Picking An All-Star REIT Team To Defend Against Interest Rate Risk [View article]
I write puts myself. Why is that a problem? Dollar cost (risk) is absolutely defined. What is the difference between this and waiting for a desired entry point (except that you get paid to wait)? It's the same proposition for worst case:
1. You write a put for a desired purchase. The stock goes lower than your strike price, and you pay more than market - less the premium.
2. You wait for your desired entry point and buy. The stock goes lower than your purchase price and you lose the difference.
In either case you can sell or cover if you don't like what's happening.
Another nail in the coffin for the idea that Intel builds Apple processors? Would it matter to Apple? I have to think Intel would be a lot less defensive about enabling competitors if they have large market share.
The Case For Owning Digital Realty Trust: When Hedge Funds Don't Know What They Are Talking About [View article]
In the Brad Thomas article on SA about the short announcement from Highfield (http://seekingalpha.co...) I listed three pretty complicated sets of questions that I sent to Digital. Yesterday, I sent two specific Jacobson quotes to Digital for their comment - as follows:
1. Is it true, as Jacobson was quoted saying by Barron's on 5/8/13, that "True adjusted funds from operations (AFFO) is 87 cents per share, not the $3.90 per share the company reports." Is this accurate according to the NAREIT definition at http://bit.ly/QufUB0?
2. Is is true (as stated by Jacobson) that Digital "changed the definition of non-recurring capital expenditures to include maintenance capex"?
Digital Realty Investor Relations sent me this message this morning:
**********************... "Both statements are inaccurate. Mr. Jacobsen asserts that we are understating our maintenance cap ex. In fact, we run most of the maintenance and repair expenses through our income statement (approximately 45% of the property operating and maintenance line item, excluding utilities = ~$90M in 2012), which is consistent with the other data center REITs and is a more conservative accounting approach than if we were to capitalize these expenses. In fact, the portion of the data center portfolio that we own and operate has roughly an average age of approximately 3-4 years. The major components that we maintain (generators, HVAC systems, etc.) have a useful life of 25-30 years - like any other real estate company only on a larger scale - so there is no need to replace this equipment.
In response to your second question, in 2Q2011 we added to the our supplemental report (available on our website under Investors) footnotes explaining how we define recurring and non recurring cap ex for clarification purposes only to the Historical Capital Expenditures schedule. We did not change the definitions. This is easy to verify by looking at the earlier reports, which are archived on our website. The difference between the two amounts being spent did not change quarter to quarter. As an aside, as head of Investor Relations, I was the one who asked to have the footnotes added in response to investor requests at the time for just such clarification. Updates and improvements to our disclosures is not uncommon as we continually seek to be as transparent as possible and ensure that we are proving investors with the best information available.
In any case, I hope you find this helpful. Please let me know if I can be of further assistance. I am traveling all next week meeting with our institutional shareholders in Europe, but will try to respond in as timely a manner as I can.
Best regards, Pamela Garibaldi" **********************... EDITORIAL
I think that this information deals with the Jacobson assertions which are most amenable to analysis. Unlike some others, I do not find Jacobson to have some inherent reliability (by virtue of either his education, employment history, current clientele, or website marketing) which overcomes his stated interest in seeing a decline in Digital's stock price. He has no real downside if he were to mischaracterize truth - he is only stating an opinion, or interpretation.
On the other hand, I do attribute some measure of reliability to company filings, disclosures, and statements (however inadequate I or anyone else may deem them), since there are potentially serious civil and criminal penalties for Digital's management and board if they are misrepresenting the company financial picture.
I think what happens in these events is similar to the innuendo we see in politics, where media coverage is exploited because it's possible to do so. Any chance to create a perception is used to advantage, regardless of truth. I actually get pretty sick of it.
We have seen some high profile examples of corporate misconduct - Tyco, WorldCom, Enron - which are much more memorable than those cases (some cited in SA articles) where short sellers or activist investors were feathering their nests. If anyone wants to react on the basis of "where there's smoke, there's fire," I suppose I can't blame them if they fear losing the money they have invested. But in doing so I think more bad behavior is encouraged.
