For income-focused investors, real estate investment trusts (REITs) offer the attractive combination of moderate to high yields and the potential for substantial dividend growth. New REITs hit the market through IPO’s or spin-offs and typically come with an exciting story and not much of a track record. With my focus on the safety of dividend payments and visibility of future dividend growth, I like to let new REITs get seasoned in the market before I make an investment decision. My REIT database includes seven REITs that launched with IPO’s and are now approximately one-year-old as publicly traded companies. Let’s take a quick review o...
$100 Trillion Up in Smoke “We aren’t addicted to oil, but our cars are.” – James Woolsey “The greatest asset, even in this country, is not oil and gas. It’s integrity.” – George Foreman If energy powers the world, then whoever owns that energy must have power over the world. That’s certainly been the case for the last century or two. Ownership of our primary energy source, crude oil, is what made billionaires of John D. Rockefeller, H.L. Hunt, and assorted Middle Eastern kings, emirs, and sheikhs. Oil in the ground is wealth only on paper – you may own that oil, but it earns you nothing until you recover and sell it. Yet p...
Following Friday’s mediocre jobs report, the Atlanta Fed GDPNow Forecast made a surprising leap. The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2016 is 2.2 percent on February 5, up from 1.2 percent on February 1. After this morning’s employment report from the U.S. Bureau of Labor Statistics, the forecast for real consumer spending growth increased from 2.5 percent to 3.0 percent and the forecast for real gross private domestic investment growth increased from -0.4 percent to 2.1 percent. GDPNow Chart Why? I pinged Patrick Higgins, senior economist at the Atlanta Fed and he provi...
Recently, when Deutsche Bank stock was about 10% higher, the biggest German commercial bank declared war on Mario Draghi, as we put it, warning him that any further easing by the ECB would only push stocks (with an emphasis on DB stock which has gotten pummeled over the past few months) lower. What it got, instead, was a slap in the face in the form of a major new easing program when the Bank of Japan announced it is unveiling negative rates just three days later. Which is why overnight a badly wounded Deutsche Bank has expanded its war against the ECB to include the BOJ as well, and in a note titled “The Risks From Further ECB and BOJ...
Japan has adopted negative interest rates as the latest effort to revitalize its dying economy. But the country has been falling down the demographic cliff after its baby boom ignited a surge of spending in the 1980s. Look at Japan’s Spending Wave. This shows a 47-year lag from birth to peak spending: Japan’s pre-World World II baby boom peaked in spending in 1989 at the height of the country’s economic prowess. The last of its baby boom peaked in spending in late 1996. It’s been in a coma economy ever since. And unfortunately, it only gets worse overtime. While it’s hitting Japan hardest right now, this is a demographic reality a...
Deals and Financings BeiGene (NSDQ: BGNE), a Beijing clinical-stage novel drug company, raised $158.4 million in its US IPO that showed strong interest (see story). The company priced the offering at the top of the expected range — $24 per share — and increased its size from 5.5 million ADSs to 6.6 million. In its first day of trading, the company’s stock rose $4.62 to $28.62, a 19% increase. The transaction is especially impressive in view of the early-2016 stock market turmoil, which prevented any companies from completing IPOs in the US during the month of January. Sinovac Biotech (NSDQ: SVA), a Beijing vaccine compa...
How did the world get this way? I don’t mean the oncoming recession, if that is indeed, as it appears, the economy’s fate. How did the payroll statistics ever attain this kind of deference and even religious zeal? U.S. manufacturing is shrinking, corporate profits are declining and goods are piling up on warehouse shelves. Those trends have elevated concern that a U.S. recession may loom in the next year or two. Yet in the one area that matters most, the economy has continued to shine: Hiring. Those two paragraphs are at extreme odds with each other, so much so that they are mutually exclusive. It cannot be both. Forced to choose, the me...
The employment release provided some interesting insights into how manufacturing has fared, in the wake of the appreciation of the dollar (and the slowdown in the world economy). In particular, manufacturing employment growth registered at the high end of the range experienced over the past year, as noted by Furman/CEA. Figure 1: Log industrial production in manufacturing (blue), employment (red) and aggregate hours (green), all normalized to 2014M07=0. Source: FRB and BLS via FRED, and author’s calculations. Note that while employment is above the most recent peak, aggregate hours is not. Furthermore, the dollar has appreciated on a broa...
I don’t believe it. That is, I don’t believe that we are over the effects of the Great Financial Crisis – the one that, according to Oz economist Professor Keen, 99.9% of professional economists didn’t anticipate. “The employment rate (the proportion of people aged from 16 to 64 who were in work) was 73.7%, the highest since comparable records began in 1971,” chirrups the UK’s Office of National Statistics in their November 2015 report. Translated to block graph form, their data looks something like this: Fig. 1 The best in over 40 years? Really? Somebody with more patience and expertise please unpa...
There now is a cascade of negative news and investors are starting to get it. The litany of this was felt much of this week. Even supposedly great Employment News Friday investors caught up with the analysis of what it was really like. Even Obama tried for a victory lap on news of a 4.9% unemployment rate. The laughable and hollow cheer was found to be BS since the data reflected terrible full time employment hiring and weak wage growth. We continue to lose full time well-paying jobs. Those jobs have taken flight given good trade deals for manufacturers and most good jobs are now off-shore. Economic data all week was worse than disappointin...