Perplexing Signs For REITs: Will They Turn Bullish Again? [View article]
Prices are changing constantly, but book value is only reported quarterly. Some of these REITs are burning through their book to unload leverage as it turns less favorable, and using the cash to pay dividends. So don't rely on last quarter's book to tell you what the company is worth!
Selling to harvest LTCGs is not irrational. If you might need the money later (and who doesn't?), you save on taxes in the long run. And you don't have to stop owning the security; you can buy it right back with a higher cost basis, losing only the spread and transaction cost. (No wash sale rule on cap gains, only losses).
That is, assuming that when you "need" the money, your income is in a tax bracket >15%. Maybe not so needy, after all. But some people are just phobic about taxes. It would be better for everyone if politicians stopped messing with them and just let society adjust to a predictable tax rate on everything.
Can They Spare A Penny A Click For International Coverage? [View instapost]
Jon, I appreciate your articles. I don't see how 1¢ per click is going to pay much of your expenses for travel to Sri Lanka, though, so maybe this argument isn't all that useful?
In 2009, when the civil war was in its last throes, I became interested in investing in Sri Lanka. I called my brokers; no way. I scoured the internet for any vehicle for doing so; only one hedge fund, domiciled in Singapore, with a huge minimum and high fees. At that time, I would have paid far more than mere pennies to get reliable guidance. I gave up, and fumed as that market went up 300% in little more than a year.
But now, it's just one opportunity among many, with uncertain valuation and a future as insecure as anywhere else, so I'm not going to get bent out of shape about it.
How To Analyze The Value In Hybrid Mortgage REITs - Part 2 [View article]
Awesome article, thanks. It makes other attempts to analyze these stocks pale by comparison.
I'm trying to understand what you said about liquidations. If a mortgage defaults, the payments stop coming, which immediately reduces cash flow. It takes some time for the mortgage to go into formal default, more time to foreclose, and still more time to liquidate; and after all that, there's no assurance (AFAIK) of a full recovery of principal. So I don't see how all this can be good for the mortgage investor. Can you clarify?
Haunted, thanks for pointing out the Bock Q&A. Both the question and the answer were a bit muddled; they said they didn't like the 50% allegation but certainly did NOT say that the coverage was substantially better than that. At the same time they hint that there might be a dividend increase once the new capital is deployed. That would be nice. But what bothers me is the argument for raising new capital, that they have to make a lot of new deals. Well, what if the new deals that come begging are all higher risk? They're already committed to making more deals. Could be they're going farther out on a limb.
Several Reasons Why I Think The Double-Digit Mortgage REIT Yields May Soon Decline [View article]
So many mistakes in this article it's hard to know where to start. Fortunately, other comments have already covered most of them.
Anyone who understands how mREITs make their money was selling in recent months. I was not surprised that NLY reported that their spread (from which all net income is generated) had been cut in half during the last quarter, even though Fed competition for assets has increased the market value of their book. Dividend cuts are inevitable. The only question is how much more the price has to come down to make the remaining yield attractive to buyers again. It will take at least another quarter or two, unless other events force an early capitulation.
Comments On Pope Resources Third Quarter Results [View article]
jjmc: If you are thinking about an investment in POPE, be aware that the shares are not very liquid. Spreads can be 1-2% at times, and hours might go by without a trade. Fine for long-term investors, but a headache for traders.
TWN has merely reverted to its average discount; last week's narrower discount was a fluke.
It did offer a distribution of 56¢ last year, on LTCG, but then it reported a UNII of (-.36), suggesting that they over-distributed. Also, the NAV was 10% higher at this time last year, so unless they have traded brilliantly, there may be no LTCGs to distribute—or any gains at all. So I don't see why this is a buy.
Chart Of The Day, Employment Edition [View article]
Extrapolating the 2002-2006 trend tells what the capacity of the US economy would be if we could continue to borrow to infinity. It was a credit-driven bubble in both housing and government. That party is over, and the economy needs restructuring, not another party like that.
Another takeaway is that is your retirement savings isn't enough to support you in the US, there are some nice Greek islands where you can live much more cheaply.
American Capital's Buyback Remains Underappreciated [View article]
Kina: Yes, it's true the valuation methods are different. But what's your thesis here? Management is *undervaluing* assets, so the company is really worth more, and we should buy it because it's a bargain; or they are *overvaluing* assets, which would not support the buyback scheme, as you allege.
I don't know of any corporations that don't use stock options to compensate managers. It's not a sign of corruption.
Most BDCs trade close to book value, or a little over with a good track record. Even if stock options dilute the shares by 10%, how does that justify a 40% discount to NAV?
