When Tesla viciously cut prices last year, several companies announced they had no problem matching the new price level. BYD was one of the companies made great overtures about this. While not an existential threat, we can now see BYD was hit hard by Tesla's aggressive pricing. When Berkshire sold off BYD, Buffett said he did not want to compete against Musk. We have arrived at a time when advisories from companies are honest on rare occasions. 99% of news releases are intended for investors who believe such news releases. I estimate this group to make up roughly 80% of investors, on average; it varies by company. For someone like me, who is a long term investor, I look for honesty in a CEO. It almost doesn't exist but it is there if you look for it. It's a lot easier to sleep at night, knowing your market investments are founded on the operations of a company that is generally doing a good job. My CEOs don't always meet their goals and they are occasionally wrong about things in a public way. I'm able to chalk these cases up to a mistake and continue to believe in these executives. My residential REIT was the strongest performer in my portfolio, for about 18 months. These days, the dividend has been cut, the stock is well down, and the outlook is strong on survival but weak on excitement. I stopped reinvesting in this company in 2019 but I haven't sold a single share. When I stop believing in the honesty of a CEO, they do not stay in my portfolio for long. If I still believe in them, I am a loyal partner. I consider media outlets to be extremely greasy, in general. Countless things have been published that would not have been published, had those outlets been operated by people with integrity. As well as this lack of filter, media is inundated with corporate announcements that are built on barnyard fertilizer. What is currently missing from my portfolio is risk. I consider this a sign of my own pessimism. I haven't found extreme value in a long time. This is why I've gone outside the market and focused on small business with some of our new money. At this time, this approach has not paid off. Time will tell if it was a wise move but I am comfortable with our situation. Comfort is the key to not doing dumb things.
I've been trying to learn about the new pneumonia strain that China invented. As best I can tell, we are not under threat of another global pandemic.
Even if we were, you think people will lock down again? Not in a million years. It'd take airborne Ebola to get people to stay inside.
The WHO has tabled international health regulations that will give them power to lock the world down. I expect nearly all western countries to sign on, with the possible exception of America and a couple of certain exceptions in Europe (Denmark, Sweden, perhaps Germany). Few organizations operate as openly with their corruption as the WHO. I have no intention of ever voluntarily taking another vaccine. My trust and confidence in western medicine has dropped to near zero. Denmark was the first country to drop all COVID restrictions, including travel restrictions, back in 2022. They also dropped their vaccination program while the world looked on in horror. I was watching and praying they would stop ruining the global economy and our lives. I was only on board with the vaccine and, to a lesser extent, lockdown during the very initial phase when we didn't know anything about COVID-19 and the world was both terrified and (with some justification) hysterical. Now I've had COVID many times. I sniffle for a few days and carry on, like the extremely mild cold it has become. While I'm ranting, Pfizer has an advertisement saying COVID is evolving so we should vaccinate. That is utter bullshit. Why would we vaccinate for a previous strain when the virus is evolving? Anything negative about the vaccine or lock downs has been removed from the majority of medical publications citing, "This is not in the public good." There are a bunch of YouTube videos by prominent virologists telling us they haven't been able to publish a paper since COVID started, despite being leaders in the field. Too many researchers have been disregarded to ignore the fact that our science has been corrupted into non-science. OK. Rant off. I will return to being the crazy old man who lives in a tent but doesn't bother anyone.
Now that I've upset everyone with my corruption/politics rant.... The last 6 trading days have been epic. Not the biggest gains of our investing careers but really good gains, every day. Our two stragglers really pulled up their socks but everything is up. While neither straggler has set an ATH, they are back in the comfort range. Now that we have the opportunity to exit our positions, we have decided to do nothing. Because, that's what we do. Nothing. If I was a bull, I would have heavily bought one of our two hardest hit REITs across the last two years. I believed in it and knew it would return, one day. I have no way to know if the current price will be sustained. No one does. Instead, I went heavy on money markets. As retirees, it has been nice to know our future is secure. While we are now at ATH, we would have done better to simply float with the S&P 500. Our trajectory is not any sort of victory but it is nice to see some positive numbers, as it's been a while.
I have a mode I call, "the vacuum". We have a small cap that sees low volume. It is a medium holding for us. I followed it for 24 months before buying in 2018 and it has done very well, since then. It's no Tesla but is a big success story for us. I recently opened a long term buy order at a value price to catch anyone selling at market when the buy queue is empty. It happens. This order has not connected in the couple of weeks it's been open but I like having it there. I expect we will get several hundred shares at an excellent price with that approach, over the next year, based on previous experience. Over the long term, weird stuff happens. I like to position myself to benefit from these one time events.
