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bale002

bale002
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  • Why Is Mr. Market Raining On This Small-Cap Farming REIT? [View article]
    You have a point, in at least two ways, I think. First, to grow in a REIT structure, the REIT has to continually borrow. Second, any security traded on a public exchange is subject to wicked volatility that the investor can see day-to-day, minute-by-minute: US financial markets are volatile, reflecting, among other things, the flexibility of our economy in allocating capital (at least in theory and to a good extent also in practice).

    In principle, the same is true for closely held properties, but a long-term owner (not a flipper) usually does not look at the price until it is time to sell, what, once every 10-20 years or more.
    Nov 23, 2014. 05:15 AM | Likes Like |Link to Comment
  • Why Is Mr. Market Raining On This Small-Cap Farming REIT? [View article]
    So far it appears that LAND specializes in mainly berry crops, namely strawberries, which are annual row crops, and blueberries which are permanent crops (bushes that can grow up to 12 feet high), mainly in Florida and California. Indeed, so far much different than FPI which features grain and seed row crops in the mid-west and now apparently into South Carolina.

    Together they do appear to give the small investor some kind of diversification.

    For the entire picture, you really have to follow the companies yourself, press releases and periodic reports.

    In any case, under current conditions, I would not view it as a 12-month capital growth story, but as part of an overall long-term plan to hedge against inflation (5-30 years), with an around 3% yield in the meantime.

    Several huge institutional investors have already been doing this (they aim at 5% yields), with a view to asset/liability matching over decades, and there are also several private equity firms serving very high net worth individuals (say $5M to $25M and up).

    But for the small investor, FPI and LAND are the only domestic game in town right now. So take it, with a grain of salt as it were, or leave it. In any case, if you do take it, don't bet the farm on it as it were, but just a small percentage of your overall portfolio may be worth the short-term risk as long-term inflation hedge.

    Good Luck!
    Nov 23, 2014. 05:03 AM | Likes Like |Link to Comment
  • Why Is Mr. Market Raining On This Small-Cap Farming REIT? [View article]
    The only other farmland REIT is LAND, which focuses on berry crops in California and Florida.

    Those share prices have also fallen over the past quarter or so, in both cases due to current, and the outlook for, crop prices, justifiable or not with respect to land prices, whose rises have slowed and some analysts are forecasting declines of 5%-10% per year over the next several years.

    These forecasts are all averages over wide regions and different types of crops.

    The managers of the two REITs in question, FPI and LAND, claim, I believe that these are triple net leases and that they have rent escalators in their lease contracts (Brad already mentioned that they receive their cash rents once a year upfront, before harvest). Both REITs have also entered into financing agreements with various entities of the US Farm Credit System, for whatever that's worth.

    The small investor has to determine whether, and to what extent, the farms owned by these two particular REITs will be affected by the generally expected crop price trend over the next two-five years.

    No one knows the future. Most likely crop prices, along with other commodities, will remain in the doldrums for several more years. So, for those interested in long-term farmland investment via publicly traded REITs, my best guess is to accumulate slowly at these low, and possibly lower prices, maintaining discipline in terms of overall portfolio allocation, or even reducing a little, with a horizon of more than five years.

    Good Luck!
    Nov 21, 2014. 09:26 AM | 4 Likes Like |Link to Comment
  • We Currently Have A Positive Bias On The U.S. Bond Market [View article]
    Good article.

    I would be willing to buy high quality bonds on 10-50bps dips, hopefully even more but I wouldn't hold my breath for that.
    Nov 19, 2014. 09:43 AM | Likes Like |Link to Comment
  • '$1.6 Trillion In Defaults Coming,' Legend Says [View article]
    I have not bought any high yield bonds in a while, do not plan to, they are a small and dwindling percentage of my overall portfolio, and perhaps I should have sold 6-12 months ago.