Highfields Capital Is Wrong Because This Digital Cloud REIT Ain't Going Nowhere But Up [View article]
In addition to the three questions I listed above (which might be rather research intensive), I sent two more specific Jacobson quotes to Digital for their comment - as follows:
1. Is it true, as Jacobson was quoted saying by Barron's on 5/8/13, that "True adjusted funds from operations (AFFO) is 87 cents per share, not the $3.90 per share the company reports." Is this accurate according to the NAREIT definition at http://bit.ly/QufUB0?
2. Is is true (as stated by Jacobson) that Digital "changed the definition of non-recurring capital expenditures to include maintenance capex"?
Digital Realty Investor Relations sent me this message this morning:
**********************... "Both statements are inaccurate. Mr. Jacobsen asserts that we are understating our maintenance cap ex. In fact, we run most of the maintenance and repair expenses through our income statement (approximately 45% of the property operating and maintenance line item, excluding utilities = ~$90M in 2012), which is consistent with the other data center REITs and is a more conservative accounting approach than if we were to capitalize these expenses. In fact, the portion of the data center portfolio that we own and operate has roughly an average age of approximately 3-4 years. The major components that we maintain (generators, HVAC systems, etc.) have a useful life of 25-30 years - like any other real estate company only on a larger scale - so there is no need to replace this equipment.
In response to your second question, in 2Q2011 we added to the our supplemental report (available on our website under Investors) footnotes explaining how we define recurring and non recurring cap ex for clarification purposes only to the Historical Capital Expenditures schedule. We did not change the definitions. This is easy to verify by looking at the earlier reports, which are archived on our website. The difference between the two amounts being spent did not change quarter to quarter. As an aside, as head of Investor Relations, I was the one who asked to have the footnotes added in response to investor requests at the time for just such clarification. Updates and improvements to our disclosures is not uncommon as we continually seek to be as transparent as possible and ensure that we are proving investors with the best information available.
In any case, I hope you find this helpful. Please let me know if I can be of further assistance. I am traveling all next week meeting with our institutional shareholders in Europe, but will try to respond in as timely a manner as I can.
Best regards, Pamela Garibaldi" **********************... EDITORIAL
I think that this information deals with the Jacobson assertions which are most amenable to analysis. Unlike some others, I do not find Jacobson to have some inherent reliability (by virtue of either his education, employment history, current clientele, or website marketing) which overcomes his stated interest in seeing a decline in Digital's stock price. He has no real downside if he were to mischaracterize truth - he is only stating an opinion, or interpretation.
On the other hand, I do attribute some measure of reliability to company filings, disclosures, and statements (however inadequate I or anyone else may deem them), since there are potentially serious civil and criminal penalties for Digital's management and board if they are misrepresenting the company financial picture.
I think what happens in these events is similar to the innuendo we see in politics, where media coverage is exploited because it's possible to do so. Any chance to create a perception is used to advantage, regardless of truth. I actually get pretty sick of it.
We have seen some high profile examples of corporate misconduct - Tyco, WorldCom, Enron - which are much more memorable than those cases (some cited in SA articles) where short sellers or activist investors were feathering their nests. If anyone wants to react on the basis of "where there's smoke, there's fire," I suppose I can't blame them if they fear losing the money they have invested. But in doing so I think more bad behavior is encouraged.
Intel's Server Market Share To Decline As Competition Heats Up [View article]
Gordon E. Moore = Nostradamus?
Was he supposed to predict exactly how technology would achieve extreme productivity increases? If his precise method envisioned 50 years ago is not what is currently happening, does that mean such increases have stopped? Ignore any progress that doesn't fit a particular parsing of what Gordon could be construed to have meant?
Emerging Markets And The Case Of The Disappearing Dividends [View article]
Hi Frankie. You're so right. There are a very few countries where I'm qualified to select investments. That's why I use passive funds that weight different areas/countries, and active funds that are more expert in other local scenes.