I will share some thoughts and analysis of one of our holdings. It's a common scenario so it may be interesting to young investors. We bought a REIT in 2009 that was paying 11.25%, at the time. I recall asking about the company on another forum and being told only morons invest in REITs. In fact, the question triggered a response of anger, hostility, and personal attack. So, I bought the hell out of the company. I aggressively built up the position from 2010 to 2014. That REIT tripled in value and bumped the distribution twice between 2009 and 2015. Needless to say, we were flying high. While I purchased more of this REIT between 2014 and 2017, they were DRIPs and small adjustments. The thing that changed in 2017 is a letter sent by the CEO/chairman outlining his extreme performance while citing a 75% equity gain for investors over 3 years. At that point, it was distributing about 7% which was still strong, even after the equity gains. Two months after the letter, he donated $375M of company money charity. Obviously, the letter was a pre-emptive strike on push back to his spending of owner money. The letter was the end for me. When a CEO explains how great he is, that is a sign he is really bad. That's when I started selling down the position. The sell down was not all at once, to say the least. I would post long term sell orders and would sell calls in accounts with that capability. A few of the call contracts sold and all of the sell orders connected. It wasn't a high trading REIT so I tried to sell in increments less than 20% of the average daily volume. By 2019 I had sold about half and by 2020, all were sold except a very small position in a large account and we have a very small account that holds this company exclusively. We carry these lousy shares today. The dividend was cut in half at the end of 2022 and the stock lost 55% of it's market equity within 3 weeks. I had no thoughts of re-purchase at the lower price. I'm mostly happy with how that money was re-allocated but not completely (that is a discussion for another post). Early in 2023, and at a low equity point, the company purchased a bunch of advertising to extol the amazing performance of the management team. No joke. These guys had a messiah complex. The CEO/Chair was one of the largest shareholders so I was surprised to see him removed in October 2023 by two interim people. Yesterday morning, they announced those positions have been filled permanently and they are recruiting for most executive positions. The only person staying is the CFO. This brings us to today. I believe this company will do well over time if they can fix the massive cash leak. Interest rates seem to be backing down slightly and that is massive for a REIT. This could be a big opportunity and I'm sitting on a mountain of near cash. The reason I don't pump up this position is because the new management make this a new company to me. These guys could be just as bad as the outgoing executive. I won't know until I get to see performance over several quarters. Also, it's easy to look at the outgoing guy as the devil who created bad numbers and the new guy as a saint who creates good numbers but this change is made at an inflection point in the interest rate curve. That point of view would be slightly myopic so I will attempt to compensate for that. Commercial RE leases are indexed against inflation so the poor performance will be remedied over time, even if nothing is done. This company is almost fully leased so I am expecting good things in the near future. What I am looking for is massive cash bleeding from the new management. Generally, bad management won't start looting the coffers until a couple of years go by but I've seen it happen from day 1 so we will see.
We are on an up-tick today but our rocket is now on it's second down tick. I'm not sure what to make of that but it's nice to think the market may be on an up swing.
We've been flat for the last week. The actual number is a minuscule down tick from last Tuesday. Our four year GIC ladder is starting to unwind. We are swimming in cash. GIC rates are now substantially lower than money markets so that is where our money will rest. If rates get too low, I will move a bit of that near cash into the markets but I hope that doesn't happen. I've been considering how low is too low to lock our money into a GIC. Being locked in doesn't bother me all that much, as we are retired, but it still presents a small problem. Certainly, any GIC below 3% is a non-starter. I can't imagine a situation in which I would want a GIC below 4%. At 5%, I'm happy to lock up a small amount of our money that is earmarked for insurance purpose. The other question is how much of a premium does a GIC have to pay over money markets to warrant locking up money. Right now, money markets pay better but the rates float while GICs are mostly fixed rate for the full term. If rates fall, GICs would potentially be a better choice. I ignore this as irrelevant because markets perform extraordinarily well when rates are super low so we can simply move into the markets.
I'm astonished how much terrible advice and disinformation is floating around, particularly about Canadian investing. It should be criminal. Literally. If your spouse dies, you get their TFSA. That TFSA will be locked for further contributions. The standard advice is to spend down the spousal TFSA first. Most bank staff and, apparently, a lot of online forum people will advise this. That is complete bollox. If you spend down your spousal TFSA, that tax free headroom is gone forever. That is a mistake, although it may not matter in some situations near end of life. If you need to withdraw money from a TFSA, you should pick your own. That way, you can re-contribute that money, perhaps in the next calendar year from RIF withdrawals. Maybe you won't need that headroom for some years but, one day, you may find yourself selling your house or a property, inheriting some money, or come into some money in any way and, at that time, it would be nice to shelter it tax free. Seriously, 90% of bank staff are financial morons who think they are far smarter than they actually are. 99% of forum members are financial morons, also. My suggestion is to try to think for yourself and, in any case, don't consider the first advice you are given as a great idea. Do your own research and learn what you can about your financial world. If you make an expensive mistake by doing it yourself, at least you will learn a lesson from it.
