Posted by stockoperator > 2015-03-07 21:59 | Report Abuse

That is Right KC. If you like believe in REIT. You should Buy good Property stocks. Think about it.

Posted by NOBY > 2015-03-07 22:30 | Report Abuse

This fact surprised me
"Performance of some Reits during the US Sublime Housing Crisis in 2008

During the US sublime housing crisis in 2007-2008, the broad market dropped by 40% in just 10 months from 1445 points to 864 points in 30th September 2008. Axis Reit dropped from the adjusted price of RM1.90 to RM1.01, or 47%. Hectar Reit performed even worse. It dropped by 52% from RM1.55 to just 74 sen during the crisis."


I always thought that dividend paying stocks were defensive and wouldn't drop as much in bear markets. I guess when market is irrational, there is no place to hide.

Posted by stockoperator > 2015-03-07 22:38 | Report Abuse

That is Right Noby. That is the Story of Supply Side Banker who promotes REIT.

Posted by stockoperator > 2015-03-07 22:44 | Report Abuse

To be fair I am not saying it is Bad. But it will be sub par return over a long period of time compared to good property companies.

Posted by nnmm > 2015-03-07 22:46 | Report Abuse

if u look at warren buffett's investment records, reits is definitely one of his buy.

Posted by truthseeker1 > 2015-03-07 22:59 | Report Abuse

Why KC Chong never recommend Hua Yang. If you read his blogs carefully he recommend Plenitude and Daiman. He condemned Ivory. Can someone check whether Cold Eye ever own it?

Posted by calvintaneng > 2015-03-07 22:59 | Report Abuse

Yes, Reit is not defensive.

I bought Hektar Reit at RM1.00 & Sold off at RM1.40 before Lehman Brothers Debacle. Later I bought back Hektar Reit around 70 cents. Hektar Reit crashed 50%

Look at it this way.

Suppose you have a collection of 20 houses giving an average of 10% rental yield a month. In a Market Crash Property Values do fall together with rental. Why?

If people suffer lost in share market they might be forced to liquidate their properties. And for those who rent they will move out to cheaper rental properties. So the collective value and yield of 20 properties will fall in tandem.

That's Why ALL REITS LIKE HOUSES, SHOPS & FACTORIES Will Also Fall Down in A Market Crash. And since Management Still Take a fee in good or bad times Reits Will Even Bleed More Losses in Bad Times.

Posted by stockoperator > 2015-03-08 00:28 | Report Abuse

Think about the whole process of Reit creation.

It starts with a good property companies with Rich property on hand which then wants to liquidate them for certain reasons.

If we like REIT so much, we should really like the good property company which can have the ability to create another REIT, fair?

Posted by stockoperator > 2015-03-08 00:55 | Report Abuse

KC, for trading matters as you mentioned few times. I have seen some extra ordinary successful commodity traders with good trading systems. Sometimes, very extraordinary gain. Sometimes small gain, sometimes small losses, sometimes few losses in a row. But overall result is fantastic month over month. Their trading records is there for you to verify.

Not in trading stocks as in stocks market we are dealing with very long term trend Not so much with short term trends and volatility.

Posted by NOBY > 2015-03-08 01:41 | Report Abuse

ks55, I kind of agree with you that REITs are more suitable for passive investors who need regular income as they are obliged to pay the dividends.

But the dividend is not guaranteed, what you see as 7% today is based on 90% of historical earnings. If their future earnings drop by 50%, the dividend yield will drop correspondingly as they have little or no excess cash to maintain dividend payout. So while it is compulsory for them to pay a dividend, the payment will be only based on a percentage of their earnings.

I do agree that beta for REITs is lower than other stocks. This is more related to the perception of the public that this type of asset class is more defensive (due to its dividends) despite the fundamentals suggesting otherwise.

Posted by Probability > 2015-03-08 01:49 | Report Abuse

wah...i am really learning a lot here.... thanks for sharing KC, ks55, Noby, Kean leong and all who are coming out with some tangible infos.

