Author Topic: U-Haul U-Notes  (Read 9329 times)

TSR Capital

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U-Haul U-Notes
« on: June 11, 2013, 10:17:37 AM »
https://www.uhaulinvestorsclub.com/HowItWorks/

I found this the other day while researching peer to peer lending.

It's basically a direct collateralized bond with Amerco (U-Haul parent corp).

I'm going to purchase a small amount soon to try it out.


giggles

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Re: U-Haul U-Notes
« Reply #1 on: June 11, 2013, 01:59:02 PM »
This looks really interesting.  Thanks for sharing!  If you decide to do it, PM me and we can do the refer-a-friend.
« Last Edit: June 11, 2013, 02:06:37 PM by giggles »

arebelspy

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Re: U-Haul U-Notes
« Reply #2 on: June 11, 2013, 02:25:09 PM »
I'd love to hear your thoughts on why this investment deserves a place in your asset allocation.

What are the risks vs. return?  How is this correlated, or not, versus your other investments?  What's your potential upside?

I'm just not clear on why one would invest in this versus the many more well established investments with track records, etc., and since you've apparently been thinking about it, I'd love to hear your reasoning.
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ScottEric

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Re: U-Haul U-Notes
« Reply #3 on: June 11, 2013, 02:34:21 PM »
I did something like this with a company that aligned with my own personal values (sort of local fair trade coffee roaster).  It worked out really well, it was essentially a "CD" without FDIC insurance.  They had a really strong track record and the returns were better than most anything else at the time.

U-Haul, however, doesn't tick any of the right boxes for me at all, quite the opposite.

If that's your thing though, good luck!

TSR Capital

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Re: U-Haul U-Notes
« Reply #4 on: June 11, 2013, 03:17:31 PM »
Reply to arebelspy:

Yeah, those are fair questions.  There's nothing overly special about this except that the corporate issuer is dis-intermediating traditional financial institutions, as does other p2p lending (somewhat Mustachian).  It's also backed by underlying assets (like trailers, trucks), which is a bit novel, for the direct p2p lending model.  I wouldn't be surprised if more corporations do this kind of direct issuance.  I also suspect there will be more asset-backed p2p lending in the future as well.  I think I heard the Lending Club CEO talking about getting into mortgages at some point.

A U-Note is just an asset backed bond with Amerco.  I'm not done researching this, so I may not invest.  But what I saw of their financial statements and annual report looked ok.   I think the Club has been around for a couple years.  I'm not that concerned about the Club/novelty aspect.  I'm more concerned with the soundness of Amerco.

I was looking for some longer duration (around 5-8 years or so), higher yielding bonds.  I don't own much of those.  Mostly I have shoter term US treasuries (which are backed by only a printing press) and shorter bank CDs, and some stocks/etfs.

Upside potential is limited by the yield on the specific U-Notes you buy.  10 year note yields about 6.5%.  And you get some of the principal back each year, rather than all at the end.  So you get higher yields without having to lock all of the capital up for the entire duration.   The underlying assets serve as collateral so those mitigate the risk below that of a comparable unsecured bond.   There's always some risk, though, of course.

I like family owned/insider owned companies, and Amerco is one of those.  It's been around since 1946, I think mostly run by the same family.


arebelspy

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Re: U-Haul U-Notes
« Reply #5 on: June 11, 2013, 03:39:26 PM »
And if it defaults, you're going to go repo some used u-haul?
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Honest Abe

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Re: U-Haul U-Notes
« Reply #6 on: June 11, 2013, 05:35:55 PM »
And if it defaults, you're going to go repo some used u-haul?

At least these are backed by an asset, as opposed to Prosper and LC (which I invest in) which are unsecured loans.

This also explains why the interest is so much lower on these loans. vs. Prosper and LC

It looks to me like Amamco wanted to raise it's own funds rather than secure bank financing for it's needs and decided this was a cheaper way for them to do it. It could be a win for both parties, as 3% fixed income returns that are relatively low-risk aren't easy to come by.

That being said, there's no secondary market for these, so if someone makes a 30-yr investment to U-Haul you have to wait it out for 30 years to get your principal back.. that's pretty significant.

Well this isn't my cup of tea in any case but I thought I'd give my thoughts.

arebelspy

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Re: U-Haul U-Notes
« Reply #7 on: June 11, 2013, 05:47:56 PM »
And if it defaults, you're going to go repo some used u-haul?

At least these are backed by an asset, as opposed to Prosper and LC (which I invest in) which are unsecured loans.

Are you answering with, essentially: At least this turd sandwich isn't as smelly as that other one?

This also explains why the interest is so much lower on these loans. vs. Prosper and LC

Really?  Does that "backed by an asset" (which would take money just to try and get a hold of) properly compensate you for the risk?

Seriously, think about this:
And if it defaults, you're going to go repo some used u-haul?

Answer that with a yes, with a straight face.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
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smedleyb

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Re: U-Haul U-Notes
« Reply #8 on: June 11, 2013, 06:57:06 PM »
It looks to me like Amamco wanted to raise it's own funds rather than secure bank financing for it's needs and decided this was a cheaper way for them to do it. It could be a win for both parties, as 3% fixed income returns that are relatively low-risk aren't easy to come by.