I can see our investing is going to take on a seasonal pattern going forward. I don't log into our account during the time we are overseas, which is 4~5 months each year. The security risk is too high to consider. I do follow the portfolio on Yahoo Finance. This year, we came home for Christmas and that gave us an opportunity to make some year end adjustments for tax purposes. As long as my wife isn't reading this, that's a primary reason I wanted to come home. Investing has been a part-time job for me over decades. I've worked like a maniac and saved like a moron to build a nest egg for us. Now that we have arrived in retirement, I don't see much need to tend to our flock of companies. The days of 5.5% money markets are over but there was a very long period during which we just pushed money into MM while we waited patiently for a better opportunity. At this point, we have far too much cash, even for a retired couple. It's not super important but I'm patiently waiting to adjust things into more reasonable balance. If it never happens, that will be OK too. Something to think about is that, not only does day trading universally lose money, the labor involved makes it a jail. Perhaps some folks think they can lay on a beach and trade crypto or any other commodity that isn't bolted down while bikini clad chicks bring drinks and crystal meth to their chaise lounge. Sooner or later, we need to learn how to gainfully manage money with a small fraction of our time in order to have a life of freedom. Ignore what 99% of posters tell us. Making money is really, really hard. One of extreme few methods that work is buying the S&P 500 index and holding it forever. You won't get rich quick but you will grow with the economy. What's more, you are free to take a trip on Peruvian frog poison in a shack in the Andes while your host extracts alkaloids from his current crop with gasoline, instead of randomly pressing buttons on your phone. I read an article that attempted to tie inflation to market gains. It is probably fiction, as 99.9% of trading articles are, but they suggested inflation of 5% is expected to coincide with broad market gains of 11%. These are the type of numbers you should hope for. Forget about trying to double your money. Best wishes in 24.
REIT dynamics As an RE investor, REIT dynamics seem completely whacked to me. Insane. Moronic. Zero sense. I've long thought standard REIT operation was to find someone with a galaxy sized ego, make them CEO, and watch while they over pay for everything that is not bolted down in an effort to get big. To be clear, this though is not completely wrong. What is happening is they see purchase price as less relevant because inflation will fix over-paying, over time. If you pay $400M for a building that is worth $200M, it won't matter in 20 years when the building is worth 20B. RE generally appreciates 10x per decade. This explains BlackRock and quite a few other REITs. The problem is, inflation is not guaranteed. Right now, with China being a dumpster fire, we could easily (perhaps likely) see some deflation in the next five years. That could easily bankrupt BlackRock, et al. If you can find a well run REIT, it will be one of the best investments in your portfolio. They distribute like champions. Most REITs, however, are operated without much sophistication or thought.
Meanwhile, in international politics, Venezuela is planning to invade Guyana. It's always the same assholes.
I shouldn't. A life long buddy of mine is an extremely successful businessman. Far, far outstripping my own success. He is an older man, by now. He has money. He has freedom. He has driven away every single person who cares about him. Not much to lose. A few years ago, he went to Peru. While telling us about it, he mentioned he found some sort of clairvoyant woman to inject him with frog poison. Apparently, that is a thing there. You take a trip through the frog's eyes. When he came out of it, he realized she had taken him to an extremely remote shack that was probably used for cocaine processing. Its all about business. Product, customers, sales,... I listened to the story for about 30 minutes before asking if he was joking. He was not. This is a cautionary tale for young people. Be careful who you get to inject you with frog poison. Although, my buddy was fine. Nothing bad happened, beyond him losing the trust of another friend by sharing that story.
RE appreciates at a CAGR of 26% p.a? Besides, why would you hope for inflation? All you should care about is your real rate of return.
Inflation is the reason RE with it's extreme leverage works. Remember, leverage works the other way to provide extreme hurt during deflation. Assume you have 100M of RE. Next year, that RE can be expected to be worth $107 to 108M. That equity gain is used to buy more RE without changing the original loan to value ratio. In this way, the following year, you have 107M gaining 7-8%. Its an acelleration. But, let's go back to the original 100M to 107M gain. The REIT put down something like $20M and financed 80M. At the end of the first year, they now have 27+M of equity in an average year. Each year, the gain will accelerate if the equity gains are reinvested. Now, imagine this cycle with infinite market funding for leverage. It is wildly compelling. I argue that, not only should the RE investor hope for inflation, they need it to make RE investing profitable. Fortunately, RE investors get inflation nearly every year.
