What do you think about the trend of declining populations in the West and what this will do to the value of REITs? Population size is one of the big underlying long term trends, also mentioned by Howard Marks in his book Mastering the Market Cycle.
Here are a few considerations:
Some properties dont need a growing population - a bit like EPR, they will just need a finite amount of people to consume their services. Thinking retail space here maybe.
But others seem more dependent, like residential apartments.
At the moment, immigration seems to be filling the gap, if politics dont get in the way, but I am not convinced that immigration will solve the decline of population in the West in the medium to longterm.
Good topic, Andy. The thing about the arc of population is that it involves slow, persistent changes for many decades. In my view, what happens to populations across the West broadly will reflect immigration policies. There are and will be plenty of willing immigrants for the foreseeable future.
But as to gradual population declines, consider that those populations also will be growing steadily more wealthy. This house I write in is atop land where 140 years ago loggers' shacks were tightly packed together. There remains no sign of that thriving community, save for the big house that was the brothel and city hall.
Real estate evolves. My guess is that in most places gradual replacement and renewal will suffice to adapt to whatever population does.
Good point on the growing wealth and evolution of real estate. But probably also in your example, what drove the loggers away was a growing population. Maybe a topic to explore in an article, just an idea.
As always, I greatly appreciate your scholarly, in-depth approach to investing! I read every word you write with keen interest and often read the articles several times. We're retirees, and you've helped us steer clear of higher-risk stocks. We own many solid stocks you've recommended in recent years. I'm still working out of some real duds (Paramount, Newell Brands, Kirin Breweries, AT&T, Steelcase, Liquidity Services, etc.) recommended by my recent advisor (alas, a former, more competent one retired in 2018) at Morgan Stanley. After three decades with that firm, I finally found the time and guts when I retired to move my holdings and cash to TD Ameritrade, now Schwab. For the present, I spend long hours, daily, managing our investments. We own far too many stocks, and I look forward to a more streamlined portfolio like yours. I've been at it for a few years now and can see it will take a few more to achieve greater simplicity. You're a massive help in this intensive process! What a peaceful-looking setting you've provided for yourself and your family!
Thanks for the comment. The emotional reward of hearing that I have helped someone is a big part of my satisfaction with doing this. My kids plan to keep the place, and will be enabled by my legacy. This too is satisfying.
I'm glad to hear this, Paul. It's moving to hear how much you love your kids. We, retired professors, know what it means to care about the next generation. At 70, I still feel like the Gold Star kid I've been since 1953, a mere seven weeks after I was born when I lost my Navy pilot father (John A. Fletcher, II, Lt, JG ), a 26-year-old Annapolis graduate, in line of service. Your work significantly helps his only child.
Hi Paul--Good, honest piece. If my memory serves me those two liquidations of SPG took you a long way! I should have followed you on one of those....I wouldn't say that I have a lot of "faith" in REITs, and while hard to find, I have already invested and I see those investments as opportunities. I include a macro perspective in my investing and that helps me bet on interest rates falling at least somewhat over the next 6-12 months, and that producing a 10-20% improvement in my REIT share prices. This is based on assumptions Fed cuts and a non-recessionary situation, which I have no guarantee of. Two of my REITs I see as fairly solid, AHH and LADR. Two were in hindsight not great choices, MPW and CLPR. However, all of them should respond well, moving the first two to greater profit and the last two to smaller losses. And all are paying nice dividends, for the moment anyway. As I've mentioned before, I also anticipate that, if my macro wish comes true, my REIT ETF holdings in RIET and PFFA will pay well and appreciate. Of course, no guarantee here, and I balance my portfolio with an identical amount of tech stocks (most large cap) and some overseas holdings. So it goes...
Great post Paul. The most critical part of this piece is-not buying and holding. I have fallen victim to this sort of "Stockholm Syndrome" in my investing and it has cost me dearly. Congrats on the success of your portfolio. Cheers
Hi Paul, loved the sincerity of this post.
What do you think about the trend of declining populations in the West and what this will do to the value of REITs? Population size is one of the big underlying long term trends, also mentioned by Howard Marks in his book Mastering the Market Cycle.
