salomon Brothers survey showed an 8.6 percent annual appreciation in housing, there’s reason to believe one can do much better than that. I checked with two Dallas men who spend much of their time buying single-family homes and duplexes, fixing them up, then either holding on for rental income or selling quickly for the gain. Dan Beard and Bob Hultstrand say that if an investor carefully chooses his properties and is willing to work hard at improving and maintaining them, he might make 50 percent on his total investment within a couple of years. Considering that the usual cash down payment for a house is about 20 percent, that’s more than 200 percent on actual cash invested.

Beard and Hultstrand generally buy homes or duplexes which are in decent condition but capable of being improved. They quickly fix them up, enabling a large increase in rents, which in turn greatly enhances the resale value. Beard holds his for long-term appreciation, allowing the rental income to pay his mortgages. Hultstrand resells his as quickly as possible, plowing the profits back into more properties.

Here is their advice for a Dallas investor considering the same sort of investment:



● Discuss the idea with a banker and determine how far he will back you.

●Study the potential buying area verycarefully, looking for an area on the fringeof a nice neighborhood. You want to bein the path of increasing home values.Look for nearby bus transportation, shopping and entertainment.

●Find a cadre of reliable maintenancepeople whom you can call, especially aplumber.

●Look at plenty of properties. Onceyou find a good one, have it examinedinside and out to determine how muchmoney you will have to invest for improvements. This is likely to be your cash, sodon’t underestimate.

●If you plan to hold the property long,try to make a seller-financed deal, whichsome older sellers like. It will give theseller more interest than alternative investments and cost you less savings andloan mortgage mone

●Check out potential renters carefully and don’t show your property unlessit’s clean. Anyone who wouldn’t mindmoving into a dumpy home isn’t likely tokeep it up.

●Start out small, so if you make mistakes they won’t be too costly. Keep in touch with your accountant to understand tax ramifications of any move you might make.

There is no guarantee that housing values will continue to spiral, but it seems likely for the next few years. If an investor buys good properties, chances are he can capitalize on the trend.



While American and Japanese diplomats are trying to work out a new air traffic treaty this month, some Dallas-Fort Worth businessmen and politicians are busy attempting to lobby their way into the Japanese treaty as adroitly as they did in the recent U. S.British air negotiations. The object is a non-stop air route to Tokyo, which makes good sense. But after Dallas-Fort Worth’s near flop in the British negotiations, the Japanese treaty isn’t likely to be taken lightly.

The cities nearly blew the critical campaign to make the British treaty, which gave Dallas-Fort Worth its first non-stop international air route, a matter of considerable commercial significance. Dallas-Fort Worth civic leaders, unaccustomed to playing hard-ball politics at home, quickly learned how to play them on the road. This fall they are a good bit wiser in the ways of pressure politics, and not coin-cidentally. more successful for it. The story of the British negotiations suggests a dramatic drop in Dallas’ political naiveté.

Last spring the Dallas-Fort Worth business communities were doing routine lobbying to push for the cities’ inclusion in the U. S.-British air treaty. Area congressmen, particularly Jim Mattox, were making telephone calls to important White House contacts, the Department of Transportation, and so on. Despite these efforts, in the waning hours of negotiations Dallas-Fort Worth officials discovered that the British had very little interest in a D-FW route. To make things worse, the British had great interest in Houston. If Houston were to secure international air routes at the exclusion of Dallas, Houston might become the logical entry point for all foreign routes into Texas, a very unwelcome prospect in Dallas-Fort Worth.

Working through the North Texas Commission, civic leaders contacted House majority leader Jim Wright on the eve of the final negotiations. Fort Worth’s Wright said he happened to have an appointment the next morning with President Carter and would broach the D-FW subject. Wright did, and Carter seemed to take an interest. At the same time President Carter’s trade negotiator, Dallas’ Bob Strauss, was reportedly working in the background, pushing the U. S. negotiating team to force Britain to include D-FW in the treaty.

On the morning of the final negotiations, Wright teletyped a message to Alan Boyd, President Carter’s negotiator. Boyd, a long-time acquaintance of Wright’s, received the message in the afternoon, London time. Although it’s not clear precisely what the President did, observers feel certain he did something, because the American negotiating team held up final details of the treaty far into the night until British negotiators agreed to include Dallas-Fort Worth.

Perhaps the most effective element inthe Dallas-Fort Worth strategy was thecities’ intelligence network in London,which discovered at the last second thatD-FW was very low priority with the British, despite our area’s friendliness towardthe Concorde. Most of the intelligencewas gathered by London-based businessmen working for Dallas-Fort Worth companies, who tapped their political sourcesin London. Without their information,Dallas-Fort Worth leaders might neverhave realized the need to play last-secondheavy politics by calling on Wright, Straussand President Carter.