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Industry Discussions / Real Estate Inv. Trusts: REITs


Subject:  Re: REIT Preferred Pricing Anomalies Date:  2/21/2020  6:37 PM
Author:  Valuemongeragain Number:  85570 of 86798

"Do I get an "yes-you-told-us-so" from any old timers on this board?"

No, not really. The Barclays Aggregate Bond Index (BABI)has had negative returns in two of the last 8 years. Why negative? Because bond prices fell in 2013 and 2018 by more than their yield. Why did bond prices fall? Not credit risk, but higher interest rates, so there has been interest rate risks in the last 8 years. Figure in taxes and inflation and they have provided a negative real after tax returns in four of last 8 years.

Neither interest rate risk or reinvestment risk would be largest risks for fixed income. What would be is inflation and taxes. Yes inflation has been low recently, but interest rates are so low even mild inflation eats the majority of their returns. Inflation rises and fixed income will be hurt bad.

To me buying REIT preferreds today is like picking up nickels in front of a bull dozer

PSA-D is trading at $25.91 with a call date of July 2021. If it is called subtract that 91 cent premium from the $1.86 in dividends that you would receive in the interim. In late 2018 PSA-D sold as low as $20.95. Should you buy today and sell at $20.95 in a couple of years, the two years of dividends you would receive would pay for only half of your capital loss.

Too many ways to lose and so little to win if you win.

I will finish with a couple of my favorite investment quotes.

“Risk means more things can happen than will happen.” – Elroy Dimson

“An investor that has all the answers doesn’t even understand all the questions.” – John Templeton
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