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  • How Much High-Yield Is Too Much High-Yield? [View article]
    Great article Adam...
    Nov 16, 2014. 11:59 AM | 7 Likes Like |Link to Comment
  • Mr. Market Provides Some Early Fall Color For REIT Investors [View article]
    HCN (long HCN) announced a secondary offering yesterday at $63.75 per share which was more than $2.50 below it's closing price on Thursday ($0.50 above the closing price yesterday). This may have spilled over to VTR (long VTR). I think a couple other REIT's are in the process of secondaries as well. This may be a contributing factor to the current price swoon. You could feel the heat though. I think interest rates are part of the issue but I think prices have just gotten ahead of themselves too. I trimmed positions in AVB and BXP a couple weeks ago.
    Sep 13, 2014. 05:06 PM | 4 Likes Like |Link to Comment
  • REIT Valuations Part 2: Industrial [View article]
    And User, it appears you chronically ignore the basic rule that the first letter of the first word of a new sentence be capitalized. It would help your credibility if you followed this basic rule.

    Dane, nice article with a lot of great information. I have been long PLD for a long time (pre AMB merger and through the financial crisis). I pared my position in half in May 2013 (fortuitous timing!). I will probably hang on to my current position but I agree that PLD is probably somewhat overvalued right now.

    I also enjoyed your article on the healthcare REIT's and am looking forward to your future articles on other REIT sectors. It's nice to see some honest analysis and not just cheerleading spiced with Graham and Buffett quotes.
    Aug 24, 2014. 09:14 PM | 4 Likes Like |Link to Comment
  • What, Exactly, Constitutes 'Yield Chasing'? [View article]
    Adam, referring back to my point in your previous article, the interest rate set-up entering into what ever the next "event" will be will likely be much different that it was when we entered into 2008. The collapse in interest rates in 2008 actually provided some temporary support for the distributions for leveraged funds through the crisis, although...look at HYT, the distributions have slowly ground downward since as the pre crisis bonds have rolled off (and HYT also did lose about 60% of its value from top to bottom...much more than the S&P 500....and has never come close to fully recovering).

    Imagine though what would have happened if we were rolling into an early 1980's like recession caused by the Fed trying to stamp out inflation. You don't need anything as extreme as the absolute rates then to cause the same havoc. Imagine some inflation rumblings where the Fed raises short term rates rather quickly to, say 4 or or not much above historical averages How is the leverage for HYT it based on short term rates or long term rates? What will happen to the NAV of its portfolio and the cash flow available for distribution? Well just go to this link and read page 12.
    Aug 22, 2014. 12:07 PM | Likes Like |Link to Comment
  • What, Exactly, Constitutes 'Yield Chasing'? [View article]
    Dave, extremely wise advice. Have to admit I thought about you when I heard about the guy in the $1 million buy-in tournament who lost with two pocket aces to a drawn Flush. If that doesn't support your line about being harmed sometimes even when you make the right decision, I don't know what does.

    I think progress is being made towards having civil discussions about our differences...and our similarities. Adam no doubt deserves a lot of credit for this with his non-judgmental approach to writing about challenges that all of us who are either partially or fully focused on income investing see. This benefits those newer participants here who can compare and contrast all the information without having to filter through the repetitive dogma and sarcasm to figure out what might work best for them.
    Aug 21, 2014. 08:21 PM | 3 Likes Like |Link to Comment
  • What, Exactly, Constitutes 'Yield Chasing'? [View article]
    Adam, not concerned about you at all so yes, my comment referred to certain posters to your two recent articles. I don't think risk apathy quite captures it. I think there is the same attitude you see on the growth stock pages where investors who have a high tolerance for risk head out to the fringes. The dividend speculators cloak themselves with a seemingly conservative income wrap then perhaps convince themselves they are different from speculators in other genres because of it. Maybe they just have the fortitude to go through boom and bust cycles, or to some investing may be more about the thrill of the hunt as opposed to the sustenance of the catch. Not sure what psychology is at work in each instance but I think most know exactly what they are doing and how risky it is.
    Aug 21, 2014. 02:14 PM | 4 Likes Like |Link to Comment
  • What, Exactly, Constitutes 'Yield Chasing'? [View article]
    sierra, how about this as an explanation....even the tortoise has the intelligence to freshly evaluate which path to take when it comes to the inevitable forks in the road? I agree it is fair for you to criticize my combined choice of words as on their face they do not seem to match up. Guess I'll need to come up with a new slogan ;).
    Aug 21, 2014. 12:46 PM | Likes Like |Link to Comment
  • What, Exactly, Constitutes 'Yield Chasing'? [View article]
    I am noticing a trend here and in Adam's other article that concerns me. Many of the past arguments about the viability of a dividend-based strategy have focused on the likelihood of dividend cuts. The Mainstreamers as I called them above point out that through the financial crisis, relatively few blue chip firms cut their dividend. The ones that did for the most part were either in or had significant exposure to the financial sector. I think the Mainstreamers have a good argument that, through the last financial crisis at least, dividends from non-financial firms were indeed a ballast.

