THE NEW, HIGHER PRICE OF THIS COLUMN
Bill Kistler: ‘>> Starting March 1, the price of this column doubles.<<
Oh sure, and I bet you have an unsubscribe fee too!’
☞ That’s where I make most of my money.
REITS: AARON’S PICK
Aaron Stevens: ‘You might advise M. Farbiarz to look into Equity Residential REIT (EQR). First, it has fantastic management pedigree (Samuel Zell has been in this business for his whole life). It invests in rental housing all over the country. I feel this is type of REIT is much more stable in an economic recession than those that build shopping malls or trade mortgages, but still has plenty of upside potential if/when the boom times return. Even better, EQR pays a handsome dividend (approaching 6.4%), and has consistently increased the dividend by about 8-10% per year.’
REITS: WHY PICK ‘EM AT ALL?
Eric Haas: ‘I think it interesting that you advocate index mutual funds in your book, but you advocate individual securities on your web site. Rather than suggesting an individual REIT, how about a no-load REIT Index Mutual Fund, like the Vanguard REIT Index Fund? Isn’t diversification a good thing?’
☞ Yep. But there’s also this issue I should have addressed yesterday. Just how closely do REITs correlate with the housing market? Answer: not as closely as you might think. What they do correlate with pretty closely is interest rates – inversely. That is, when interest rates go up, REITs come down. And interest rates may by now have at least as much room to rise as to fall. Robert Rogers: ‘If interest rates go up over the three years that M. Farbiarz wants to buy a house, he may be faced with higher interest rates on the mortgage he may need and a lower investment value in his REIT shares.’
David Morrison: ‘Two more factors that work against selling short: The long-term trend of the economy and the stock market is up. The long-term trend of the value of money is inflationary.’
☞ So true. And a third is a point Warren Buffett has made (thanks to Roger Farley for reminding me of this) – that the managers of companies with overvalued stock can sometimes use that overvalued stock to acquire other companies, becoming at least somewhat less overvalued in the process.
IRAQ and IRONY
An interesting article in the Financial Times of London points out the leading role Halliburton played under CEO Dick Cheney in supplying Iraq with needed oil-drilling equipment. It was legal – just a bit ironic.
The article appeared November 3, 2000, long before the average American felt any real threat from bad guys abroad. In these days of the Axis of Evil, it has resurfaced. It makes an interesting contrast to then-candidate Cheney’s remarks the previous August in an interview with ABC’s Sam Donaldson:
Donaldson: ‘I’m told, and correct me if I’m wrong, that Halliburton, through subsidiaries, was actually trying to do business in Iraq?’
Cheney: ‘No. No. I had a firm policy that I wouldn’t do anything in Iraq – even arrangements that were supposedly legal.’
Monday, really this time: What Should You Put in Your Roth, Versus Your Traditional, IRA?
Quote of the Day
To the BELOVED REPUBLIC under whose equal laws I am made the peer of any man, although denied political equality by my native land, I dedicate this book with an intensity of gratitude and admiration which the native-born citizen can neither feel nor understand.~Dedication to Andrew Carnegie's Triumphant Democracy (Scribner's, 1886)
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