Orders For Gold Go Unfilled In Asia [View article]
What are the penalties for defaulted delivery on a futures contract? Who are the counterparties in that exchange? Hard to believe that such defaults occur and are not reported as delisting events by the exchanges....
Highfields Capital Is Wrong Because This Digital Cloud REIT Ain't Going Nowhere But Up [View article]
I've been having some fun looking at DuPont Fabros Technology's SEC filings in comparison to Digital Realty's. While they are not directly comparable (e.g. DFT apparently prices leases according to kilowatt/hour demand rather than sq. ft.), looking at both is informative for those with the time and inclination to do it. Pages 47-48 and 65-66 of the DFT 10-k talk about the capitalization issue. Also the spreadsheet on Pg. 100 caught my eye. Almost $800mm of about a $2.4B total is listed as cost capitalized after acquisition - that looks a lot like Digital's ratios of cap vs. maintenance/operation costs which were questioned by Jacobson... Maybe the industry at large is a short. :)
Another article here on SA is worth a read for general background on the data center space if one feels particularly wonky. See http://bit.ly/14xBh7j
Richjoy403 made good points about how informed anyone can really expect to be - but I actually like doing the research even if I don't achieve complete mastery of the topic.
The Case For Owning Digital Realty Trust: When Hedge Funds Don't Know What They Are Talking About [View article]
mjvcaj, is that the converse of "if you're so smart, why aren't you rich?" Not a terribly good argument in that case. Correlation does not equal causality. I think Jacobson's background is good too, but "the world is full of shipping clerks who have read the Harvard Classics" (Charles Bukowski).
Anyway, to answer your question about financing, just check out the schedule of debt due in any of their presentations. Financing is not long term like a home mortgage, and often is not even property specific. Good REITs use a combination of debt and equity in their capital structure, using the latter to take out the former from time to time.
Emerging Markets And The Case Of The Disappearing Dividends [View article]
Very nice article, with great data (even though I disagree with some conclusions). Overall I would caution that in comparing the US with EM one must be very careful. They are structurally different and in different growth trajectories. That's why they are such a good allocation pick - they lack correlation.
Many "good" things about US companies are bad in an EM context. For instance, the fact that EM companies don't buy back stock is a good thing, given that better return is available almost anywhere in their markets. While the oscillations are more pronounced, expect a steeper growth curve overall in EM.
In my own portfolio (the active part, anyway) I have been overweight US - now is when I'm beginning to unwind that into greater EM exposure. Your excellent chart illustrates why re-balancing works - it would sell US high and buy EM low.
The dividend paying stocks are the best bet IMO. They represent more stable profitable opportunities. If payout is going down, maybe it means that overall productive investment is happening right now. Disclosure: long DEM & DGS.
Picking An All-Star REIT Team To Defend Against Interest Rate Risk [View article]
1. You write a put for a desired purchase. The stock goes lower than your strike price, and you pay more than market - less the premium.
2. You wait for your desired entry point and buy. The stock goes lower than your purchase price and you lose the difference.
In either case you can sell or cover if you don't like what's happening.
ATAC Week In Review - May 19, 2013: Dollar Dilemma And Anomalies [View article]
At least we agree that US Small Caps are the place to be (but you're a month late IMO).
Intel Wins Samsung's Galaxy Tab [View article]
Emerging Markets And The Case Of The Disappearing Dividends [View article]
The Case For Owning Digital Realty Trust: When Hedge Funds Don't Know What They Are Talking About [View article]
1. Is it true, as Jacobson was quoted saying by Barron's on 5/8/13, that "True adjusted funds from operations (AFFO) is 87 cents per share, not the $3.90 per share the company reports." Is this accurate according to the NAREIT definition at http://bit.ly/QufUB0?
2. Is is true (as stated by Jacobson) that Digital "changed the definition of non-recurring capital expenditures to include maintenance capex"?
