The Dow Jones REIT Index more than doubled in 6 months last year when it rocketed ahead from 85 to 181. After reaching an interim high in September, it has been struggling while most popular averages have been roaring ahead. The REIT index fell 5-10% off its high for 3 months. In the middle of December, REITs were hot, taking the index to 192 after which it pulled back pretty much hugging its former high level of 181. The inability to record new highs while other stocks were (especially high yielders) suggests that REIT investors are holding their breaths, waiting for the other shoe to drop.REITs have 2 big advantages at this difficult time for financial companies. With their heavy mortgage loads, interest is generally their biggest expense. Low interest rates are bringing significant cost savings when they are needed. Secondly many of their mortgages and debt are held by banks at a time banks are under pressure to make loans and renew existing loans.Rents are the source of revenues and rent reductions are biting hard.
Archive for January, 2010
One of the primary purposes of a financial plan is to identify how clients can achieve their financial goals while exposing themselves to the smallest amount of risk possible. For instance, I recently worked with a couple who just transitioned into retirement. This couple was accustomed to living a lifestyle that required $72,000 of annual gross income. However, this client’s million dollar nest egg was cut in half during the bursting of the credit bubble in 2008, and consequently, the clients were incredibly risk averse. In fact, their portfolio was 100% cash, and they didn’t want to invest in anything that wasn’t 100% guaranteed.
This couple was on track to receive $36,000 annually from Social Security. Research indicates that a portfolio utilizing only money market investments (3-month Treasury Bills) would have achieve an annualized rate of return of 5.86% since 1970 (and a return of only 3.72% since 1926).
It’s tempting for parents whose savings and earnings have been wiped out by the economic downturn to tell their teens: “We love you. We want you to go to college, but we can’t afford to pay tuition right now. You’re on your own.”
The immediate cash savings are certainly tempting, but the long-term impact on the children could be devastating, a new survey says.
Public Agenda, a nonpartisan research organization, surveyed hundreds of students, recent graduates and dropouts. It found that 63% of people who graduated from college said they had received some financial help from their families.
Should you apply for a prepaid credit card or a bad credit card? Either way it doesn’t matter to your acceptance, because you will be accepted for either as long as you haven’t totally shot your credit by not keeping to even a bad credit card agreement. Believe it or not, some do this!
Most people have lost their credit card because they couldn’t keep up the payments. Most people also wish they could have a second chance, because they have learned their lesson. I know, because I was one of these people. I had 12 credit cards at one time, and was behind in my payments on all of them. Even though I had court judgments against me on some of these, and came to a low monthly payment agreement on others, I was still able to get a bad credit card and a prepaid credit card was also offered to me by several firms.
Until I had none left, I did not realize how important a credit card was to modern life. Try making a hotel booking online or by telephone without a credit or debit card.
Wheee, what a ride!
The week can be neatly summed up by my 1:35 comment to Members in Friday’s chat, summed the week up quite nicely as I said: “So funny, a whole week of gains I thought were ridiculous wiped out in 4 hours.” Of course it’s easy to laugh when you play the market correctly – as I had said in the morning post, we had cashed out into Thursday’s run up and planned on going bearish through the weekend but it turned out we got our sell-off early, jumping the $100K Portfolio, for example, up 12% in one day – enough to send us back to cash rather than risk a weekend reversal.
We laid the groundwork for this little sell-off in last weekend’s posts as we put up an aggressive Buy List for Members but in my regular weekend post we emphasized the need to cover our buys with “Disaster Hedges” as we were heading to the tops I had predicted when I published the “Last Charts of the Decade,” where I set resistance targets of Dow 10,457, S&P 1,135, Nasdaq 2,314, NYSE 7,389 and Russell 638. As you