Squirrel!!!

Dug (the dog), from the movie Up, 2009

Which is essentially a metaphor for being easily distracted. Which may be the answer to Buy, Hold Long’s comment on last week’s post. The more complete answer would be the final 10% is more complex than anticipated and other than one outlier (so far), the corrections to my cost basis has generally been within a couple of dollars – mostly lower. So yes, I recognize the need – and have the desire for – accurate reporting, but complex algorithms take a brain toll and to rest I hunt (figuratively) squirrels!

A thought can be like squirrels and one of my recent squirrels was compliments of Buy, Hold Long’s post (congrats on the good month, by the way) where he comments on his recent purchase, APN Asian REIT. His statement, “Take a look here to see how its going” is like telling me ‘hey, how about this rabbit (in this case, squirrel) hole‘. Simply irresistible.

Not a bad choice, in my view, but the fees, structure and liquidity raise a few questions mitigated by the historical performance and geographic diversification. As essentially a REIT of REITs (kind of like a reverse engineered Banker’s Bank), my adversity to fees (even reasonable ones) got me questioning why not a company with diverse real estate holdings (like Hong Kong’s Swire Pacific (SWRAY) with property in Hong Kong, mainland China and the US? Only then did I realize it was a moot point (squirrel) as APN Asia is not registered for sale outside of Australia and New Zealand.

Another type to consider is the rabid squirrel with one of the symptoms being unprovoked aggression or unexplained fearlessness. One of my ongoing diversions concerns the banks caught up in the ongoing investigations surrounding our illustrious president and his surrounding minions. While I have yet to identify a sound investing thesis, the list continues to grow. From a former board seat (Ivanka, SBNY), suspicious activity reports (FRC, RY), subpoenas (DB, COF) and questionable loans to Cohen and/or Manafort (CFG, STL, BANC). Perhaps most rabid being the private Illinois bank that allegedly loaned Manafort a sizable sum that representing about a quarter of their loan portfolio. I’m still waiting for the Fed’s answer to that one.

Then there’s the rabble-rousing one best illustrated by the Ray Stevens classic, Mississippi Squirrel Revival. From the ‘amen pew’ we hear from the Green New Dealers. While generally in agreement with their goals, I’m troubled by parts of their messaging. One area that has my sporadic attention is the topic of corporate welfare. I’ve been working on a file of subsidies granted since Trump took office. While far from complete, the initial findings are that the majority of subsidies are SBA loans for small businesses, which have roughly a 17.5% default rate. Next up are loans for hurricane recovery (as most of these are managed by the SBA, they are in the “corporate welfare” classification). Surprisingly, Federal research grants for alternative fuel sources (battery, solar) were granted by the Energy Department. The larger problem I envision is the fact that these subsidies are provided to large and small companies, foreign and domestic. Charities and religious organizations get a piece of the action as well. Inquiring minds are begging for an answer as to how this will be voiced through the upcoming election cycle. Although not directly an investing theory, my attempt is to identify foreign companies that have proven adept at being subsidized by the American taxpayer. It is another area that heeds Dug’s Squirrel! siren call.

Some of these ideas will bear investing fruit, most probably won’t. The larger question will probably be whether these types of subsidies are permitted under WTO regulations. But the research is enlightening and provides a welcome relief to the tediousness of spreadsheet formulas!

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