American Capital's Buyback Remains Underappreciated [View article]
Quibbles with the article aside-- this stock is an amazing buy, IMO. Yesterday they announced the book value is up to $17.39; that's a P/B of 0.68. Where do you find a company with positive earnings at a price like that?
Hurricanes Do Not Have A Silver Lining [View article]
Much building will take place with borrowed money. Borrowed money is created by the fractional reserve banking system, increasing the amount of money in circulation. That's why it's not a zero-sum game.
The rest, of course, is insurance money. The economic activity takes place (mostly) where the damage is, but reinsurance is global. So US reconstruction will be using capital not only from the US, but from Britain (Lloyds of London), Switzerland, Japan, Hong Kong.
Even so, the lost productiivity of people who can't get to work, e.g. in lower Manhattan, will take awhile to replace. Oh, wait, we're talking about the financial sector? They weren't doing anything productive, anyway. So that's another plus.
Perplexing Signs For REITs: Will They Turn Bullish Again? [View article]
Bear Market Odds And Ends [View article]
That is, assuming that when you "need" the money, your income is in a tax bracket >15%. Maybe not so needy, after all. But some people are just phobic about taxes. It would be better for everyone if politicians stopped messing with them and just let society adjust to a predictable tax rate on everything.
Can They Spare A Penny A Click For International Coverage? [View instapost]
In 2009, when the civil war was in its last throes, I became interested in investing in Sri Lanka. I called my brokers; no way. I scoured the internet for any vehicle for doing so; only one hedge fund, domiciled in Singapore, with a huge minimum and high fees. At that time, I would have paid far more than mere pennies to get reliable guidance. I gave up, and fumed as that market went up 300% in little more than a year.
But now, it's just one opportunity among many, with uncertain valuation and a future as insecure as anywhere else, so I'm not going to get bent out of shape about it.
How To Analyze The Value In Hybrid Mortgage REITs - Part 2 [View article]
How To Analyze The Value In Hybrid Mortgage REITs - Part 2 [View article]
I'm trying to understand what you said about liquidations. If a mortgage defaults, the payments stop coming, which immediately reduces cash flow. It takes some time for the mortgage to go into formal default, more time to foreclose, and still more time to liquidate; and after all that, there's no assurance (AFAIK) of a full recovery of principal. So I don't see how all this can be good for the mortgage investor. Can you clarify?
Prospect Capital's CEO Discusses F1Q13 Results - Earnings Call Transcript [View article]
That would be nice.
But what bothers me is the argument for raising new capital, that they have to make a lot of new deals. Well, what if the new deals that come begging are all higher risk? They're already committed to making more deals. Could be they're going farther out on a limb.
Several Reasons Why I Think The Double-Digit Mortgage REIT Yields May Soon Decline [View article]
Anyone who understands how mREITs make their money was selling in recent months. I was not surprised that NLY reported that their spread (from which all net income is generated) had been cut in half during the last quarter, even though Fed competition for assets has increased the market value of their book. Dividend cuts are inevitable. The only question is how much more the price has to come down to make the remaining yield attractive to buyers again. It will take at least another quarter or two, unless other events force an early capitulation.
There's nothing political about any of this.
Comments On Pope Resources Third Quarter Results [View article]
CEF Weekly Review: Taiwan Fund [View article]
But...
TWN has merely reverted to its average discount; last week's narrower discount was a fluke.
It did offer a distribution of 56¢ last year, on LTCG, but then it reported a UNII of (-.36), suggesting that they over-distributed. Also, the NAV was 10% higher at this time last year, so unless they have traded brilliantly, there may be no LTCGs to distribute—or any gains at all. So I don't see why this is a buy.
Chart Of The Day, Employment Edition [View article]
Living Well At 95 [View article]
American Capital's Buyback Remains Underappreciated [View article]
I don't know of any corporations that don't use stock options to compensate managers. It's not a sign of corruption.
Most BDCs trade close to book value, or a little over with a good track record. Even if stock options dilute the shares by 10%, how does that justify a 40% discount to NAV?
American Capital's Buyback Remains Underappreciated [View article]
Hurricanes Do Not Have A Silver Lining [View article]
The rest, of course, is insurance money. The economic activity takes place (mostly) where the damage is, but reinsurance is global. So US reconstruction will be using capital not only from the US, but from Britain (Lloyds of London), Switzerland, Japan, Hong Kong.
Even so, the lost productiivity of people who can't get to work, e.g. in lower Manhattan, will take awhile to replace. Oh, wait, we're talking about the financial sector? They weren't doing anything productive, anyway. So that's another plus.
Sheldon Adelson's Online Crusade Makes Las Vegas Sands A Sell [View article]