    Nonetheless, in terms of a sharp drop in prices, rise in interest rates and four-fold increase in the default rate, the article may have been convincing if you had provided even one solid fundamental economic reason why, instead of briefly citing interest rates, suggesting the by now very tired mantra that interest rates will rise simply because they _have to_.

    Really?

    Do you have a better argument? Global and national recession?

    Maybe. But let's have a clear statement of the underlying reasons.
    Nov 18, 2014. 10:24 AM | 1 Like Like |Link to Comment
  • The Dividend Stock Bubble [View article]
    I too would be cautious about overpaying for high-yield dividend stocks, but the precise forward-looking fundamental economic reasons for a significant rise in interest rates are what exactly???

    And if they rise gradually over the course of a decade, that would probably be commensurate with economic and wage growth. In such case, dividend-paying stocks would probably also keep pace.

    I myself have been mostly sitting on the sidelines these past three weeks or so, but in the long run (at least five years, better if 10+), overpaying a little is probably okay, and the greater risk is in the relative short run, getting whipsawed by volatility-generating events, which could even be a tantrum-causing rumor or perceived threat. It happens two or three times a year.
    Nov 13, 2014. 12:11 PM | 2 Likes Like |Link to Comment
  • Time To Exit Municipal Bonds [View article]
    Same article for the past two, three, four, five, six years. In the meantime, we have achieved stabilization, but forward-looking economic fundamentals (outlook for growth, wages, inflation and interest rates) haven't changed much.

    To be sure, I wouldn't be a buyer now, but I wouldn't sell any already entrenched in core bond portfolio, and I welcome periodic drops like in 2011 and 2013.

    So please keep it up - in fact we haven't enjoyed a good muni scare article in many months -, especially if we experience another isolated default or Puerto Rico grabs the headlines again.

    That would be most helpful.

    Thanks.
    Nov 13, 2014. 09:55 AM | 12 Likes Like |Link to Comment
  • Equity REITs: A Critical Component To A Diversified Portfolio And Essential To Our Way Of Life [View article]
    The accounting fraud at ARCP has nothing to do with the inherent riskiness of REITs, but with the fraudulent behavior of specific individuals, it could have happened at any company in any industry.

    I believe the point the author is making is that US commercial real estate historically has intrinsic underlying value, regardless of economic trends.

    For example, it is possible to convert a building from one use to another, updating its technology, or demolish and reconstruct, but if located in an economically prosperous community, where quality of people counts the most, the underlying land will maintain and increase its value over the long run.

    On average, REIT prices should be a bit less volatile over, say, a ten-year period, while at the same time paying often superior yields than average compared to blue chip stocks, for example, while at the same time offering long term appreciation perpetually (at least in theory), in contrast to, say, bonds.
    Nov 10, 2014. 12:25 PM | 1 Like Like |Link to Comment
  • Monmouth Is A Steady Eddie REIT, So Why Don't I Own It? [View article]
    I bought some MNR below $9 on the occasion at its last public offering below $9, back in May 2014 I beloieve. I would probably buy some more at another public offering if it causes a dip, even better if accompanied by a general dip in equity/REIT prices.
    Nov 10, 2014. 09:27 AM | 1 Like Like |Link to Comment
  • Everyone Hates Bonds [View article]
    Agreed. The national inflation statistics are averages, just like national income and the effective tax rate.

    But we all have our individual inflation, income, tax rate and time curves. Within certain constraints, we can all invest accordingly in our deep and broad financial markets.

    After all, finance means the ability to move resources through space and time.

    Good Luck!
    Nov 7, 2014. 04:11 AM | 1 Like Like |Link to Comment
  • Update: The FBI Is Looking Into American Realty Capital Properties [View article]
    You use the word "error", but if it was intentional, then "fraud" seems more appropriate, as do the words "crook" and "criminal", as in criminal investigation.

    It is very sad, certainly disappointing, even scary, but innocent until proven guilty, so hopefully not a case of a rotting fish.

