BG2008

I think telling your wife that the ROI on renovation is low is a mistake to start out with. Unless your wife has drank the value investing cool aid like all of us on this board, reasoning with her from a ROI perspective is setting yourself up for disappointment. I would never lease a Acura MDX myself. I think an Acura TL with totally fine despite having a newborn. But the Mrs. wants to be able to take one car to go to dinner with the in-laws. In a happy marriage, you're not going to get everything right. But the major things are important. They go something like this: 1) Happy wife 2) Agree on same values - savings, kids, tight family etc 3) Don't do crazy things - bet the farm on whatever crazy investments is I think your objective should be to understand why your wife want it. If she cooks a lot and wants a nice kitchen so that you can have your close friends and family over for memorable dinners and gatherings, that ROI is actually much higher than whatever hard numbers you can measure. If you just can't afford the project, be honest and upfront. Just make sure she's not going to change her mind and want something else. I also think you'll have a better chance of talking your wife out of the project if you genuinely paid attention to why she wants the project. Remember, Buffet paid $30,000 cash for his house and never regretted it. BRK.B has done 2,400,000% since 1965. So if you viewed it from that perspective, it can get depressing. If the grand wizard thinks it's okay, then I think it's alright. 10 years ago, I would've been more ROI focused. Now that I have a newborn, I understand why you want to buy into a nice neighborhood etc.

I have read in the news about European No-Go Zones where the police cannot enter certain areas or regions without backup. Do such a zone really exist? Have they gotten worse after the recent migrant crisis? If one is concerned about safety for his family while traveling aboard, what is the best way to avoid this? I know we have quite a bit of a European constituent on this board. Please share your experiences. If you have details on Italy, it would be greatly appreciated.

I think a lot of the returns for Vornado is due to the unique circumstances of NYC getting safer, interest rate going from 8-10% to sub 3%, the kale eating crowd crowding into NYC, coupled with a land constraint location. I know a lot of people who have levered returns in the 20s range who simply bought property in a fringe area in NYC and sat on it for 20-30 years. They don't speak any English and had no formal education. So, his track record has to be valued in that light. Pupil - send me a PM. Let's chat offline. There's no agenda on my part to keep crapping on your ideas. I've seen a crazy cycles in 08 and 09 when SLG traded from over $100 to under $10. I have a tendency to nitpick. It's probably because I am a grumpy old man who has failed to keep up with time.

FRP Holdings - Over 20% family ownership LAACZ - 70% family ownership There are very few followers of these two companies. You basically own a bunch of real estate in the private market alongside the family at a big discount to liquidation value. They behave like how a wealthy family would with regard to their real estate portfolio. There aren't a ton of people following them. So there is no management to quarterly results.

"Measured against interest rates, stocks actually are on the cheap side compared to historic valuations," Buffett told CNBC on Monday. "But the risk always is interest rates go up, and that brings stocks down." Feb. 27, 2017

I believe either the XIV or SVXY will go into auto-redemption mode after a 80%+ drop in a day? Does after-market movement count? Can you explain the mechanics a bit more?

I forgot to mention that having control is very real unless you know that the CEO and Chairman have aligned interest.