Posted by stockoperator > 2015-03-08 01:55 | Report Abuse

It surely is part and parcel of asset allocation much alike fixed income. If price drops, yes, we should Buy more.

In market, we nonetheless should focus on Business which has ability to Grow and create value for shareholders for a period of time. Well, surely if management fails to deliver, price will be punished. In times of uncertainty, price will be much more volatile.

Still, i totally agree this is Not the market to Trade.

Posted by stockoperator > 2015-03-08 02:01 | Report Abuse

But dont mix up cash and REIT as we thought cash and REIT is same. As i mentioned if price of REIT drops you Buy more. But now we dont have anymore cash, how are we going to Buy more?

So cash is a different asset class of its own.

Posted by kcchongnz > 2015-03-08 02:45 | Report Abuse

Posted by truthseeker1 > Mar 7, 2015 10:59 PM | Report Abuse
Why KC Chong never recommend Hua Yang. If you read his blogs carefully he recommend Plenitude and Daiman. He condemned Ivory. Can someone check whether Cold Eye ever own it?

Me: This is a very interesting comment and I wondered why was it flagged. It is interesting as the writer of that comment is a perfect object for study of psychology; the psychology of the mindset of negative people of energy vampires.

1) Yes, you are right. I never recommend Hua Yang, neither do I recommend Crecendo, MKH, Tambun etc. In fact those who read my posts they will know I have said I know little about property companies and I admitted it a number of times, and I never recommend anyone to buy any share. As I have mentioned in this thread, they were raised by other forumers in my thread such as the Magic formula, Graham net net, Coldeye etc and I gave my comments after looking at their annual reports.

I wrote about KSL (+298%), Daiman (+105%, Plenitude (+78%), and PJD warrants (+100%+)in i3, quite a lot. But those articles were for knowledge sharing, and not stock recommendations. The return of Daiman at 105% and Plenitude of 78% is more than twice the return of KLCI of 42% during the same period. Anything wrong with my sharing of those articles? What about KSL which returned 298%? You never mentioned it in your post?

See what I mean by "Energy Vampire"?

2) I condemn Ivory? No lah, I share my analysis and comments on the management actions and the extremely poor performance of Ivory, and many other lemons, many times in i3. Ivory share price dropped by 68% while the broad market went up by 42% during the same period.

So what is wrong with my analysis, and what are your complaints?

If you heed my comments, you would have made tons of money investing in KSL, and save your heavy losses in Ivory. Some more acts like an energy vampire, all the time, endlessly. Padan muka.

3) Cold Eye owns Ivory? I don't know and don't care. But you mean everyone must own Ivory when Cold Eye bought it a few years ago, like you do? What is your investment thesis in Ivory? Cold Eye asks you to "cheak sai" you also cheak ah?

For me, I have written something about it here plus many comments in i3:

http://klse.i3investor.com/blogs/kcchongnz/45373.jsp

Where is your writeup? No I am not going to condemn you making a mistake in its share price or for promoting this thrash, knowing very well nobody can predict share price movement, but just to discuss with you your investment thesis on Ivory if you have any.

Ivory is just one of scores of stocks in ColdEye's portfolio. He made tons of money in his other stocks. He did make some mistakes in a few stocks. Doesn't everyone make any mistakes in investing?

Of course, no one is as good as you; never lose money in any stock, never made any mistake.

Posted by soojinhou > 2015-03-08 07:55 | Report Abuse

Thanks for the research kc. My experience tells me the only time to invest in REIT is when interest rates are rock bottom and every other asset class is already inflated. This situation forces investors hungry for yield to pile into reits. Being supposedly conservative, they are often the last asset class to appreciate. This happened circa 2011-2012 in Malaysia and 2014 in Australia. Reits in australia returned in excess of 20% in share price appreciation alone last year. I made a nice sum from boustead REIT during this period, but otherwise I won't touch it.

Posted by Kian Leong Lim > 2015-03-08 08:06 | Report Abuse

What we usually learn from smart people are how to make mistakes?

