Saving Energy: Installing New Windows & Doors

I have now received the first empirical evidence that replacing your old windows & doors can have an impact on your utility bill.

Our house is one of the standard, ranch-style houses that were popular in the SF Bay Area in the late 1960s. It had the original, single-pane aluminum windows, and hollow-core doors.

We replaced the exterior doors a couple of years ago, but we just completed last month the installation of new, double-pane windows throughout the house. We also replaced the large sliding glass doors in our living room.

It’s a large expense, and while you are comforted somewhat that the money will come back to you when you sell the house, that seems like it will be very hard to prove. As a result, I’m really glad to see that our heating bill (our kerosene heater is gas-driven) for the first cold month of the year is actually quite a bit lower than last year.

Of course, the low gas bill could also be the result of us doing less cooking at home around the birth of my second son on October 30th. I’ll keep monitoring, but hopefully, the energy savings promised around this type of improvement turn out to be accurate.

Why I love Timber as an Asset Class

I found this article on the Motley Fool this week called “Is Lumber the New Gold“, and it reminded me why Timber might be my favorite asset class of all.

I was first introduced to Timber as an asset class at Harvard Business School, in one of my classes on Venture Capital & Private Equity. Dave Swensen, who managed the Yale endowment for over 20 years, discussed the strategy that led Yale to incredible outperformance in the 1980s and 1990s. He took the endowment from $1.3 Billion to $14 Billion, using a strategy very different than his colleagues.

It would be a whole different post to sing the praises of Mr. Swensen, and his philosophy on investing has now become public knowledge since he released a book on the subject. In his discussion with the class, I remember his specific comments on assets that had extremely attractive risk/reward ratios. Private Equity is one, to be sure, but he also allocated over 20% of his funds to “real assets”, which included Timber.

Timber is fascinating as an asset class. Here is a summary, cribbed from a recent post on Seeking Alpha:

  • Excellent Returns. Annual returns of 14.5% since 1972. Better returns than any common asset class (stocks, bonds, real estate, commodities)
  • Less Volatility than Stocks. What? More reward with less risk? It shouldn’t be true, but it here at least empirically.
  • Timber is counter-cyclical with Stocks. Especially nice to have an asset that zigs when the stock market zags.
  • Money grows on Trees. Fundamentally, you have to like the fact that 6% growth every year comes from the fact that trees just grow bigger with natural sun & water. The value of trees is also non-linear, in that growers can just “not cut” in weak years for timber prices, and make even more in subsequent years.

Here’s a nice post from Seeking Alpha in July on why Timber should outperform in an inflationary market. It even features my personal favorite REIT stock in the sector, Plum Creek Lumber (PCL), which I’ve owned since 2002.

You have to love the web. I found this fantastic blog post from 2005 on Timber. Couldn’t have said it better myself.

Until recently, it was very hard to invest in timber without a portfolio allocation in the millions of dollars. However, now, there are several ways to add timber to your portfolio. My favorite are the REIT stocks, like PCL & RYN, which allow you to own companies who have a primary business in owning & maintaining timber land. Given the regulations around managing timber land, and the tax-advantages of the REIT structure, it’s hard to get better direct exposure.

It’s interesting, but as the trend continues towards development & environmental protection, these firms should have an even more compelling advantage as the supply of quality timber dwindles, and the regulatory environment grows more arduous. Even the sleepy paper companies are starting to look more valuable for the timber land that they own, rather than the product they produce.

It’s so interesting that money, in some cases, really can grow on trees.

Update (6/13/2007): A commenter forwarded me to a webpage that had a link to one of my favorite articles on timber as an ivnestment, from a 2001 issue of Smart Money magazine.  Check it out here.

Blogs I Read: 2Million

This is another personal finance blog that I’ve started reading. It was references on My Open Wallet.

I found it through this recent post on calculating the benefit from renting out an old property instead of selling it:

The Real Return on My Rental Property

Here is the link to the blog itself:

2Million – My Journey to Financial Freedom

While I doubt I’d ever have the guts to post my personal financial details online, we are so lucky to have people like this posting out there. I myself have wondered if my wife and I should consider keeping our first house as a rental property when we eventually upgrade.

Check it out and let me know what you think.