I've written a bit about my experience in the last 10-15 years about figuring out "paying up for quality". In short, the NYC and CA assets are higher on the quality spectrum and they rightfully deserve a lower cap rate. Although, I disagree that you should pay 2% for anything. 4% is on the expensive side of reasonable for CA in my humble opinion. Often time when you buy a high yield in the middle of lower, you're paying for the long term lease, you're not paying for the dirt and the replacement value. If the existing tenant leaves upon lease maturity, you oftentimes can't get a similar tenant. This is especially true in a smaller market where your building maybe 5% of the market. I personally think that interest rate risk is very real. Assume you have a REIT that is 50% LTV, due to low interest rates, it trades at a 4% dividend yield. Bc of higher rates, people demand a 5% yield. Two things will happen, first the cost of debt capital will go up when the debt matures. Second, people now demand a higher dividend yield. Third, the bank may want to maintain a 50% LTV but the value of the assets have moved against the REIT. So, the REIT may have to put up more capital. All of these factors makes levered REITs a really good investment when interest rates drop but terrible one when rates increase. I am convince that this applies for companies trading at 20 P/FCF with substantial debt on them as well. Unless you're a REIT that can grow out of these issues, you're going to have some tough going ahead. We own FRPH and we know that FRPH will face some cap rate expansion headwind, but the FFO will be minimally impacted due to higher interest rate cost. We own some LAACOs as well. It is a severely under followed and under discussed name in Southern California and San Diego trading at 7.5-8.0% cap rate plus a free Downtown LA building. The amount of debt is roughly $50mm versus a private market value that is in the 6-700mm range. Just to walk through that 50% LTV REIT excercise (this exercise applies to privately owned assets as well) - F $1.0 bn asset with 50% LTV with 6% cap rate $60mm in NOI less $10mm in G&A equates to $50mm in EBITDA $500mm of debt at 4% equates to $20mm of interest expense This equates to roughly $30mm of FFO and we assume 80% payout which equates to $24mm at 4% dividend yields a market cap of $600mm Now that interest rate is 1% higher Still $50mm of EBITDA because the assets still generate the same cashflow $500mm of debt at 5% equates to $25mm of interest expenese This equates to roughly $25mm of FFO and we still assume 80% payout which equates to $20mm at a 5% dividend yields a market cap of $400mm This is how a 50% LTV REIT can logically lose 33% of its value in a 1% movement in interest rate. This is also the reason why I've avoided RE companies with a lot of leverage. FRPH and LAACO both have leverage below 10% of their private market value. FRPH has non-recourse leverage at one of its multi-family building in DC, but that's a 10 year fixed mortgage. So we view that a little differently. We've held a lot of cash because in a world where 3-4% interest rate is normal and cap rates in the 3-5% is normal for certain type of assets, a 100 bps movement is seismic. This applies to both real estate and anything that trades at 20x FCF or higher.

If anyone has resources on specialty chemicals, I would love primers, newsletters, etc. If anyone here works in the field or knows someone who work in the field, I would not mind directly compensating or donating to a charity for your time in helping me understand the barriers to entry, pricing power, and long term trends of this industry. The specialty chemicals involves specialty refined products such as lubricating oil, Waxes, Petrolatum, Solvents, branded synthetic lubricants etc. I also think that this forum we should utilize the industry expertise of this forum more. I'm a real estate guy in case anyone wants to chat about that.

I know a lot of people here have looked at retail real estate, i.e. Seritage, Macy's, mall REITs, etc. You absolutely should subscribe to Shopping Center Smart Brief. I don't read it everyday, but it has articles on turn around, deals, developments etc. It's a fantastic resource if you own any these names. Although, I don't own any of these names myself because 1) I once worked on a $400mm sell side deal for three regional malls and they have all turned the keys back to the bank 2) I lost money in Macy's 3) I watched Sears from the sideline and can't believe how much of a time drain and brain damage that would've been had I own it

I stand corrected about the yield. I think that the purpose of owning treasuries is that you want to own the treasuries not some ETF that can potentially trade at crazy discount/premium to NAV in a 2008/2009 scenario. The decision is really between holding cash vs holding 2 year treasuries. Thanks for the input everyone and I would encourage anyone who holds a substantial amount of cash to look into owning 2 year treasuries. I think the treasuries will have substantial liquidity and will likely do their job in case we get another 08/09 situation.

#1 - yes, but I have only bought long duration zeroes... was easy though. #2 - I think you just buy the cheapest... they are probably are within rounding, so look to the lowest spreads... #3 - What is TPA? bond appreciation/discount is accreted to income on 1099's I believe... so it's all interest. #4 - Correct... #3 - TPA is my third party fund admin. Does IB generate a bond appreciation/discount in the 1099?? I guess you don't have to calculate that manually? #4 - Is the amount of taxes on the interest calculated by your broker via the 1099? How is the interest known?

VGSH yields 1.1%, if you buy the 2 year treasury, it yields close to 2%. I'm more confident that I can sell my 2% 2 year treasury in case shit hits the fan than I can sell VGSH at $60 or whatever it trades at. I'm also more confident that the 2 year treasury will trade at close to a 2% yield or even lower in case shit hits the fan. I think that the ETF could trade all over the place.