Posted by kcchongnz > 2015-03-08 08:37 | Report Abuse

Posted by Kian Leong Lim > Mar 8, 2015 08:06 AM | Report Abuse

What we usually learn from smart people are how to make mistakes?


There are indeed a lot of smart people in this thread. But with your mindset and mentality, your sentence is not right above. You have to change that "we" to "I".

For others people, please change the word "make" in your sentence to "avoid".

Posted by NOBY > 2015-03-08 09:01 | Report Abuse

KC, the best way to deal with these clowns is to just ignore them. One is a tin kosong who acts like an expert and another is a just a problem maker. Dont waste time writing long replies to them as they probably dont ynderstand even 10 pct of what you say. Their comments are not worth to respond to. I think 99pc of the i3 members appreciate what you hv contributed.

Posted by superspeculator > 2015-03-08 12:00 | Report Abuse

kcchongnz, how about getting margin finance and buy risk free bond like sukuk?

Posted by kcchongnz > 2015-03-08 12:11 | Report Abuse

Tell me your margin fiance rate, cost of setting up, Sukuk price, face value, its coupon rate, year to maturity, your intention for holding for how long you intent to hold etc.

Otherwise can't answer you.

I doubt the return can cover your costs, even if it does, doubt you have any worthwhile margin.

Posted by kcchongnz > 2015-03-08 12:18 | Report Abuse

And if interest rate goes up, you lose value in Sukuk bond, or any bond for that matter. And your margin finance interest rate will go up as it is based on base lending rate. A double whammy.

Margin finance doesn't sound good for any investment thing, generally, not for ordinary people.

There ain't tooth fairy in investment banks.

Posted by Probability > 2015-03-08 15:45 | Report Abuse

value88...dont la neglect clown...we also need them.
If the person is sincere and very confused...we need to help them out laa...

Posted by AzmiMerican > 2015-03-08 18:03 | Report Abuse

what about the second part, “borrow at 4.85% and get 6% distribution every year for a net gain of 1.15%?” Some more another “3.5%” capital gain (?) is added by him above to give an amplified return of 4.65%. Isn’t this a perfect risk-free arbitrage? I love risk-free arbitrage.

kc

Some more another “3.5%” capital gain (?)

3.5% is not capital gain la maksud dia 3.5% FD interest rate on his 100000 la

jadi net gain dari reit 1.15% tambah FD 3.5%...4.65%

kalau beli reit tu masa harga masih murah mungkin dapat capital gain lagi... semua risk free kalau market ok

Posted by AzmiMerican > 2015-03-08 18:14 | Report Abuse

kc

Oh... nanti nanti

I silap sikit kc u pun dah silap sikit....

Total return dia bukan 4.65% je

REIT return is 1.15% on 250000 = 2875

FD is 3.5% on 100000 = 3500

All 6375... and capital dia 100000 only so return 6.375% risk free

Posted by AzmiMerican > 2015-03-08 18:16 | Report Abuse

Nampak ok kan

Maybe dont use margin to full 250000 guna 225000 ke 200000 ke can sleep la

Posted by AzmiMerican > 2015-03-08 18:51 | Report Abuse

kc

Now that u see correct return is 6.375% risk free, macam mana can pakai or not cara ni guna leverage beli REIT... lagi risk free.. lagi mungkin capita gain lagi

guna margin financing for leverage dan beli REIT lagi... all against your advise

Posted by kcchongnz > 2015-03-08 19:06 | Report Abuse

Posted by AzmiMerican > Mar 8, 2015 06:51 PM | Report Abuse

kc

Now that u see correct return is 6.375% risk free, macam mana can pakai or not cara ni guna leverage beli REIT... lagi risk free.. lagi mungkin capita gain lagi

guna margin financing for leverage dan beli REIT lagi... all against your advise


Me: Correct return? Risk free? Capital gain?

Non of such thing in Bursa. None of them in investing in Reits, or any investment.

"When you locate a bargain, you must ask, 'Why me, God? Why am I the only one who could find this bargain?'" - Charlie Munger

Try understand what the article is trying to convey, and read some of the good comments in this thread and you may understand.