    Good Luck!
    Nov 3, 2014. 09:06 AM | Likes Like |Link to Comment
  • Everyone Hates Bonds [View article]
    I too am waiting for another municipal bond scare. I caught some of it in late 2013 with the Detroit/Puerto Rico thing.

    In the meantime to me the unrealized capital gains on my bond holdings are useless.

    The next scare will probably be a 25 basis point increase in short-term interest rates, hopefully triggering a more than proportional (by the economic fundamentals) increase in long-term rates, which then dissipates in the ensuing months, weeks or even days.

    Again, one thing is to repeat a mantra that (long-term) interest rates will rise simply "because they have to", and to contemplate about what would happen in the case of high levels of inflation, another is to take a realistic measure of the economic fundamentals.

    So far, I have not seen anyone make a solid case for some combination of rising real wages, even a partial reversal of globalization, and a dearth of production, or its potential, in manufacturing, agriculture or otherwise, in the US economy, that would trigger high levels of inflation and long-term interest rates.

    If anything, I see a surplus of almost everything, except maybe consumers willing and able to keep buying more stuff (to wit, self-storage REIT prices are booming).

    Somebody please provide solid and convincing fundamental economic arguments to the contrary. I am willing to listen.

    But simply repeating an almost decade-old mantra is not enough.

    And even if there is a permanent rise in long-term rates (10Y UST rate above 3%, 30Y UST above 4%, anything lower is noise), then the bond investor can reinvest the income streams at higher rates.

    In fact, much more costly to the bond investor over these past several years has been re-investment risk, certainly not interest rate risk or even credit risk (Detroit and others not withstanding; by the way, I had insured Detroit bonds in my portfolio, never missed an interest payment and the capital recently paid back in full, no issue here for the individual bondholder).
    Nov 3, 2014. 04:40 AM | Likes Like |Link to Comment
  • Everyone Hates Bonds [View article]
    " ... as [long-term] yields move up ..."

    Really? Based on what economic fundamentals? Because everyone says so?

    There are many different kinds of bonds, including investment grade insured long-term bonds paying 4%-5%, and tax-exempt at that.

    There are many different kinds of investors with many different needs, including long-term asset/liability matching.

    In the United States, the average person has access to very wide and deep financial markets, designed to satisfy many, many economic circumstances, including individual calculations of inflation.

    In my view, based on certain needs, circumstances and purposes, short-term bonds are riskier than long-term bonds.

    Long-term bonds continue to maintain, even increase, their prices, and will probably continue to do so (within a 100bps or so), because of long-term economic fundamentals, the long-term needs of various types of investors, and various circumstances that arise from time to time (e.g. relative interest rates globally, periodic episodes of flight to quality, etc.).

    No one blanket recommendation fits all.
    Nov 1, 2014. 08:03 AM | 1 Like Like |Link to Comment
  • American Realty Capital plunges over accounting probe [View news story]
    Well, another experiencing showing why diversification is key; one rule of thumb is no more than 5% of portfolio in one issuer. Still, this one hurts.

    Not only reckless, but crooks too.
    Oct 29, 2014. 11:01 AM | 2 Likes Like |Link to Comment
  • Everyone Hates Bonds [View article]
    I agree that we are in a "bubble" concerning abuse of the word "bubble".

    Is the average investor/consumer borrowing money (margin/loans) to load up on treasuries, as was the case with, say, tech stocks in the late 1990s or housing in the mid-2000s?

    By my definition, a bubble includes a large amount of reckless borrowing among investors/consumers.

    There are very solid fundamental economic reasons why bond prices, especially for quality bonds, remain sustained, and could very well remain sustained into the foreseeable future.

    Yes, they do overshoot from time to time, as happened about 10 days ago, but I would not expect a sudden 100bps reversal overnight or even over a period of months either: mid/late 2013 may prove to be the exception. If anything, overnight we have surges in bond prices on cuts in growth forecasts and adverse global events triggering flight to quality.

    Good Luck!
    Oct 27, 2014. 09:28 AM | Likes Like |Link to Comment
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