- Evergrande still hasn’t said a word about its missed dollar bond payment last week. And I’m not holding my breath about it making its $47.5 million payment due Wednesday.
- This is all happening as China faces significant power issues. As coal supplies tighten, it’s been trying to get tough on emission standards.
- The power pinch has been affecting manufacturers in industrial hubs on the eastern and southern coasts for weeks. Several key suppliers of Apple and Tesla halted production at some plants.
- On the plus side, Ben Kaplan, CEO of Top Data – which tracks millions of cell phones to analyze business trends – told Yahoo Finance that “retail businesses, for the most part, have successfully weathered the Delta variant”.
Quote of the Day:
“The future is uncertain… but this uncertainty is at the very heart of human creativity.” – Ilya Prigogine
Evergrande is back in the news.
Actually, China in general is back in the news. But let’s start with Evergrande specifically.
On Friday (after my last blog post went out), the company came out with more bad news yet. This time, its electric car unit is in jeopardy unless it gets cash quick.
As such, it won’t follow through with its previous plans to issue RMB shares. Which only makes sense.
What’s less obvious is why the U.S. markets are shrugging off this latest round of bad news for such an influential Chinese company. As I’ve said before, I wouldn’t be acting so secure so fast.
But, hey. What do I know? I only lost everything in the housing crash in 2008 because of an overabundance of optimism.
Incidentally, Evergrande still hasn’t said a word about its missed dollar bond payment last week. And I’m not holding my breath about it making its $47.5 million payment due Wednesday.
This is all happening as China faces significant power issues. As coal supplies tighten, it’s been trying to get tough on emission standards.
Rationing is now in play in multiple northeastern cities – at a time when the nights are getting exceptionally cold. And businesses are cutting hours in order to comply.
“The power pinch has been affecting manufacturers in key industrial hubs on the eastern and southern coasts for weeks. Several key suppliers of Apple and Tesla halted production at some plants.”
Steel. Aluminum. Cement. Chemicals. Dyes. Furniture. Soymeal production. It’s all affected. So supply shortages won’t be getting any better any time soon.
The World According to REITs
On the plus side, Ben Kaplan, CEO of Top Data – which tracks millions of cell phones to analyze business trends – told Yahoo Finance that “retail businesses, for the most part, have successfully weathered the Delta variant.”
“… overall, retail business in terms of foot traffic are only down about 0.5%... since the rise of the Delta variant. And really, what’s been bolstering that is back-to-school shopping right now. And also, service businesses – you know, your haircuts, your nail salons – they’ve been doing [okay]. Not as well as retail, but actually outperforming a lot of other in-person businesses.”
That’s good news for many of the shopping-center real estate investment trusts we follow. And there’s also good news for two New York City REITs today.
Bank of America’s James Feldman boosted both Vornado (VNO) and SL Green’s (SLG) price targets – up $4 to $46 and the latter up $5 to $75, respectively. He sees office life returning in January, with tech’s continuing growth in the city boosting them further.
Otherwise, REITs were rather quiet the last 24 market hours, minus these three announcements:
- Four Corners Property Trust (FCPT) purchased three properties across from Washington Prime Group (WPG) for $5.1 million: a Buffalo Wild Wings, a Wells Fargo, and a Texas Roadhouse. They have a weighted average of five years left on their existing leases.
- Kite Realty Group (KRG) saw S&P affirm its BBB- issuer credit, complete with a stable outlook.
- Hannon Armstrong Sustainable Infrastructure Capital (HASI) launched its Green Commercial Paper platform with a $100 million CarbonCount Green Commercial Paper Note Program. The goal is to acquire or refinance green projects such as those involving behind-the-meter, grid-connected, and sustainable infrastructure ventures.
Finally, here’s how 20 of the REITs we follow did last week…
(Source: The Daily REITBeat)
Inflation Is a Monster REITs Can Help You Beat
One of my readers recently wanted to know if I was worried about inflation – an intensely legitimate question.
Ronald Reagan once said, “Inflation is as violent as a mugger, as frightening as an armed robber, and as deadly as a hitman.” And, considering the mess he inherited, that statement wasn’t nearly as melodramatic as it might sound.
Jimmy Carter’s policies… on top of Richard Nixon completely cutting the dollar from gold… on top of Lyndon B. Johnson’s spending sprees were devastating. Together, they destroyed businesses, wiped out personal savings, and sent the entire country into a depressing tailspin.
Today, we could be looking at similar bad policies with similar bad results. Which is why I definitely do have inflation on my radar.
Fortunately though, I also have REITs.
As I wrote months ago, they offer “natural protection against inflation” since rental contracts tend to include such considerations. In fact:
“… many leases are tied to inflation. This supports REIT dividend growth and provides a reliable stream of income regardless, helping to support the following fact…
“That, in all but two of the last 20 years, REIT dividend increases have outpaced inflation as measured by the Consumer Price Index.”
Not bad, right?
Not bad at all! Just as long as you know which ones are worth your money at any given time – both from a valuation and quality perspective.
That’s why iREIT on Alpha gives members ahead-of-the-curve advice on what’s what in REIT-dom through:
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This is your chance to try us out – without any strings attached. Activate your two-week free trial period now and see if iREIT is right for you.
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Analyst's Disclosure: I/we have a beneficial long position in the shares of FCPT, HASI, KRG, SLG either through stock ownership, options, or other derivatives.
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