iREIT Daily

Hedging Against China

Brad Thomas

467 postsMay 12, 2022

For decades, China has demonstrated a global economic status powerful enough to pull countries like the U.S. into its orbit. With a massive low-cost labor market, incredible industrial infrastructure, and an entertainment audience that affects our culture in America, China’s influence cannot be underestimated.

But what happens if China slows down in economic status? What if one of the world’s favorite fiscal goliaths stumbles in the face of COVID restrictions, decreasing demand, and energy cost influxes? Well, we may soon find out.

From The Wall Street Journal:

The effects of China’s slowdown are showing up everywhere from German factories to Australian tourist spots. Exports are weakening in Asia as China’s neighbors watch their largest market sag. Companies including Apple Inc. and General Electric Co. warned investors about production and delivery problems stemming from China’s troubles, as well as dwindling sales.
Car sales in China have collapsed, hitting auto makers including BMW maker Bayerische Motoren Werke AG, Volkswagen AG and Tesla Inc. Tesla sold just 1,512 cars made at its Shanghai plant in April, down 98% from the more than 65,000 it sold in March, according to data released Tuesday by the China Passenger Car Association. Toyota Motor Corp. on Tuesday apologized for repeatedly missing its production plans, in part because of lockdowns in China, saying it expects to churn out 700,000 vehicles in May rather than the 750,000 it previously expected.

The collapse of the Chinese economy is more detrimental than you can imagine. It’s a compound problem because China is both our biggest manufacturer and one of our largest markets. Raw materials from all over the world make their way to this economic powerhouse and if they lose the means to produce anything with them, the entire world economy would see chaos.

Check the tag on the tongue of your shoes, on the back of your shirts, inside your cellphone… You’ll see that a great many of the items we purchase every day come from China. In fact, China produces 28.7% of global manufacturing output. If its economy eats it, ours could, as well.

So, how should you hedge against this if companies like Apple, Nike, AMD, Colgate and Kellogg’s are so exposed to a shaking Chinese economy?

One word: Diversification.

Diversifying your portfolio has never been more important.

In the REIT world, putting your money in healthcare, storage, and residential REITs is a great way to offset some of the risks inherent in the retail, industrial, or hotel sectors. With money in self-contained property models like local hospitals, storage facilities, and homes, your investments are safe from the direct manufacturing uncertainties of retail or industrial sectors and the global nature of many hospitality REITs.

This isn’t to say you should focus exclusively on these categories, but it never hurts to have a dynamic portfolio full of diverse assets.

It’s no secret that the world has been dependent on China for quite some time now. I think right now is a really good time to assess our own dependencies on the People’s Republic. If we can break our addiction to the Chinese economy, the rest of the world may soon follow suit.

More Non-REIT News to Know About

Jerome Powell Lands Second Term

As our inflationary economy enters an all-time high, Federal Reserve Chair Jerome Powell has been selected to serve another term.

Yesterday, the Senate voted 80–19 to grant Powell four more years at the reigns of the central bank, ending a long-delayed vote that’s been in contention since President Biden nominated him last November.

“Chairman Powell’s leadership has helped spur economic growth while preserving the best-capitalized banking system in American history,” Sen. Patrick Toomey, the ranking Republican on the Senate Banking Committee, said in a statement.

Orchestrating a series of moves aimed at altering this insane downturn, Powell is planning to ease inflation by incrementally upping interest rates. I will be watching closely to see how the market reacts.

The World According to REITs

Two REITs To Get You Through The Weekend

With the weekend fast approaching, there are only a few more trading hours left in the week. I thought I’d end the week by introducing some of the REITs that have me excited for the next stage of our economy — ornery as it is.

W.P. Carey

W.P. Carey Inc. (WPC) invests in properties leased to single tenants via NNN. It recently announced a merger with Corporate Property Associates, a publicly registered non-traded REIT, and is expecting benefits to include more liquidity and a combined portfolio with more power on the market.

The stock traded at $76.45 early this week, in a 52-week trading range of $71.72–86.48. The stock has a forward dividend yield of 5.5%.

Spirit Realty Capital

Spirit Realty Capital (SRC) is a triple net-lease REIT headquartered in Dallas, Texas. It’s a great REIT for tempering your portfolio against the turns of an anxious market. It’s recently upgraded its portfolio for diversified cash flows by reducing tenant and industry concentrations. This has proven to grow both industrial and investment-grade businesses and serves the REIT’s balance sheet by expanding its pool of unencumbered properties and lowering net debt-to-earnings ratios.

It’s one of the few NYSE assets to perform with a upward arrow in the last couple of days, the stock gaining nearly 4% during yesterday’s trading day.

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.

Passive Income: A Panacea for Fear

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

Hedging Against China

Brad Thomas

467 postsMay 12, 2022

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Hedging Against China

467 postsMay 12, 2022

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