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The difference between wanting to own, and wanting to buy.

July 08, 2009 – Comments (0) | RELATED TICKERS: NRF , PBT , BPT

It's happened to me before.  Perhaps it's happened to you as well.  There's this REIT.  It's so... yielding.  I mean wow.  The fact that a company will pay me on a regular basis, lucratively, just for the pleasure of owning it... that so... HOT.

Ok, actually, there are a few of them.  MLP's too.  Oooooh so deliciously tempting.  I'll bet their fat cash payouts taste just like Grasshopper Pie ice cream.  You know, that's Oreo Cookies mixed with Peppermint and if you're lucky, Pistachio.

And then I'm reminded of reality.  You know.  What a company that's required to pay most of it's earnings out must do if it wants to grow.  Yes, that.  *shudder*   Borrow.  Man that's gotta hurt.

It's hurt Northstar Realty, who I love, even though, fishy derivative hedges aside, they mostly deal with healthcare real estate.  It's hurt the big O - that's right, Realty Income.  It's hurt Capstead Mortgage, although they're so good at the fishy derivative 3 letter acronymn game that they're moving up - yeah, that's going to hurt again soon.

It's even hurt my two lysdexic twin ponies, Permian Basin Royalty Trust and Prudhoe Bay, PBT moreso than BPT - as well as a slew of MLPs that I was watching so patiently for the right moment.

Now maybe this wouldn't be so bad.  Maybe if growth wasn't such an expectation, than a steady stream of dividends would seem like a godsend.  Maybe these corporate tax structures weren't designed with growth in mind.  Maybe companies that can't grow without debt and leverage aren't actually prudent for those that don't thoroughly understand the industry.  Just because everyone borrows, doesn't mean it's actually a wise idea.

Unfortunately, the crowd likes a bubble.  I'm no anthropologist, but I know that the larger a crowd gets, the larger it's propensity for irrationality.  If I were in a position to hold indefinately, then I'd hold these, err, indefinately.  But I can't take it.

I can't live under a bubble.  I'm too small time, and it will hurt too much.  Even the smallest bubbles burst eventually.