I am giving my opinion, not advising you. If you still think it is a good idea to use margin finance, go ahead. It is your choice.

Posted by AzmiMerican > 2015-03-08 19:13 | Report Abuse

I silap sikit kc u pun dah silap sikit....

Total return dia bukan 4.65% je

REIT return is 1.15% on 250000 = 2875

FD is 3.5% on 100000 = 3500

All 6375... and capital dia 100000 only so return 6.375% risk free



6.375% return salah ke... abih correct return berapa??

Posted by AzmiMerican > 2015-03-08 19:15 | Report Abuse

kc

Tolong la kirakan correct return dia berapa??

Posted by truthseeker1 > 2015-03-08 19:16 | Report Abuse

Azmi, you kira saham naik saja. Kalau saham yang dibeli turun dan kena margin call, macam mana kira?

Posted by NOBY > 2015-03-08 19:16 | Report Abuse

Azmi how you justify the REIT return is risk free ? The REIT cannot lower the dividend ? The REIT price cannot fall ?

Posted by AzmiMerican > 2015-03-08 19:20 | Report Abuse

Reit dan semua saham subject to drop kan?? Semua sama subject to market kan?? Saham Reit semua

Posted by AzmiMerican > 2015-03-08 19:22 | Report Abuse

Ok put risk free aside dulu kiraan return 6.375% tu betul tak dulu??

Posted by AzmiMerican > 2015-03-08 19:26 | Report Abuse

ks55 u ada???

can tolong kira correct return dia berapa tak??

Posted by NOBY > 2015-03-08 19:41 | Report Abuse

Azmi should be correct. But personally speaking 6.375 pct is not worth the risk of taking margin finance.

Posted by AzmiMerican > 2015-03-08 20:03 | Report Abuse

Terima kasih Noby Baik orang u

Posted by Wong Heam Kiew > 2015-03-08 20:26 | Report Abuse

Instead of using 100K FD to get 250K margin, He should use that 100K cash to buy shares first, then use these shares to apply for 150K margin. Now his anticipated return would be (100K*0.06+150K*(0.06-0.0485))/100K=7.725%.

Posted by AzmiMerican > 2015-03-08 22:45 | Report Abuse

BDB adalah rezeki sikit.

Saya pun tahu main margin bahaya, market tak tentu kan. Terima kasih la I ucapkan for your advise.

Posted by AzmiMerican > 2015-03-09 00:23 | Report Abuse

Wong Heam Kiew

Wah... you betul betul know benda ni... maksud you 100000 pun jangan put in FD sebab return tak cukup.

You mesti kaya la... you pernah try in real live??

Ada tricks lain??

Posted by NOBY > 2015-03-09 09:32 | Report Abuse

Wah Azmi, bahaya... you mesti faham kalau pledge shares bahaya ialah bila bila masa bank boleh designate itu share.. makna kalau exposure bank too high on one particular share , nilai cagaran saham itu boleh dikosongkan begitu sahaja... Masa tu, kalau you leverage maximum, you mesti kena margin call... advise is kalau nak guna margin, pastikan faham betul betul risiko kerana kalau menang, menang besar, tapi kalau kalah pun kalah besar...

Posted by MrWealthy4321 > 2015-03-09 11:50 | Report Abuse

thanks for sharing !

Posted by kcchongnz > 2015-03-09 19:24 | Report Abuse

Posted by Wong Heam Kiew > Mar 8, 2015 08:26 PM | Report Abuse
Instead of using 100K FD to get 250K margin, He should use that 100K cash to buy shares first, then use these shares to apply for 150K margin. Now his anticipated return would be (100K*0.06+150K*(0.06-0.0485))/100K=7.725%.

Good comment here. Let us put aside your own money of 100k which subjects to the same risk return of investing aside and focus on your 150k margin.

Your expected return on Reits of 6% less of the interest of 4.85% gives you a return of just 1.15%. Actually the future outcome can be better, say 10%, we just don't know. but since we are more concern about risk, let us focus on this risk thingy.