Digital Realty Investor Relations sent me this message this morning:
**********************...
"Both statements are inaccurate. Mr. Jacobsen asserts that we are understating our maintenance cap ex. In fact, we run most of the maintenance and repair expenses through our income statement (approximately 45% of the property operating and maintenance line item, excluding utilities = ~$90M in 2012), which is consistent with the other data center REITs and is a more conservative accounting approach than if we were to capitalize these expenses. In fact, the portion of the data center portfolio that we own and operate has roughly an average age of approximately 3-4 years. The major components that we maintain (generators, HVAC systems, etc.) have a useful life of 25-30 years - like any other real estate company only on a larger scale - so there is no need to replace this equipment.
In response to your second question, in 2Q2011 we added to the our supplemental report (available on our website under Investors) footnotes explaining how we define recurring and non recurring cap ex for clarification purposes only to the Historical Capital Expenditures schedule. We did not change the definitions. This is easy to verify by looking at the earlier reports, which are archived on our website. The difference between the two amounts being spent did not change quarter to quarter. As an aside, as head of Investor Relations, I was the one who asked to have the footnotes added in response to investor requests at the time for just such clarification. Updates and improvements to our disclosures is not uncommon as we continually seek to be as transparent as possible and ensure that we are proving investors with the best information available.
In any case, I hope you find this helpful. Please let me know if I can be of further assistance. I am traveling all next week meeting with our institutional shareholders in Europe, but will try to respond in as timely a manner as I can.
Best regards,
Pamela Garibaldi"
**********************...
EDITORIAL
I think that this information deals with the Jacobson assertions which are most amenable to analysis. Unlike some others, I do not find Jacobson to have some inherent reliability (by virtue of either his education, employment history, current clientele, or website marketing) which overcomes his stated interest in seeing a decline in Digital's stock price. He has no real downside if he were to mischaracterize truth - he is only stating an opinion, or interpretation.
On the other hand, I do attribute some measure of reliability to company filings, disclosures, and statements (however inadequate I or anyone else may deem them), since there are potentially serious civil and criminal penalties for Digital's management and board if they are misrepresenting the company financial picture.
I think what happens in these events is similar to the innuendo we see in politics, where media coverage is exploited because it's possible to do so. Any chance to create a perception is used to advantage, regardless of truth. I actually get pretty sick of it.
We have seen some high profile examples of corporate misconduct - Tyco, WorldCom, Enron - which are much more memorable than those cases (some cited in SA articles) where short sellers or activist investors were feathering their nests. If anyone wants to react on the basis of "where there's smoke, there's fire," I suppose I can't blame them if they fear losing the money they have invested. But in doing so I think more bad behavior is encouraged.
End of editorial.
Highfields Capital Is Wrong Because This Digital Cloud REIT Ain't Going Nowhere But Up [View article]
1. Is it true, as Jacobson was quoted saying by Barron's on 5/8/13, that "True adjusted funds from operations (AFFO) is 87 cents per share, not the $3.90 per share the company reports." Is this accurate according to the NAREIT definition at http://bit.ly/QufUB0?
2. Is is true (as stated by Jacobson) that Digital "changed the definition of non-recurring capital expenditures to include maintenance capex"?
Digital Realty Investor Relations sent me this message this morning:
**********************...
"Both statements are inaccurate. Mr. Jacobsen asserts that we are understating our maintenance cap ex. In fact, we run most of the maintenance and repair expenses through our income statement (approximately 45% of the property operating and maintenance line item, excluding utilities = ~$90M in 2012), which is consistent with the other data center REITs and is a more conservative accounting approach than if we were to capitalize these expenses. In fact, the portion of the data center portfolio that we own and operate has roughly an average age of approximately 3-4 years. The major components that we maintain (generators, HVAC systems, etc.) have a useful life of 25-30 years - like any other real estate company only on a larger scale - so there is no need to replace this equipment.
