iREIT Daily

Energy vs. Inflation

Brad Thomas

467 postsAugust 4, 2022

Inflation and energy are inextricably linked.

That’s not rocket science. As the price of energy goes up, so does the cost of everything from production to shipping. And then retailers pass on the costs they incur to customers.

Almost instantly, higher energy costs reach consumers with just about every purchase.

Our energy situation was already bad before the Russian conflict began. But then you add in that geopolitical tension – which has bottlenecked over 12% of the world’s energy supply – and we feel it even more.

That’s why I’m happy to report that American fuel prices have fallen for the seventh week in a row. The Wall Street Journal reports:

“The average cost of a gallon of regular unleaded gasoline sank to $4.16 Wednesday, the 50th straight day that prices have declined, according to OPIS, an energy-data and analytics provider. That is a 17% decline from the previous high of $5.02 a gallon set back on June 14, according to OPIS.
“Global demand for oil has fallen in recent weeks as economic growth has slowed around the world, including in China, analysts said. Demand data and consumer surveys also suggest Americans are driving less.”

This drop in demand is a sure sign that inflation has finally caught up with the American consumer. I reported yesterday on the slowing of our industrial sector, which plays a huge role in the amount of energy we consume.

Essentially, as our economy contracts, there’s less demand for the fuel that keeps it running.

Even on a direct demand level, many Americans report they’ve made adjustments to their daily driving habits. A whopping 88% say they’re driving less, and 74% are combining errands to save on gas.

The obvious question is where the balance between inflation and energy costs will meet their equilibrium. Since the two are so closely related, will the decrease in energy demand have a significant effect on our extremely inflated economic climate?

If we look at the Consumer Price Index (CPI) for June, we can see that energy costs accounted for a higher percentage of that record 9.1% increase than all other categories combined.

So as energy prices continue to drop, the CPI should soften. It’s just a matter of how far they’ll continue to fall.

More Non-REIT News to Know About

We’ve probably all dreamt of the IPO that will put millions in our bank accounts. And, over the last couple years, we have seen some pretty crazy get-rich-quick picks that left some early-in investors holding onto huge bags of cash.

From the GameStop (GME) squeeze to the Dogecoin days, there have been lightning-in-a-bottle moments that have left a select few with jackpot portfolios.

This happened again just this week with a Hong Kong-based company called AMTD Digital (HKD). In a matter of days, its stock jumped from a July IPO of $7.80 to a peak value of over $2,555 – an over 21,000% increase.

Aided by the Reddit army on Wall Street Bets, this stock soared in such a fashion that even the AMC (AMC) and GME craze looks like child’s play. What’s even wilder is that this incredible run seems to have happened for no particular reason.

“To our knowledge, there are no material circumstances, events, nor other matters relating to our company’s business and operating activities since the IPO date,” the company said in a statement earlier this week.

As such, those looking to cash in on this flash in the pan will likely find that the party’s over. The stock shed about 34% yesterday, proving once again that the market should be treated like a business, not a casino.

Sure, sometimes someone somewhere hits it big. But the chances of it being you aren’t high enough to mess around with.

The World According to REITs

New Lake Capital Partners (NLCP) is proving itself to be a very innovative real estate investment trust (REIT). This cannabis funder leverages sale-leaseback transactions and third-party purchases across 31 cannabis cultivation facilities and dispensaries.

The company has a strong capital base. And since it works directly with its tenants, NLCP can increase returns quickly in a quickly growing market segment.

Recently, it acquired even more capital for further expansion, adding two lenders to its existing five-year revolving credit facility. It also expanded the aggregate commitment under that facility from $30 million to $90 million.

CEO Anthony Coniglio said:

“We are pleased to increase our credit facility and appreciate the trust of our newest bank partners. Access to debt capital is a competitive advantage in this challenging environment and should allow us to continue our disciplined approach toward investing in high-quality cannabis real estate.”

This is a great example of an innovative REIT putting its balance sheet and debt capital to work for it. Hopefully, this results in long-term growth and continued confidence from investors.

Today, I consider the company a Speculative Buy.

Author’s Note: If you do determine this stock is right for you, make sure to purchase it at a smart entry point. Even the best of companies can burn you badly if you buy in at inflated prices.

Happy Investing

Brad Thomas

467 posts

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Brad Thomas is Senior Research Analyst at iREIT and CEO of Wide Moat Research LLC. With over 30 years of real estate experience, he is also long-time Editor of Forbes Real Estate Investor, a monthly subscription-based newsletter that dives deep into the vast world of profitable properties, and since 2021, he has served as an adjunct professor at New York University.

