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Julien Pervillé's avatar

Thanks Paul for the perspective. It's rare to see REITs go bankrupt but from experience some REITs (eg. RMR, GNL, DBRG) are very good at empire building at the expense of the shareholder. I pay attention to leverage and shareholder-friendliness of management.

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Paul Drake's avatar

Indeed so!

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Eric K's avatar

Great analysis! Zero Fed Funds really distorted our perspective. While shredding old documents for my mom, I found a 1998 jumbo mortgage refinancing at 7.18%. That’s around the current rates and was a normal 30 year fixed rate during the 1990s. Exporting countries that recycled their trade surpluses into treasuries caused the low long term rates than Alan Greenspan mused about before the GFC. Then the Fed kept rates low with QE and forward guidance. Now other countries are overweight overpriced US assets (S&P 500 and treasuries) with an administration that is creating volatility in front of trillions of bond refinancing. Bessent talked about a “detox” period before the tariff-driven selloff it seems like the “yippy” bond market traders forced Trump to reduce the non-China tariffs.

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Paul Drake's avatar

Indeed, Eric. I remember in the 80s, when a 10% rate on a home mortgage seemed normal. As you say, in some sense the Fed plus those events suppressed rates from someplace in the 90s until 2022. And before that was the impact of the growth and decline of the Great Inflation. Very hard to know that a "normal" interest rate should be.

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M. Keith, Ph.D.'s avatar

I appreciate how your curious intellect thrives on the relentless pursuit--through regular analysis of stocks you own or owned--of practical knowledge needed for success in the market! Well-done! I hope you feel better.

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