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  • ING: Global REIT Returns Estimated at 8%-12% for 2011 [View article]
    Yes, Drizzt, these are total returns. They do comment generally as to which portion of the total they think will come from income yield and which from capital appreciation.
    Feb 7 06:45 PM | 1 Like Like |Link to Comment
  • Should Banks Hold More Capital? It Worked Out Great for REITs [View article]
    Sure thing, thannagan. Thanks for your thoughtful comments.
    Feb 7 12:10 PM | Likes Like |Link to Comment
  • Should Banks Hold More Capital? It Worked Out Great for REITs [View article]
    I wasn't offended, Norm--you just gave me an opportunity to make the point that some "explanations" of the credit crisis have sought to pin the blame on the Fed as a way of shifting blame away from those sources of political pressure that actually stopped the Fed from taking actions that might at least have mitigated the crisis, if not avoided it.
    I should also say that the pressure not to rein in bank lending wasn't necessarily bad, and shouldn't necessarily be judged bad. One major source of pressure was the desire to help lower-income and minority households to become homeowners--a goal that many people share. In general, accomplishing that required someone to take on additional mortgage credit risk, and the public policy decision was to permit the banks to do that with the Federal government as their backstop. Was that goal worth the gamble? Many people would (still) say yes.
    Thanks.
    Feb 7 12:09 PM | Likes Like |Link to Comment
  • Recommended Reading: PIMCO on Diversified Portfolios for Retirement Investing [View article]
    Gratian,
    My own portfolio allocation, like yours, is different from the one in PIMCO's report. But it's an excellent starting point for all investors (even the biggest pension funds).
    --Brad
    Feb 7 09:38 AM | 1 Like Like |Link to Comment
  • New Hotel REIT: RLJ Lodging Trust Files for IPO [View article]
    Bernie 1,
    Actually, there's less scope (or incentive) for creative accounting in publicly traded REITs than in other corporations. It's a pretty simply business: buy good assets, manage them, earn lease rents, occasionally sell an asset, pass along the earnings. A lot of the creative accounting in other corporations has to do with things like research & development expenditures, and REITs don't do those.

    I haven't looked into Strategic's situation, but in general the reason that stock prices are up is that earnings are expected to increase strongly over the next several years, partly from improving property fundamentals and partly from profitable acquisitions. Much of the IPO activity comes from companies wanting to participate in the acquisitions but lacking capital to do it.
    --Brad
    Feb 7 09:36 AM | Likes Like |Link to Comment
  • Should Banks Hold More Capital? It Worked Out Great for REITs [View article]
    Thanks, BT.
    Feb 7 09:32 AM | Likes Like |Link to Comment
  • Recommended Reading: PIMCO on Diversified Portfolios for Retirement Investing [View article]
    Not sure, Scooter-Pop, but certainly Munis would be included in the BC US Agg Bond index.
    Feb 7 06:51 AM | 3 Likes Like |Link to Comment
  • Should Banks Hold More Capital? It Worked Out Great for REITs [View article]
    Very thoughtful observation, thannagan. Generally speaking, of course, the banks that were unable to survive have tended to be much less diversified, geographically and by product line.

    However, it's going a bit far to pronounce the UK study "silly"--it's not silly at all. And the idea that "there's no evidence that banks require anywhere near 50% equity to survive even the worst recession" is of course wrong, since the UK study provides exactly such evidence.
    Feb 6 04:22 PM | 1 Like Like |Link to Comment
  • Should Banks Hold More Capital? It Worked Out Great for REITs [View article]
    Thanks, Westcoaster. Actually, I think the idea of moving to substantially higher bank capital deserves real, careful consideration. Companies that use way too much leverage, such as private equity real estate funds (among others), want debt to be freely available and cheap, partly because if they use enough debt then they can report high "value added" or "opportunistic" returns without having added any value or located any opportunities, but rather by depending on the leverage to jack up poor asset-level returns. This analysis doesn't mean that capital won't be available, just that more of it will be equity capital rather than debt capital. Equity capital means that you have to earn your returns.