    Now, I see posts about people not only reaching for yield, but doing so through investing in BDC's (which are leveraged financial firms, right?), CEF's, many of which leverage already leveraged holdings, and some even buying these on personal margin to further hype yields...leverage on leverage on leverage. I assume you all know why Lehman failed. I assume you also know why the MBS market collapsed leading to the crisis. It was because of leveraging already leveraged and risky investments. Just because a BDC or CEF has diversified investments within it doesn't address the primary risk of owing these investments. You can monitor all you want, but structuring a portfolio based that is highly concentrated in these types of investments is living on the very edge of the cliff...there will be no time to react when the gust of wind comes. Stop losses? They are volumes are generally too low and buyers totally disappear for these fringe investments in a crisis.

    There is no ballast from income in this approach. If (really when) it collapses you will see extreme damage to both your principal and your income stream. If you want to put 5 - 10% of your portfolio in these, without margin, as your speculative play money, I think that's OK. To be all in on these or anything remotely close to that as some here appear to me...head to Vegas instead...your odds are probably better and you will get free drinks.
    Aug 21, 2014. 12:05 PM | 7 Likes Like |Link to Comment
  • What, Exactly, Constitutes 'Yield Chasing'? [View article]
    Steve, that is a very reasonable comment. I do not believe that having a smattering of higher yielding holdings takes you out of the mainstream and I agree they should not be all be lumped together as being super high risk. It is those investors that go virtually all in to the BDC, mREIT, MLP realm that concern me. Again, there are examples of such people here on the boards if you read through comments on various articles.
    Aug 20, 2014. 06:07 PM | 1 Like Like |Link to Comment
  • What, Exactly, Constitutes 'Yield Chasing'? [View article]
    Adam, you are beating the drum hard. Personally, over time, as an outsider (a "total returner") I've noted roughly three different subtypes of dividend focused investors that post here:

    There is a mainstream group that focuses primarily on blue chip, reasonable yielding stocks that have growing earnings to sustain a growing dividend. While their primary objective is a growing income stream, they are cognizant of the market value of their holdings and are accepting of gains in their portfolio value even if they prefer not to utilize them to fund their cash needs. I identify strongly with the investing principals of this group even though I focus more on capital gains and allocating among different asset classes.

    There is a second group of strongly rules-bound dividend investors. For example, they focus rigidly on metrics such as dividend payment histories avoiding any company that has not paid an increasing dividend for a certain number of years...regardless of how compelling the investment story may be.

    Finally, there are the dividend speculators...those are the ones you are addressing in this article. Their objective is maximizing yield through holding BDC's, MLP's, mREIT's as the largest investments in their portfolios. They appear to believe yield is always safer than capital gains even at the far fringes of the risk spectrum....or perhaps, as Bob Wells suggested, they are just greedy.

