Focused Investing Perspectives #45
And I thought the previous week was turbulent. This one hit closer to home.
Two dividend cuts and guerilla warfare, plus a significant merger needing attention, all in a 9-day period. Wow. It’s fair to say that I’ve never had an investing week like this.
And meanwhile the S&P 500 is off 8% over the past month. That has the media click-baiters going nuts.
But despite all that, my overall portfolio (including withdrawals) it down only about 2% from the all-time high reached a few weeks ago. That indicates that the risky positions were not oversized, which is a goal.
So far so good.
Meanwhile, though, my concerns over world events slowly grows. I don’t believe one can predict macroeconomic events — too many variables — so I certainly don’t buy any tale of woe about the specific impact of this or that policy.
What often comes to my mind, though, is events nearly a century ago. The world stumbled into the last major trade war, eventually depressing trade by 2/3. And both the US President and the Fed made decisions that turned out to have really bad consequences.
The Great Depression followed. Nobody had tried to bring it about. And there was no single cause. Among the causal factors:
The massive decrease in trade-induced economic activity
The failure to respond to the liquidity crisis by inflating the currency [1].
The failure of many countries to decouple from gold so that the US did not drag them into depression and keep them there [2].
The highly unstable US banking system.
The outdated idea that in-place wages must fall in response to economic difficulties.
None of that is specifically relevant today, although some of it might rhyme.
Let me be clear: I do not expect a Depression. But one can never rule it out.
This combination is why I invest as I do. Mostly into solid companies amply able to pay dividends, and likely to keep paying through bad times. History supports the notion that they will, mostly. And those investments are complemented by a substantial and diverse flow of fixed income to support spending.
Where these concerns came home to roost for me this week was with Alexandria Real Estate (ARE). I still think they are the most undervalued REIT. But seeing that value any year soon depends on progress with leasing up their 2027 deliveries.
If the US economy goes in the tank we might see a delay in that leasing. It could be bad enough to produce a dividend cut. The consequence: I took ARE out of my Go Fishing bucket and put it in the Medium Risk bucket.
(One thing I love about REITs. With Target and such, one worries about the next quarter. These worries are two years out.)
Meanwhile, I’m considering various bad news one item at a time, and often putting thoughts in the Chat or in Brief Notes to subscribers.
[1] See Gary Gorton “Misunderstanding Financial Crises: Why We Don’t See Them Coming.”
[2] See Barry Eichengreen “Golden Fetters”
Focused Investing News
Forthcoming:
My goal has been to generate reports on all my “Go-Fishing” holdings once they issue their annual 10-K. All this recent chaos, combined with a subscriber comment, has helped my realize that this is not the best use of time.
If a Go-Fishing stock can wait a year between close looks, it can wait 18 months. Prompt attention to current investing events matters more.
What will be out early next week is some thoughts about Armada Hoffler (AHH) after their dividend cut. My analysis of Regency Centers (REG) is nearly done. It will come out when we next get a week with less news.
I’m also hoping to officially roll out my new portfolio organization and plans at the end of the month.
Personal News:
This time of year is great for dramatic sunsets here. I can’t resist sharing another one from the past week:
Meanwhile we had a wine dinner at Bennethum’s featuring wines made by Michael Trujillo both from his own vineyards and for a couple very tall farmers named Butuello, who were also there. Lots of fun and wonderful wines.
We sold a lot of the older, “library” Trujillo wines too. Check out this gorgeous display:
Member News
Material since February 10 has included the following.
Items that went to all members:
Three of these perspectives articles.
Items that went to paid members, often including a free preview of much of the article:
My February Monthly Update
My analysis of the new, post-merger Whitecap Resources.
My analysis of Alexandria Real Estate and a later update on risk there.
A Brief Note after earnings on Armada Hoffler and one on Western Midstream.
My analysis of the Orion dividend cut.
Paid members have access to the Focused Investing chat.
The Google Sheets (for annual members):
The main attraction on the Google sheet is full disclosure of my live, real-time portfolio. If you are an annual paid member and do not have access, please contact me.
There are in addition a REIT assessment sheet and a Midstreams assessment sheet, each a tab. And if you scroll down on the portfolio tab, you can see some tickers I track and some playing with possible portfolios.
Also:
Paid members can also post items of interest on the Focused Investing chat, which I do often. Check it out and post your own items, please. Comments and questions are always welcome.
There is a search function on the Focused Investing home page, to help look for past articles.
It can be challenging to search the chat (for paid members only) on mobile devices. To do so, you have to get into the chat so my picture is on the top left, and then punch my nose with your finger. You will see a display with a search emoji.
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