    And, of course, the main purpose of raising capital standards would be to eliminate many of the banking crises that so regularly plunge the whole economy into recession. Yeah, more bank lending would help move us out of this Great Recession--but after all, LESS bank lending would have helped keep us out of it in the first place.
    Feb 6 02:59 PM | 1 Like Like |Link to Comment
  • Should Banks Hold More Capital? It Worked Out Great for REITs [View article]
    Thanks. One thing, though: I actually think the Fed actually deserves a great deal of credit for trying to prevent the meltdown, though unsuccessfully. You have to remember that the Fed is only "independent" because a bill passed by Congress and signed by a President set it up that way; Congress and the President can change their mind, so the Fed actually operates within the political system that also encompasses the Executive branch and Congress. When the Fed was proposing higher capital standards to rein in subprime lending and other problems of the debt bubble, members of Congress were threatening to pass bills that would have stripped its power to regulate banks--and the reason was to prevent the Fed from moving ahead with those proposals. I personally witnessed political pressure on the Fed not to raise capital standards. So I think there were plenty of "bureaucrats" at the Fed who understood the logic of this argument--they just couldn't get it accomplished.
    Feb 6 12:07 PM | 2 Likes Like |Link to Comment
  • ING: Global REIT Returns Estimated at 8%-12% for 2011 [View article]
    aussiereader5,
    ING Investment Management didn't cover Australian REITs in their global market outlook because this report came from their Australia office. I haven't found their projection for total returns on Australian REIT investments, but in another report (www.ingim.com.au/ingim...) they predict earnings growth averaging 4.8% for Australian REITs, which is higher than Canada but lower than the UK.

    Note that their global outlook predicts total returns in three ranges: 5%-10% in Japan, Singapore, and Continental Europe; 8%-12% in the U.K., Canada, and the U.S.; and 15%-20% in Hong Kong/China. Based on their earnings growth forecast, my guess is that they might put Australia in the same category with the U.K., Canada, and the U.S.
    Feb 6 08:06 AM | 1 Like Like |Link to Comment
  • Commercial Real Estate: Good Fundamentals, Increased Default Rates - Why the Disconnect? [View article]
    K Smith,

    Thank you for what is mostly a thoughtful comment. Do not, however, accuse me of playing fast and loose with the facts or of misleading people.

    My article was about the direction in which real estate operating fundamentals seem to be headed, which is positive: things are getting better. That's very different from saying that things are good. Of course vacancy rates are extraordinarily high: we seem barely to be past the very worst, and they're not going to improve quickly--but they do seem to be improving.

    When you're in the first stages of a recovery, things still look very bad. If you wait until things look good, you're near the end of the recovery, and very possibly near the end of the upturn. Tactical investing is all about correctly perceiving changes in the economy earlier than other investors do. What you seem to be suggesting is waiting until things are already great for everybody, which implies buying at the top of the market.

    I've written before (seekingalpha.com/artic...) that the market is "bifurcated" or even "trifurcated" in the sense that operating fundamentals and property values maintained better strength and have already been improving for some time among the higher-quality assets, while they're relatively much weaker and, I expect, will probably even continued to decline among the lower-quality assets. You're clearly looking at some properties in the lower-quality segment of the market. It is common for a crisis to cause a "flight to quality" and this is a good example.

    The high default rates that I expect will persist for some time will generally be concentrated among the lower-quality segment of the market; in contrast, the spike in property values that I cited was measured by the Transaction Based Index (TBI), which focuses on a generally higher-quality segment of the market.

    How on earth can someone accuse me of "creating the impression that all is rainbows and lollipops" from an article the first two paragraphs of which are all about record-high default rates?

    --Brad
    Feb 6 07:47 AM | 1 Like Like |Link to Comment
  • ING: Global REIT Returns Estimated at 8%-12% for 2011 [View article]
    That sounds right--although I'm learning from you, so thanks!
    Feb 5 12:37 PM | 1 Like Like |Link to Comment
  • ING: Global REIT Returns Estimated at 8%-12% for 2011 [View article]
    Hmm, not sure, but again it's basically the same as long-term capital gains. The idea of locating your low-income, high-appreciation investments in your taxable accounts and your high-income, low-appreciation investments in your tax-advantaged accounts (assuming you have both, and can't keep everything in tax-advantaged accounts) is that the taxes that you'll ultimately pay on your long-term capital gains will be deferred anyway until you sell them, whereas the taxes on ordinary income can't be deferred except by holding them in IRAs and the like. So I think the answer is that you don't lose the return-of-capital advantage, you just defer it, which makes it worth less. (But I'm certainly not a tax expert!)
    Feb 5 11:16 AM | 1 Like Like |Link to Comment
  • ING: Global REIT Returns Estimated at 8%-12% for 2011 [View article]
    Yes, of course. In fact, for many investors it's preferable to own it in a tax-advantaged account such as an IRA, because REITs throw off so much dividend income. (Over the past 20 years, for example, equity REITs have averaged capital appreciation of 5.05% per year and income of 6.77% per year, for a total return averaging 11.82% per year.)

    Keep in mind: a publicly traded REIT is literally like any other publicly traded corporation, and a REIT ETF or a REIT mutual fund is literally like any other ETF or mutual fund investing in publicly traded corporations. (That's not the case with non-traded REITs, though.)

    In my own situation, I have my REIT investments in 401(k)-type plans because I have two plans each with an excellent REIT option; I don't hold them in my IRA but that's just because my IRA is much smaller and that's where I keep investments that I can't do through my 401(k)-type plans.
    Feb 5 10:02 AM | 2 Likes Like |Link to Comment
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