Thomas has also been featured on or in Forbes magazine, Kiplinger's, U.S. News and World Report, Money, NPR, Institutional Investor, GlobeStreet, CNN, Newsmax, and Fox. And he was the #1 contributing analyst on Seeking Alpha in 2014, 2015, 2016, 2017, 2018, 2019, 2020 and 2021 based on both page views and number of followers.

Thomas is the recently-published author of The Intelligent REIT Investor Guide (2021), co-author of The Intelligent REIT Investor (2016), and he wrote The Trump Factor: Unlocking The Secrets Behind The Trump Empire (2016) - all available on Amazon.

Thomas received a bachelor of science in business/economics from Presbyterian College and is married with five wonderful kids.

Viva, Las Vegas and Other Entertainers

REIT Mutual Fund	Symbol
Alpine Realty Income and Growth Fund	AIGYX, AIAGX
American Century Real Estate Fund	REAIX, REACX, AREEX, AREWX, ARYCX, AREDX
Real Estate Securities Fund	MRESX
AR Capital Real Estate Income Fund	ARIAX, ARICX, ARIPX
AssetMark Real Estate Securities Fund	AFREX
Aston/Harrison Street Real Estate Fund	AARIX, ARFCX
Baron Real Estate Fund	BREIX, BREFX
BlackRock Real Estate Securities	BIREX, BAREX, BCREX
Brookfield U.S. Listed Real Estate Fund	BRUAX, BRUCX, BRUIX, BRUYX
CGM Realty Fund	CGMRX
West Loop Realty Fund	REIIX, REIAX, REICX
Cohen & Steers Institutional Realty Shares	CSRIX
Cohen & Steers Realty Income Fund	CSEIX, CSDIX, CSBIX, CSCIX
Cohen & Steers Realty Shares	CSRSX
Columbia Real Estate Equity Fund	CREAX, CREIX, CRRVX, CRERX, CREEX, CRRFX, CREWX, CRECX, CREBX
Compass EMP REC Enhanced Volatility Weighted Fund	CWRAX, CWRIX, CWRTX, CWRCX
Davis Real Estate Fund	RPFRX, DREYX, DRECX, DREBX
Delaware Real Estate Investment Trust Portfolio II	DPRTX, DPRBX
Delaware Real Estate Investment Trust Portfolio	DPREX, DPRSX, DPRRX, DPRCX
DFA Real Estate Securities Portfolio	DFREX
Dunham Real Estate Stock Fund	DAREX, DNREX, DCREX
DWS RREEF Real Estate Securities Fund	RRRRX, RRREX, RRRAX, RRRSX, RRRBX, RRRCX
DWS RREEF Real Estate Securities Income Fund	REFAX, REFCX, REFIX, REFSX
Eaton Vance Real Estate Fund	EAREX, EIREX
EII Realty Securities Fund	EIIRX
Fidelity Advisor Real Estate Fund	FHEIX, FHEAX, FHETX, FHECX, FHEBX
Fidelity Advisor Real Estate Income Fund	FRIRX, FRIQX, FRINX, FRIOX
Fidelity Real Estate Income Fund	FRIFX
Fidelity Real Estate Investment Portfolio	FRESX
Fidelity Spartan Real Estate Index Fund	FSRNX, FRXIX, FSRVX
Fidelity Series Real Estate Equity Fund	FREDX, FREFX
Fidelity Series Real Estate Income Fund	FSREX, FSRWX
Forward Real Estate Long/Short Fund	KSRYX, FRLSX, FFSRX, KSRAX, KSRCX, KSRBX
Forward Real Estate Fund	FPREX, FFREX, KREAX, KRECX
Forward Select Income Fund	KIFYX, FSIMX, FFSLX, KIFAX, KIFBX, KIFCX
Franklin Real Estate Securities Fund	FREEX, FRLAX, FRRSX, FSERX
GMO Real Estate Fund	GMORX
Goldman Sachs Real Estate Securities Fund	GREIX, GRETX, GREAX, GRESX, GRERX, GREBX, GRECX
Great-West Real Estate Fund	MXREX
Heitman REIT Fund	OARTX, OBRTX
ING Real Estate Fund	CRARX, IREWX, IDROX, CLARX, CRWRX, CRCRX, CRBCX
INVESCO Real Estate Fund	REINX, IARFX, IARIX, IARYX, IARAX, IARRX, IARCX, AARBX
Ivy Real Estate Securities Fund	IRSAX, IREIX, IRSYX, IRSRX, IREEX, IRSCX, IRSBX
John Hancock Real Estate Securities Fund	JIREX
Johnson Realty Fund	JRLTX
J.P.Morgan Realty Income Fund	URTLX, JRIRX, URTAX, URTBX, URTCX
J.P. Morgan Security Capital U.S. Core Real Estate Securities Fund	CEEAX, CEERX, CEEFX, CEESX, CEECX
J.P. Morgan U.S. Real Estate Fund	SUSIX
Lazard U.S. Realty Equity Portfolio	LREIX, LREOX
Lazard U.S. Realty Income Portfolio	LRIIX, LRIOX
Manning & Napier Real Estate Series	MNRIX, MNREX
Morgan Stanley Institutional U.S. Real Estate Portfolio	MSUSX, MUSDX, MSULX, MURSX
Natixis AEW Real Estate Fund	NRFAX, NRFYX, NRFBX, NRFCX, NRFNX
Neuberger Berman Real Estate Fund	NBRIX, NBRFX, NREAX, NRERX, NRECX, NRREX
Nuveen Real Estate Securities Fund	FREAX, FARCX, FRSSX, FREBX, FRLCX, FREGX
Oppenheimer Real Estate Fund	OREAX, OREIX, OREYX, ORENX, OREBX, ORECX
PHOCAS Real Estate Fund	PHREX
PIMCO RealEstateRealReturn Strategy Fund	PRRSX, PETPX, PETAX, PETDX, PETCX, PETBX
Pioneer Real Estate Shares	PWREX, PYREX, PCREX, PBREX
Principal Real Estate Securities Fund	PIREX, PIRPX, PREPX, PRETX, PREJX, PRRAX, PRERX, PRENX, PRAEX, PRCEX, PRLEX
ProFunds Real Estate UltraSector ProFund	REPIX
Prudential Select Real Estate Fund	SREAX
Prudential U.S. Real Estate Fund	PJEAX, PJEZX, PJECX, PJEBX
REMS Real Estate Income 50/50 Portfolio	RREIX
REMS Real Estate Value-Opportunity Fund	HLRRX, HLPPX
Rydex Real Estate Fund	RYREX, RYHRX, RYCRX
SA Real Estate Securities Fund	SAREX
SEI Institutional Mgd Real Estate Fund	SETAX, SEIRX
Spirit of America Real Estate Income & Growth Fund	SOAAX
SSgA Clarion Real Estate Fund	SSREX
Stratton Real Estate Fund	STMDX
T.Rowe Price Real Estate Fund	TRREX, PAREX
TIAA-CREF Real Estate Securities Fund	TIREX, TRRPX, TRRSX, TCREX
Vanguard REIT Index Fund	VGSNX, VGRSX, VGSLX, VGSIX
Virtus Real Estate Securities Fund	PHRAX, PHRIX, PHRCX, PHRBX