The 10 year is yielding 2.25%, which is about as risk free as you can get (and much shorter duration).  I'll pass on loaning U-haul and it's non- proprietary business model my money for 30 years at 3%.

Honest Abe

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Re: U-Haul U-Notes
« Reply #9 on: June 11, 2013, 07:58:44 PM »
And if it defaults, you're going to go repo some used u-haul?

At least these are backed by an asset, as opposed to Prosper and LC (which I invest in) which are unsecured loans.

Are you answering with, essentially: At least this turd sandwich isn't as smelly as that other one?

This also explains why the interest is so much lower on these loans. vs. Prosper and LC

Really?  Does that "backed by an asset" (which would take money just to try and get a hold of) properly compensate you for the risk?

Seriously, think about this:
And if it defaults, you're going to go repo some used u-haul?

Answer that with a yes, with a straight face.

Just trying to make conversation, maverick, take it easy. I said I wouldn't invest in it...  It's worth a discussion to compare/contrast vs. other p2p platforms.

swiper

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Re: U-Haul U-Notes
« Reply #10 on: June 11, 2013, 08:39:29 PM »
Its a neat model, thanks for sharing

aclarridge

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Re: U-Haul U-Notes
« Reply #11 on: June 11, 2013, 09:39:35 PM »
I think a long-term investment would be very silly, since the default scenario is just not something you want to have exposure to. Short term, there is less risk but the rates aren't that great...so what's the point.

Avoiding the banking fees related to bond issuance sounds good in theory, but by creating a kind of sub-company that just does their bond issuance, aren't they incurring costs anyway? Regardless, if you really believe that their system is so great (i.e. more efficient than those fat-cat bankers) then wouldn't you want to own their equity instead?

I bet that there is a high probability that this thing is not worth the time to look deeply into, and peoples' effort is best spent elsewhere.

dragoncar

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Re: U-Haul U-Notes
« Reply #12 on: June 11, 2013, 10:43:09 PM »
I'm not seeing the p2p aspect.  Aren't you just buying a corporate bond with a funky name?  Those are also backed by the company assets.

arebelspy

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Re: U-Haul U-Notes
« Reply #13 on: June 11, 2013, 11:02:14 PM »
I'm not seeing the p2p aspect.  Aren't you just buying a corporate bond with a funky name?  Those are also backed by the company assets.

If you go to the site, the company is trying to spin it that way since it supposedly cuts out the bankers and other middlemen.
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Left

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Re: U-Haul U-Notes
« Reply #14 on: June 12, 2013, 01:53:20 AM »
maybe I'm not understanding this right... but if the yield on a 30 year "loan" with them is 8%, not 8% per year... how is it not better to just buy the stock with them? They have about a 2% dividend and if the stock goes up 8% in a year, you've already made what you would have in 30 years with the U-Notes... or at the very least you'll have 30 years for the stocks to go up 8% and still break even with the U-notes. If you trust the company will be around 30 years, there's no reason to think that it's stock wont grow

dragoncar

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Re: U-Haul U-Notes
« Reply #15 on: June 12, 2013, 02:31:43 AM »
maybe I'm not understanding this right... but if the yield on a 30 year "loan" with them is 8%, not 8% per year... how is it not better to just buy the stock with them? They have about a 2% dividend and if the stock goes up 8% in a year, you've already made what you would have in 30 years with the U-Notes... or at the very least you'll have 30 years for the stocks to go up 8% and still break even with the U-notes. If you trust the company will be around 30 years, there's no reason to think that it's stock wont grow

It says 8% APR.

Reepekg

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Re: U-Haul U-Notes
« Reply #16 on: June 15, 2013, 10:19:58 PM »
And if it defaults, you're going to go repo some used u-haul?

Answer that with a yes, with a straight face.

If my S&P 500 ETF goes bust can I show up at Coke's door demanding a bottling machine or if my REIT goes bust can I take possession of a dentist's office somewhere? I don't see any advantages in this U-Haul thing, but modern financial products make backed-assets sufficiently removed from the average investor that it is hard to feel like personal physical recourse is a necessity prior investing. Let the default risk, returns, etc. stand on their own (and then conclude no).

arebelspy

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Re: U-Haul U-Notes
« Reply #17 on: June 15, 2013, 11:08:33 PM »
And if it defaults, you're going to go repo some used u-haul?

Answer that with a yes, with a straight face.

If my S&P 500 ETF goes bust can I show up at Coke's door demanding a bottling machine or if my REIT goes bust can I take possession of a dentist's office somewhere? I don't see any advantages in this U-Haul thing, but modern financial products make backed-assets sufficiently removed from the average investor that it is hard to feel like personal physical recourse is a necessity prior investing. Let the default risk, returns, etc. stand on their own (and then conclude no).

If coke was bankrupt, yes their assets would be liquidated to go to their creditors.  No, you wouldn't go repo some bottling machine.

This investment, on the other hand, is being touted as "backed by hard assets" (the trucks), thus it seems reasonable to ask into the nature of that claim, and how realistic it is.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.