Investments Trade Log

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CS
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Re: Investments Trade Log

Post by CS »

The pain is just starting for REITs.

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C40
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Re: Investments Trade Log

Post by C40 »

When will it be at full pain?

jacob
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Re: Investments Trade Log

Post by jacob »

Today looks like another broad corona selloff with few patterns other than airlines down, chlorox and foods up.
Death counts must have gone up in a newsworthy fashion.

ertyu
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Re: Investments Trade Log

Post by ertyu »

I'll take a stab. First, we still have not retested the 2200 lows - we might still make a lower low (I did not buy puts or sell calls, and I am kicking myself in my chicken ass. I missed the top of this dead cat). So (1) REITs might have further to fall just because the market in general has further to fall.
Second, as far as I understand, one issue with REITs is that they're leveraged at a time when clients are starting to say they won't be paying rent. REITs will thus do worse as credit conditions tighten. Have they tightened enough? So far we've seen some shale oil companies and a couple of retailers file. Many retailers have also been downgraded. But imo we're nowhere close to being done with either downgrades, or bankruptcies. If retailers are being downgraded and households can't pay rent (there was a notice going around media about people doing rent strikes (which, imo, high time, given the disparity between urban rents/property values and urban incomes). So you would expect at least a couple of REITs to get in major trouble, too. When they do, they will drag down the entire asset class. That's when you buy the guys you want (and I agree that you want REITs heading into stagflation).

When this will happen? Idk. I haven't personally researched REITs. I am an INFP and very much a general picture thinker with the general abiity to download a Damodaran valuation sheet and do a dcf but an extremely crap attention to detail, so I have not analyzed any names either. Probably will trust yours and @Dream_of_Freedom's names and hope for the best lol. Also consider REITs outside the US - I bet there are multiple quality European names you might want.

Contra-argument: gvt has been bailing people and companies left and right. Money printer go brrrr. Brrr.money --> risk assets up. It is completely possible for the general economy to be tanking and for risk assets to be rising in nominal terms, you just have to print enough. When is the right time to stop waiting and go long the companies you consider quality to protect yourself from potential stagflation? Idk. Might be now, or as @CS says, the pain might just be starting and there might be a better entry point.

In either case, I'd be curious how your thinking evolves.

CS
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Re: Investments Trade Log

Post by CS »

@c40
I don't know when, but the pain of everything hasn't really had time to hit. Businesses are not making rent-this month, renters are not making rent-this month, a lot of individuals might lose their houses sometime in the near future. Unemployment and bailouts will buoy some, for a while.

Plus all those other leveraged companies like the AirBNB barons. And this mess:
https://www.ccn.com/did-the-fed-just-ac ... ket-crash/
"The Mortgage Bankers Association (MBA) warned of ‘large scale disruption’ to the housing market and accused the Fed of using a ‘sledgehammer.’

This is a collapse of the system.

How The Federal Reserve Almost Broke The Housing Market
Here’s how it works. Mortgage bankers hedge themselves against interest rates going up. If rates go up, the hedge makes sure they don’t lose money from customers who locked in a lower mortgage rate.

It’s a standard practice across the industry and almost never causes any problems.

Until now.

As part of the coronavirus stimulus action, the Fed bought $250 billion worth of mortgage-backed securities in a space of two weeks. For perspective, that dwarfs the amount they bought during the housing crisis by $80 billion.
I don't know how these REITs are structured, but I'd be dang surprised if they picked the perfect allocation that avoided most issues. If we do get inflation, then yes, I guess tangible assets are a good way to good. I don't have the knowledge on how exactly this will unwind, except the observation that the consequences are not really there yet for most of the issues above.

classical_Liberal
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Re: Investments Trade Log

Post by classical_Liberal »

Not all REIT's are created equal and although all rely on leverage many do not dabble in owning the debt themselves. Look at medical REIT's, they are beaten down worse than the index in some cases. These guys are mostly reliant on rents from companies that mostly rely on federal payments, medicare and medicaid. Now is not the time you will see federal cuts in medical spending. As a matter of fact, I think there will likely even be stimulus to medical sector if COVID is cutting into their profit margins to the point they can't afford rent on their facilities, it's in the public's best interest they stay solvent. This is like having insurance on the profits of medical REIT's, who can also take advantage of low rate to restructure any of their debt.

Just my opinion.

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Bankai
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Re: Investments Trade Log

Post by Bankai »

SP500 only gave away the last 14 months' worth of gains, yet the outlook for the economy is quite different than 14 months ago so does the current price make any sense?
The United States economy will shrink 5.5% in 2020, the steepest drop since 1946, with a huge 38% contraction predicted for the second quarter, Morgan Stanley said on Friday in a new batch of forecasts on the economic damage from the coronavirus outbreak.