REIT ETF	Symbol
Flex Shares	ASET
Wisdom Tree Global Ex-US	DRW
S&P 500 Equal Weight	EWRE
iShares FTSE Industrial/Office	FNIO
MSCI Real Estate Index	FREL
S&P REIT Index	FRI
First Trust S&P REIT	FRI
iShares Real Estate 50	FTY
Flexshares Global	GQRE
iShares Cohen & Streers	ICF
iShares International Developed RE	IFGL
iShares US RE	IYR
Premium Yield Equity REIT	KBWY
ETRACS Monthly Pay 2x Leverage	MORL
Market Vector Mortgage	MORT
iShares Global REIT	REET
iShares FTSE Mortgage	REM
iShares Residential	REZ
IQ US Real Estate Small Cap	ROOF
iShares FTSE NAREIT Retail	RTL
DOW Jones Global RE	RWO
SPDR Dow Jones	RWR
Schwab US REIT	SCHH
Super Dividend REIT	SRET
ProShares Ultra RE	URE
Vanguard REIT	VNQ
Vanguard Global ex-US	VNQI
iShares International Developed	WPS
Wilshire US REIT	WREI
Pacer Benchmark Data & Infrastructure RE	SRVR
Pacer Benchmark Industrial RE	INDS
Pacer Benchmark Retail RE	RTL
Hoya Capital Housing	HOMZ
NetLease Corporate RE	NETL

REIT Name	Ticker	Annual Increases/yr
Federal Realty	FRT	51
Universal Health Realty	UHT	33
National Retail Properties	NNN	29
Realty Income	O	27
Tanger Outlets	SKT	26
Urstadt Biddle	UBA	25
Essex Property Trust	ESS	25
W.P.Carey	WPC	22
National Health Investors	NHI	17
Equity Lifestyle	ELS	15
Digital Realty	DLR	15

Energy vs. Inflation

Brad Thomas

467 postsAugust 4, 2022

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Energy vs. Inflation

467 postsAugust 4, 2022

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