    For those here though that are trying to learn about this form of investing, please pay attention to the mainstreamers. Don't get intimidated by the rules-bound "squeaky wheels" that refuse to view the world of investing as the complex spectrum that it is or by those speculators who will brag about how much income they are getting from their relatively small portfolios (and, in one case, about other fringe benefits resulting therefrom!). The investment world and economy are complex and there is no free lunch. Slow, steady and nimble will give you the best chance to get to where you want to be in the long run. I'm not telling anyone how to invest, I'm just expressing my opinion.
    Aug 20, 2014. 02:57 PM | 13 Likes Like |Link to Comment
  • The Dividend-Growth-Devoid Income Portfolio [View article]
    Thanks Doug and agree this is probably a tangent that should we should let go unless someone else wants to discuss it further.
    Aug 19, 2014. 10:20 PM | Likes Like |Link to Comment
  • The Dividend-Growth-Devoid Income Portfolio [View article]
    Doug, appreciate your feedback. Just a nuance to your comment though. It is, of course, the Treasury that determines what debt to issue and not the Fed. You are correct that the average maturity is lengthening but that has little or no effect on how the Fed may conduct monetary policy. The Fed will likely choose to increase short term rates early next year...probably by increasing the amount of interest paid on reserves. This would flatten the yield curve presuming long rates stay relatively stable as you suggest. Nonetheless, increased short rates would take some or all of the juice out of the so-called carry trade (borrowing short and investing long) so firms, like mREIT's, that borrow short and invest long could suffer sooner rather than later as a result. It not just absolute rate movements that might matter, but relative movements along the yield curve as well. I'm not sure how well the average investor really understands this.
    Aug 19, 2014. 09:29 PM | 3 Likes Like |Link to Comment
  • The Dividend-Growth-Devoid Income Portfolio [View article]
    B3player, love your moniker. I wonder how many people get what a B3 is. I've taken the fake way out...I've had a Nord Electro for years...first the 2 now the 4. Sorry for digressing but love seeing a tone wheeler chatting about investments. You on the Keyboard Corner forum?
    Aug 19, 2014. 08:19 PM | 1 Like Like |Link to Comment
  • The Dividend-Growth-Devoid Income Portfolio [View article]
    Amen Adam. I am curious, though, what your thought process was when you picked 7% as an implied dividing line between reasonable and unreasonable average yield expectations. I can't say exactly what mine would be, but it would be less than 7%...maybe 4 to 5%.

    I do think that to invest in the things you need to invest in to get to that average yield that you need to be prepared to weather a paper hit to your principal when rates start to rise. In this respect I would be mindful of mREIT's or leveraged CEF's in particular as they may be extremely sensitive to interest rate changes...especially if the rate curve flattens or inverts.

    My opinion is that one should stay with the tried and true...a diversified portfolio of reasonable yielding equities and bonds...and, if there is still a cash flow deficiency, consider selectively mining capital gains to make up the difference. Think flexibly..not dogmatically. I'm not telling anyone how to invest, I'm just expressing my opinion.
    Aug 19, 2014. 08:06 PM | 5 Likes Like |Link to Comment
  • Retirement Strategy: The Absurdity Of Believing That Dividends Don't Matter In Retirement [View article]
    Happy to find some common ground...and sorry for being snarky about the topic in a couple other recent articles but it's something that has been bothering me and I couldn't seem to get any traction in expressing my concern.

    Dave, with you on not buying anything recently. Last thing I bought was AMT about a year far so good on that one (the way I measure things at least) but not feeling a strong conviction on anything else right now. Happy about the KMR/KMI deal as I noted in one of the articles on the topic.

    jstratt...I like ADP too but I actually sold (well donated) it at the end of last year when it crossed 80....thought it was well ahead of itself. Thought MMM was too but finally decided ADP should be the victim. It's treading water so far this year as you know. I've kept it on my "might jump back in" list but I think it's still pricey right now like most everything else.

    That's two of only three or four individual stock transactions I can recall making in 2013....this year, just a bit of neutral rearranging between taxable and tax deferred accounts so far....pondering trimming positions in BXP and AVB.
    Aug 13, 2014. 02:23 PM | 2 Likes Like |Link to Comment