Risk/Reward Vol. 139
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
"You've got to pick up every stitch/Beatniks are out to make it rich
Oh no, must be the season of the witch/Must be the season of the witch"---lyrics from "Season of the Witch" by Donovan
"Head under water and they tell me/To breathe easy for a while
The breathing's getting harder/Even I know this"---lyrics from "Love Song" by Sara Bareilles
"I'll tell you something/ That Jack, he is a banker and Jane she is a clerk
And both of them save their money/When they come home from work
Sweet Jane/Sweet Jane"---lyrics from "Sweet Jane" by Lou Reed
With third quarter earnings reports (and future guidance) beginning this week, we are in "the season of the witch"---or should I say the season of the which. Which will it be? A season in which earnings propel the market upward--- one in which investors can "pick up every stitch" and even "beatniks get rich?" Or one in which lower earnings drag the market down? I look for a few weeks of roller coaster performance with individual stock fundamentals holding sway. That said, the commentators believe we are in for disappointment. This week was disappointing for sure, with the Dow Jones Industrial Average falling 282 points. Accordingly, I have not redeployed the cash that I raised before leaving for Europe and have sold more in the interim.
When I do redeploy, "I know this": I will be reinvesting in the preferred shares of commercial mortgage real estate investment trusts ("cmReits") like NRFpA or B and RASpA or B. Over the next 5 years, $2 trillion of commercial real estate mortgages become due and of those, $1trillion are "under water"---that is the value of the real estate is worth less than the balance due on the mortgage. Banks will not renew these obligations, many of which they have had to write down. But commercial real estate owners can "breathe easy for a while" because into this financing void have ridden cmREITS, pools of money, the managers of which know how to underwrite sophisticated refinancings. And there are plenty of opportunities. Take a look at the number of new offerings listed on www.quantumonline.com .
Lastly, I bid farewell to one of the most astute investors that I have ever met, my mother in law, "Sweet Jane" Holt. Widowed at an early age, Jane re-entered the work force after a 20 year hiatus, serving as a member of the administrative staff at Park Tudor School for 17 years. During that time, Jane provided for her children and maintained a series of beautiful homes---all the while saving and investing, in homage to one the mantras of her generation: "don't ever be a financial burden to your children." In retirement, Jane travelled the world and during the last eight years of her life lived in a lovely apartment at Hoosier Village---all the while embodying another mantra of her generation: "never invade principal." I saw her portfolio for the first time yesterday and was impressed by its construction and diversity. I only wish she would have been more open with her investment philosophy, but modesty prevented her from doing so.
In the spring of 1968, Jane and Jim Holt (along with Betty and Jack Busch) chaperoned the North Central High School Junior Prom. The theme of the Prom was the title of a popular song at the time by Donovan, "Wear Your Love Like Heaven." Until this week, I thought this was the most insipid prom theme I had ever encountered. But yesterday, I read the lyrics. I now see the song as a musical picture, a picture of Jane Holt standing on the porch of her cottage in Linden Hills gazing westward at the sunset (the most beautiful in the world):
"Color in sky prussian blue/Scarlet fleece changes hue
Crimson ball sinks from view/Wear your love like heaven, wear your love like heaven."
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