Here are a few considerations:
Some properties dont need a growing population - a bit like EPR, they will just need a finite amount of people to consume their services. Thinking retail space here maybe.
But others seem more dependent, like residential apartments.
At the moment, immigration seems to be filling the gap, if politics dont get in the way, but I am not convinced that immigration will solve the decline of population in the West in the medium to longterm.
So what do you think about this risk?
Cheers, Andy
Good topic, Andy. The thing about the arc of population is that it involves slow, persistent changes for many decades. In my view, what happens to populations across the West broadly will reflect immigration policies. There are and will be plenty of willing immigrants for the foreseeable future.
But as to gradual population declines, consider that those populations also will be growing steadily more wealthy. This house I write in is atop land where 140 years ago loggers' shacks were tightly packed together. There remains no sign of that thriving community, save for the big house that was the brothel and city hall.
Real estate evolves. My guess is that in most places gradual replacement and renewal will suffice to adapt to whatever population does.
Good point on the growing wealth and evolution of real estate. But probably also in your example, what drove the loggers away was a growing population. Maybe a topic to explore in an article, just an idea.
I love the pontoon boat. It really does look great.
I am looking forward to getting your thoughts on all three of your "next ups". Those are timely for me, so thank you!!
That's an awesome pic, Paul.
Always enjoy the notes, Paul: the analyses (no one does this better), weekly summaries and daily notes offer a nice variety.
Very much looking forward to BSR analysis.
Take care
As always, I greatly appreciate your scholarly, in-depth approach to investing! I read every word you write with keen interest and often read the articles several times. We're retirees, and you've helped us steer clear of higher-risk stocks. We own many solid stocks you've recommended in recent years. I'm still working out of some real duds (Paramount, Newell Brands, Kirin Breweries, AT&T, Steelcase, Liquidity Services, etc.) recommended by my recent advisor (alas, a former, more competent one retired in 2018) at Morgan Stanley. After three decades with that firm, I finally found the time and guts when I retired to move my holdings and cash to TD Ameritrade, now Schwab. For the present, I spend long hours, daily, managing our investments. We own far too many stocks, and I look forward to a more streamlined portfolio like yours. I've been at it for a few years now and can see it will take a few more to achieve greater simplicity. You're a massive help in this intensive process! What a peaceful-looking setting you've provided for yourself and your family!
Thanks for the comment. The emotional reward of hearing that I have helped someone is a big part of my satisfaction with doing this. My kids plan to keep the place, and will be enabled by my legacy. This too is satisfying.
I'm glad to hear this, Paul. It's moving to hear how much you love your kids. We, retired professors, know what it means to care about the next generation. At 70, I still feel like the Gold Star kid I've been since 1953, a mere seven weeks after I was born when I lost my Navy pilot father (John A. Fletcher, II, Lt, JG ), a 26-year-old Annapolis graduate, in line of service. Your work significantly helps his only child.
Hi Paul--Good, honest piece. If my memory serves me those two liquidations of SPG took you a long way! I should have followed you on one of those....I wouldn't say that I have a lot of "faith" in REITs, and while hard to find, I have already invested and I see those investments as opportunities. I include a macro perspective in my investing and that helps me bet on interest rates falling at least somewhat over the next 6-12 months, and that producing a 10-20% improvement in my REIT share prices. This is based on assumptions Fed cuts and a non-recessionary situation, which I have no guarantee of. Two of my REITs I see as fairly solid, AHH and LADR. Two were in hindsight not great choices, MPW and CLPR. However, all of them should respond well, moving the first two to greater profit and the last two to smaller losses. And all are paying nice dividends, for the moment anyway. As I've mentioned before, I also anticipate that, if my macro wish comes true, my REIT ETF holdings in RIET and PFFA will pay well and appreciate. Of course, no guarantee here, and I balance my portfolio with an identical amount of tech stocks (most large cap) and some overseas holdings. So it goes...
Great post Paul. The most critical part of this piece is-not buying and holding. I have fallen victim to this sort of "Stockholm Syndrome" in my investing and it has cost me dearly. Congrats on the success of your portfolio. Cheers