Is a new Ice Age descending on REITs?

Today, techs are hot, but dividend-payers are not. Photo: Vintage photo

WASHINGTON, January 22, 2013 – “Mornings” seem to be getting later and later here at Maven headquarters, located not far from downtown DC in exciting downtown Reston, Virginia. That’s partially due to editorial workload (good news, actually) and partially due to the fact that lately it takes several hours of trading before one can figure out what’s actually going on in the market. It’s also partially due to the incredible cold snap that’s engulfed us here today, chilling the blood to molasses-like consistency while leading us to doubt the wis-dumb of our friends the global warmists yet again. We call them the New Ice Age Deniers around these here parts.

No, it’s not all snowy here, like it is in the vintage circa-1918 glass negative photo of Pennsylvania Avenue posted above. But it’s cold. In fact, it’s just as cold if not colder, and we’re not exactly feeling like the hot traders we actually are this afternoon, that’s for sure. If we wanted this kind of weather, we coulda stayed in Cleveland, for heck’s sake. Clearly, Global Cooling Is Real.

With regard to today’s stock action, it’s now nearly 2 p.m. EDT and we still can’t quite figure out what Mr. Market is up to—“up” in this case being the operant word, at least at the moment. The Dow is up sixtyish points, and the other averages are following suit, most particularly the tech-heavy NAZZ which is really pouring it on today after a miserable last couple of weeks during which gloomsters have been trading Apple (AAPL) as if it were readying itself for iChapter 11.

Hey, at least we have a nice position in security-and-everything-else provider Symantec which showed some nice numbers today and vaguely promised to rationalize its business over the next few months.

Unfortunately, our portfolios aren’t having that much fun today elsewhere, having lost yesterday’s all-encompassing warmth to today’s mini-Ice Age for high dividend payers. They’re currently not as happy as the techs. Our portfolios’ negative countertrend is largely due to our overweighting in REITs and MLPs, our favorite ports in a storm. Profit-takers are out today selling these guys with abandon, a problem exacerbated by a pop secondary issue by one of our favorite REITs, Invesco (IVR).

The one problem with holding REITs and MLPs is that they can spring a secondary issue on you at a moments’ notice which dilutes the shares, temporarily, and hits the stock price as a result. And that’s what happened to IVR today. Oh, well…

Our Schwab accounts rarely get a chance to get in on these secondaries, so our positions suffer some damage in situations like this one until a given secondary’s proceeds get invested—which then lifts the REIT back to either breakeven or ahead to a profit. In the meantime, alas, we have to settle for a hit to the stock and endure the receipt a few fat dividends—in IVR’s case, roughly 12% per annum at the moment. It’s a weird way to make money, but with everything else so dicey, we prefer it nonetheless.

Speaking of weird…

The story the financial media is putting out this week is that “everybody” is leaving bonds and heading for stocks. That, of course, is what the Fed’s QE exercise is all about: inflating stock market asset prices to start prying money loose for the economy. But, that said, if everybody is bailing out of bonds, why were pretty much all of the Maven’s bonds up yesterday even as the stock market soared? They usually move opposite one another. What gives? Weird.

Also, gold has continued to mope around even as silver has acquired a little pep to its step. With the dollar presumably under inflationary pressure, gold should be going up. But it isn’t. Weird.

Plus, we’re getting dire predictions from some quarters that things are about to get a bit recessionary around here again. If so, however, why are commodities prices starting to catch a bid? And if commodity prices are starting to go up again (oil is quietly inching back toward $100 a barrel for example), why isn’t inflation heating up double time? Weird.

It’s all just too weird, frankly, so we’re going to pour a couple fingers of single malt scotch to get the blood flowing during the current cold snap and go watch a few of the shouting matches on CNBC where only Rick “Tea Party” Santelli seems to have a grasp of things and a clue about current reality.

Meanwhile, we’ll likely take some lumps for a couple of days in those REITs as well as in select MLPs like newish Alon USA Partners (ALDW) where flippers are still dumping after each day or two of pumping. Take courage, however. Anyone who’s in MLPs involved with domestic gas production and/or transmission has to be happy about our current struggles against Global Cooling which we have to fight with, umm, natural gas. And oil. And coal. Dropping stockpiles have to be a plus for these good old reliable fossil fuels, so we suspect any chilly downdraft in these stocks will be temporary, at least for now.

And so, we’ll continue to hold our REIT and MLP positions for their fat dividends, as we’re not quite approaching the income level where the Feds now feel entitled to help themselves to this money. Meanwhile, we’ll slowly peel off other positions, including some international ETFs, just because. Because we are getting so overbought that we smell a selling panic just around the corner and would rather be out when the HFT’s pull out their virtual Texas chainsaws and start chasing after the little guys.

Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate.

Any positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.

Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.

References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any ar500ticle under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.

Read more of Terry’s news and reviews at Curtain Up! in the Entertain Us neighborhood of the Washington Times Communities. For Terry’s investing and political insights, visit his Communities columns, The Prudent Man and Morning Market Maven, in Business.

Follow Terry on Twitter @terryp17

 


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Terry Ponick

Now writing on investing, politics, music, movies and theater for the Washington Times Communities, Terry was formerly the longtime music and culture critic for the Washington Times print edition (1994-2009) before moving online with Communities in 2010.  

 

 

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