2 Year US Treasuries is now trading at about 2% which I think is quite high and everyone who hold cash should own 2 year treasuries IMO. If the market crashes, and somehow it trades to a 3% yield, you'll likely have a shorter duration at a lower yield. Treasuries are large and liquid so there's no worry really. My question really revolves around the mechanics of owning treasuries. 1) Has anyone bought them from IB? 2) Any thoughts on whether to buy a zero with 2 year maturity with different coupons? 3) Is everything considered interest, price appreciation and coupons? Has your TPA been helpful? 4) I've heard that if you own Zeros, you still have to pay taxes even if you have not received any coupons. Thoughts? I think it's kind of crazy that 10 years are trading at about 2.5% and 2 years are trading at 2.0%. They say that every time the yield curve starts flattening there's a recession that comes after that. https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield

This is a hunch. I think that Amazon wind up in the DC Metro area as 3 of the 20 locations are on this final 20 list. It's DC, Montgomery County, MD and Northern VA. If you put these locations on the map, it is clear that they are all adjacent to each other. Bezos also owns the Washington Post. DC is the political center as there are more chatter now that Amazon may face anti-trust or break up risk. Just seem like it makes sense. There are a lot of locations in NV and Montgomery that has vacancy issues because the shift is to DC. Amazon can probably take 5mm sqft of space without any issue.

No political agenda here. I'm the chump who got left in the dust in 2017 with my large cash holdings. So trying to reason and learn from my mistake that's all. I would say that not all companies deserve to be 21% higher because the ones with no moat don't deserve to trade higher.

So going from 65% retained earning vs 79% (lowering of taxes from 35% to 21%) equates to a 21.5% additional value to the various companies. 2017 S&P 500 return was 21.8%. Coincident?

If you can provide pro/cons of using Fidelity or Vanguard, it would be greatly appreciated. We've used IB exclusively without need to register. Apparently there registration involved at both places? Thanks in advance.

Z, Would love to hear your thoughts on the economics, barrier to entry, pricing power etc of producing the following products from crude: 1) Solvent 2) Base oil 3) Wax 4) Branded synthetic lubricants 5) White Oils and Esters 6) Petrojelly, Parafin wax I hope you see this

No dog in this fight but the crypto thread is so porminent now that you can't ignore it. 1. Will Crypto still have value if it can't be converted into USD? Will people still accept crypto in exchange for goods or service if ultimately the current world power refuse to convert it into fiat currency? 2. It seems like central banks and frankly the US government have a lot of motive/incentives to ban crypto. US citizens benefits tremendously from being the reserve currency. It means that international capital finds its way to the US as a store of value. From an incentive perspective, it seems like the US government have all the motive in the world to outlaw or minimize the value of crypto at some point. 3. Limited supply of specific cryptos is somewhat flawed because new ICOs are constant. Larsen, the founder of Ripple, is more wealthy than the Google founders and Larry Ellison. It kind of blows my mind a bit when a founder of a company in 2012 can be wealthier than Google and Oracle founders. I don't think the latter guys are slouches. 4. I've heard people say that they will use crypto to buy RE and frankly there's a whole ecosystem that will be built out to service the people who made their wealth from crypto. Circling back to point 1) will people still accept Bitcoin or Ripple as payment if it can't be converted into USD? Just some rambling - I'm not smart enough for this stuff.

Ciber Inc liquidation, a total disaster

Fairly flat for the year in my IRA. Held mostly FRPH and other RE names that I have exhaustively researched. Mistake was buying into the Ciber liquidation and then not getting out when it became apparent that the thesis was different than I originally thought. Did much better in terms of position sizing and cutting loss with other people's money than my own IRA. Mistakes to avoid in the future - If you've been sleep deprived for a week due to the birth of your son, don't buy anything. As time goes on, I have a longer list of "don'ts" on my wall. Very impressive results for those that shared.

IB's price/quote subscription is quite confusing. What's the best package or combo that you have seen? I trade mostly US and Canadian securities.

Spekulatius, what exactly is this BG Mlp SEP? I'm also seeing a lot of MLPs in that high single digit distribution yield range

Cubs, Thank you for the kind words. If anything, I'm in need of some sort of social obligation to get myself to the gym on a more consistent basis. Great seeing you. If you're in NYC, give me a holler.