In response to your second question, in 2Q2011 we added to the our supplemental report (available on our website under Investors) footnotes explaining how we define recurring and non recurring cap ex for clarification purposes only to the Historical Capital Expenditures schedule. We did not change the definitions. This is easy to verify by looking at the earlier reports, which are archived on our website. The difference between the two amounts being spent did not change quarter to quarter. As an aside, as head of Investor Relations, I was the one who asked to have the footnotes added in response to investor requests at the time for just such clarification. Updates and improvements to our disclosures is not uncommon as we continually seek to be as transparent as possible and ensure that we are proving investors with the best information available.
In any case, I hope you find this helpful. Please let me know if I can be of further assistance. I am traveling all next week meeting with our institutional shareholders in Europe, but will try to respond in as timely a manner as I can.
Best regards,
Pamela Garibaldi"
**********************...
EDITORIAL
I think that this information deals with the Jacobson assertions which are most amenable to analysis. Unlike some others, I do not find Jacobson to have some inherent reliability (by virtue of either his education, employment history, current clientele, or website marketing) which overcomes his stated interest in seeing a decline in Digital's stock price. He has no real downside if he were to mischaracterize truth - he is only stating an opinion, or interpretation.
On the other hand, I do attribute some measure of reliability to company filings, disclosures, and statements (however inadequate I or anyone else may deem them), since there are potentially serious civil and criminal penalties for Digital's management and board if they are misrepresenting the company financial picture.
I think what happens in these events is similar to the innuendo we see in politics, where media coverage is exploited because it's possible to do so. Any chance to create a perception is used to advantage, regardless of truth. I actually get pretty sick of it.
We have seen some high profile examples of corporate misconduct - Tyco, WorldCom, Enron - which are much more memorable than those cases (some cited in SA articles) where short sellers or activist investors were feathering their nests. If anyone wants to react on the basis of "where there's smoke, there's fire," I suppose I can't blame them if they fear losing the money they have invested. But in doing so I think more bad behavior is encouraged.
End of editorial.
Intel's Server Market Share To Decline As Competition Heats Up [View article]
Was he supposed to predict exactly how technology would achieve extreme productivity increases? If his precise method envisioned 50 years ago is not what is currently happening, does that mean such increases have stopped? Ignore any progress that doesn't fit a particular parsing of what Gordon could be construed to have meant?
Why Peter Grandich Is Still Telling His Wife Gold Will Hit $2,000/Oz. [View article]
No capitulation anywhere in sight.
Emerging Markets And The Case Of The Disappearing Dividends [View article]
Picking An All-Star REIT Team To Defend Against Interest Rate Risk [View article]
Picking An All-Star REIT Team To Defend Against Interest Rate Risk [View article]
Orders For Gold Go Unfilled In Asia [View article]
Highfields Capital Is Wrong Because This Digital Cloud REIT Ain't Going Nowhere But Up [View article]
Another article here on SA is worth a read for general background on the data center space if one feels particularly wonky. See http://bit.ly/14xBh7j
Richjoy403 made good points about how informed anyone can really expect to be - but I actually like doing the research even if I don't achieve complete mastery of the topic.
The Case For Owning Digital Realty Trust: When Hedge Funds Don't Know What They Are Talking About [View article]
Anyway, to answer your question about financing, just check out the schedule of debt due in any of their presentations. Financing is not long term like a home mortgage, and often is not even property specific. Good REITs use a combination of debt and equity in their capital structure, using the latter to take out the former from time to time.
Emerging Markets And The Case Of The Disappearing Dividends [View article]
Many "good" things about US companies are bad in an EM context. For instance, the fact that EM companies don't buy back stock is a good thing, given that better return is available almost anywhere in their markets. While the oscillations are more pronounced, expect a steeper growth curve overall in EM.
In my own portfolio (the active part, anyway) I have been overweight US - now is when I'm beginning to unwind that into greater EM exposure. Your excellent chart illustrates why re-balancing works - it would sell US high and buy EM low.
The dividend paying stocks are the best bet IMO. They represent more stable profitable opportunities. If payout is going down, maybe it means that overall productive investment is happening right now. Disclosure: long DEM & DGS.