Your risk can be the broad market can drop by say 40% and individual Reit by 50% as shown in the US Sublime crisis which affected Bursa in 2008 and as described in this article itself.

Does an expected return of 1.15% justifies the potential loss of 50%?

Wont happen? Didn't I say it just happened in 2008 (-40%), or 7 years ago? Heard about the Internet bubbles in 2001 (-42%), the 1997 Asian financial crisis (-57%) followed by Anwar saga (-58%)? The Second board meltdown in 1997 (-68%)? A small scale but still significant down market in 1994? Black Monday in 1987 (-46%)?

This time is different? Are you aware that the market cycle is about 5-7 years as shown in the history of US market as well as the more frequent happenings in Malaysia? And when was the last big market down turn and just how many years ago?

Still envy of people saying they made millions using OPM, but forgetting how much they have lost?

Posted by Wong Heam Kiew > 2015-03-10 10:22 | Report Abuse

kcchongnz, I dun encourage people to use margin. But if they can handle and insist to use margin, I just wanted to point out that it is better to use shares instead of FD to get margin facility. And the other better alternative to get leverage is to trade call warrants instead of margin. For example, to buy FBMKLCI-CR at RM0.15 at yesterday closing, it is equivalent to get financing to buy a basket of blue chips at an interest rate of 6.1% per year, the "interest" is actually the premium and loss of dividend, the beauty is if market crash, the call warrant holders are not required to be responsible beyond the amount that already paid.

Posted by kcchongnz > 2015-03-10 11:56 | Report Abuse

Posted by Wong Heam Kiew > Mar 10, 2015 10:22 AM | Report Abuse

kcchongnz, I dun encourage people to use margin. But if they can handle and insist to use margin, I just wanted to point out that it is better to use shares instead of FD to get margin facility. And the other better alternative to get leverage is to trade call warrants instead of margin. For example, to buy FBMKLCI-CR at RM0.15 at yesterday closing, it is equivalent to get financing to buy a basket of blue chips at an interest rate of 6.1% per year, the "interest" is actually the premium and loss of dividend, the beauty is if market crash, the call warrant holders are not required to be responsible beyond the amount that already paid.


Me: I Used to play a little on call warrants since 5-6 years ago and initially made some money. However, I have given back all I have made and donated more. I didn't place much chip in each bet, but still lost a few thousands here and there.

Mind you I made use all what I learned and experience in this gamble.

The play field for call warrants is very uneven here. I have given up this terrible game some time ago. It is not wise to dabble in it in Bursa.

Posted by stockoperator > 2015-03-11 20:05 | Report Abuse

Listen to KC sincere advice.

Posted by yuanlong57 > 2015-03-16 00:04 | Report Abuse

Good sharing and enlightening discourse here. REITs are also my favourite.

Posted by Safarialien > 2015-03-23 13:17 | Report Abuse

Hi there I am looking at the recent big move by Pleitude bit cannot work out if it will add value to the company long term. Can you advise please.

Posted by kcchongnz > 2015-08-07 16:37 | Report Abuse

ks55,

I have shown that in a rising market, individual property stocks have done much better then REITs. In a down market, I fully agree with you that Reits will fall less than individual property stocks.

This is understandable as Reits hold a portfolio of properties, and hence are less volatile than an individual stock.

Posted by lily123 > 2016-08-17 22:29 | Report Abuse

Mr Chong, what in your opinion is the top 3 reits as of August 2016?

Posted by Yippy68 > 2016-10-09 03:40 | Report Abuse

either Reit or any property counter are not safe at this moment as most property companies are facing sale problem, if the predicted crash come in , most company even reit will fall like durian, may be it may even fall below 2010 level as seen in KC appendix table 1 and 2, my advice is sell out all reit and property counter when your profit hit your target, temperory keep in short term FD and pray a big crash for you to reinvest. selling before a big fall is better than looking for a small up side gain. i bought reit in 2009 and bought more on 2010, today my targeted profit and dividen returned for six years with capital gain added up by seven figure, may be time to run after reading this article. thank KC for your advice, you got a good point.