The U.S. bank said it had cut its first-quarter forecast to an annualised 3.4% contraction from a previous 2.4%, while in the second quarter the economy is predicted to shrink 38%, up from an earlier forecast of a 30% contraction.

U.S. unemployment will also peak at a record 15.7% in the second quarter - that is up from a previous 12.8% forecast by the bank's economists - with cumulative job losses of 21 million in the second quarter, Morgan Stanley said.

Lucky C
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Re: Investments Trade Log

Post by Lucky C »

What % of the time do you (or does the typical active investor) think the price does make sense?

Seppia
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Re: Investments Trade Log

Post by Seppia »

I would say most of the time.

jacob
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Re: Investments Trade Log

Post by jacob »

Those with energy investments (and corporate bonds), please check their solidity. This is 2015 all over again.
https://edition.cnn.com/2020/04/02/busi ... index.html

Lucky C
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Re: Investments Trade Log

Post by Lucky C »

@jacob I know your style is not to trade commodities but curious if you have or are considering commodities as a diversifier with the potential for higher inflation & much higher oil prices at some point in the future?

Aside from this month's historically low inflation-adjusted oil prices, a quick look at oil futures even with Friday's optimism has prices only at $40-42 as far out as the end of 2023 & 2024. I know those prices will continue to swing wildly but I just can't wrap my head around it staying in the $20-40 range for several years. If there is an upward trend in oil or commodities in general when it looks like the next boom cycle is starting I will definitely want a slice of my portfolio in that.

Maybe the next business cycle will peak not with Millenials trading inverse VIX (& later TVIX) and tech stock calls (& later e-minis and puts) but with Gen Z trading commodities futures.

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Bankai
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Re: Investments Trade Log

Post by Bankai »

Image

George the original one
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Re: Investments Trade Log

Post by George the original one »

Europe's COVID-19 is stabilizing, vaccine out for human trials, and stock market is up broadly.

ertyu
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Re: Investments Trade Log

Post by ertyu »

gold running like it f'in stole something, congrats to all that held

what was the deal with the 100-pt jump in spx this morning, was that oil optimism or what is going on here

CS
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Re: Investments Trade Log

Post by CS »

@2b1s pointed out that coins are running ~$150+ higher than spot price, if you can find them at all. People are definitely snapping up physical gold.

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Bankai
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Re: Investments Trade Log

Post by Bankai »

Mislav Matejka, head of global equity strategy at J.P. Morgan warned investors in a Monday research note that there is a significant chance the global economy experiences “a vicious spiral, which is typical of recessions, between weak final demand, weaker labor markets, falling profits, weak credits markets and low oil prices.”
he advised clients to ignore technical signals indicating stocks are oversold, or to be reassured by the massive fiscal and monetary support provided by global governments. To do so would be “missing the elephant in the room, that is the first consumer and labor market downcycle in 11 years.”
Once earnings estimates fall to necessary levels, it is possible that equity markets will finally begin to “over-discount” a recession. This would be indicated by the S&P 500 trading at 10 times forward earnings — a low seen in previous downturns—versus the roughly 14 times as of Friday’s close, creating an attractive entry point for investors, Matejka argued
https://www.marketwatch.com/story/inves ... op_stories

2Birds1Stone
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Re: Investments Trade Log

Post by 2Birds1Stone »

Talking heads.... https://www.marketwatch.com/story/the-w ... yptr=yahoo

No one knows what the market is going to do in the near term.

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Bankai
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Re: Investments Trade Log

Post by Bankai »

True. Recently I tend to listen to bears more due to 1) confirmation bias & 2) they have less (obvious) incentives to push their agenda so are less likely to lie. But the market will do what the market will do.

Seppia
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Re: Investments Trade Log

Post by Seppia »

Bankai wrote:
Tue Apr 07, 2020 10:15 am
they have less (obvious) incentives to push their agenda so are less likely to lie.
If you call a market crash and nothing happens, nobody will hate you.
Call it right once, and many will call you a genius.
There are people who have been bearish and wrong for 10 years and can't wait to be right.

My favorite group is "if it weren't for the Fed!" as if central banks weren't part of the variables you must consider when assessing the markets

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Bankai
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Re: Investments Trade Log

Post by Bankai »

True. I think it's slightly different if you're running an investment bank though - if you're too defensive/pessimistic and miss out on big gains, your clients will go away and so will your job. On the other hand, being optimistic and encouraging your customers to trade/transact directly contributes to your bonus. So there is an incentive to be bullish and disincentive to be bearish. I'm speculating here but this is how it looks to me.

As a side note: S&P 500 closes in negative territory in worst reversal since 2008
https://twitter.com/ForexLive/status/12 ... 7954699265

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