Fauzi Muda/iStock via Getty Images Recency bias causes many to incorrectly view REITs as a low return asset class. It is true that REITs have had dismal returns in recent years with Vanguard REIT ETF ( VNQ ) basically flat for 5 years. SA However, extrapolating the recent past misses the bigger picture. In this article I want to discuss 3 concepts which suggest forward REIT returns will likely be ...
Fauzi Muda/iStock via Getty Images Recency bias causes many to incorrectly view REITs as a low return asset class. It is true that REITs have had dismal returns in recent years with Vanguard REIT ETF ( VNQ ) basically flat for 5 years. SA However, extrapolating the recent past misses the bigger picture. In this article I want to discuss 3 concepts which suggest forward REIT returns will likely be significantly better. Longer term view of REIT returns Multiple compression High interest rates versus rising interest rates Let us examine this in a longer-term context. The furthest back we have been able to chart the REIT index is the start of 1990, so the timeframe here is just chosen by availability of data. REITs have a fairly low correlation with the S&P but generally have had almost identical returns. S&P Global Market Intelligence Around the 2000 tech bubble, S&P returns got significantly ahead of REITs. The steady cashflow nature of REITs is often viewed as unexciting so when investors are chasing outrageous returns, REITs usually lag behind. As the tech bubble unwound, REITs caught back up. Then in the 2005-2007 real estate bubble, REITs materially outperformed. With 20/20 hindsight, real estate prices clearly got ahead of themselves, resulting in REITs crashing harder than the broader market when the bubble popped. In the depths of the Financial Crisis around 2009, cumulative total return parity was once again restored between REITs and the S&P 500. REITs rebounded harder and outperformed steadily through 2020 right up until COVID hit. The pandemic shutdown disproportionately hurt REITs because certain property segments like office and to some extent retail, were basically not allowed to operate. While office is a tiny portion of REITs now, it was one of the largest property sectors back in 2020. REITs bounced back swiftly again after the COVID crash, partially aided by the fresh interest rate cuts causing the cumulative performance of REITs to once again overta...
The Strait Of Hormuz Crisis Exposes A Fatal Flaw In Economic Thinking Authored by Kurt Cobb via Resource Insights, Even a 4–5% loss in global energy supply could translate into a comparable drop in economic activity due to energy’s central role in all production. Disruptions in oil and LNG flows through the Strait of Hormuz are already removing a significant share of global energy, with cascading ...
The Strait Of Hormuz Crisis Exposes A Fatal Flaw In Economic Thinking Authored by Kurt Cobb via Resource Insights, Even a 4–5% loss in global energy supply could translate into a comparable drop in economic activity due to energy’s central role in all production. Disruptions in oil and LNG flows through the Strait of Hormuz are already removing a significant share of global energy, with cascading impacts across industries. Rising energy costs trigger widespread knock-on effects—from food and travel to semiconductors—potentially leading to a severe global recession. A priest, an engineer, and an economist are stranded on a desert island. The first order of business is to get some food. The priest suggests that they all pray. The practical-minded engineer suggests that the three men make a net to catch some fish. But where will they find the necessary materials? The priest and the engineer turn to the economist and ask him if he has any ideas. The economist replies, "Assume a fish." This well-worn economist joke summarizes one of the chief flaws in contemporary economic theory. That theory almost completely ignores the role of physical resources, assuming they will always be available in the quantities we need at prices we can afford at the time we need them. When those resources aren't available, that theory begrudgingly accepts that there will be some damage to economic activity, but tends to greatly underestimate the impact. This conceptual flaw explains why economists in most financial institutions and governments, and thus investors, are not especially alarmed at the loss of energy resources, as stock market indices remain not too far from their recent highs. For a good summary of how contemporary economic theory goes off the rails, Australian economist Steve Keen offers a mercifully brief and comprehensible explanation . Here I will relate one critical part of that explanation. About 5.7 percent of U.S. GDP is devoted to procuring and distributing energy . Most ...
Oleh Yatskiv/iStock Editorial via Getty Images Aerospace and defense stocks saw stock prices decline following the war in Iran. The reason is that near-term opportunities are capacity constrained, not demand constrained. Furthermore, we note that aerospace and defense also includes commercial activities which have higher sensitivity to economic growth and that holds particularly true for aftermark...
Oleh Yatskiv/iStock Editorial via Getty Images Aerospace and defense stocks saw stock prices decline following the war in Iran. The reason is that near-term opportunities are capacity constrained, not demand constrained. Furthermore, we note that aerospace and defense also includes commercial activities which have higher sensitivity to economic growth and that holds particularly true for aftermarket activities linked to airplane utilization and demand for air travel. Rolls-Royce's (RYCEF, RYCEY) stock dipped around 8% since the start of the war and while the stock did rebound to the price levels seen in early March, I do believe it is important to also highlight some of the risks due to customer concentration on the A350 program which uses the Rolls-Royce Trent XWB engines. The Importance Of The Civil Aerospace Segment Rolls-Royce In 2025, Rolls-Royce booked revenues of £20 billion with £3.5 billion in operating profit. Over half of the revenues were generated in the Civil Aerospace segment with revenues split roughly 70-30 between services and original equipment manufacturer sales. By engine type, the large engines category accounted for 76% of the revenues and was also the highest growth category for Rolls-Royce. While half of the revenues come from Civil Aerospace, we note that over 60% of the profits come from the Civil Aerospace segment. An important driver of revenue growth is the growth in engine flight hours and total shop visits under long-term service agreements or LTSAs. That is where things may actually get somewhat problematic when considering that the A350 and A330neo are the main growth drivers and particularly the customer concentration for the A350 may provide a challenge. Potential Challenge For Rolls-Royce Rolls-Royce Year-on-year, the installed fleet grew 3% with 5% growth when measured by thrust. What this simply means is that growth and composition of the fleet is leaning more towards large engines. Large engines in fleet grew 4.3% and 5.5% gro...
James Rolevink/iStock Editorial via Getty Images Shares of AeroVironment ( AVAV ) could have significant upside, according to a research note from BNP Paribas analyst Matt Akers, who maintained an Outperform rating and a $330 price target in a note to clients Monday. The target implies roughly 84% upside from the stock’s April 10 closing price of $179.70. The note follows a recent discussion with ...
James Rolevink/iStock Editorial via Getty Images Shares of AeroVironment ( AVAV ) could have significant upside, according to a research note from BNP Paribas analyst Matt Akers, who maintained an Outperform rating and a $330 price target in a note to clients Monday. The target implies roughly 84% upside from the stock’s April 10 closing price of $179.70. The note follows a recent discussion with the company, in which management reiterated its existing guidance. Akers said AeroVironment ( AVAV ) appears comfortable with its implied fourth-quarter outlook, despite some investor concerns after a softer third-quarter performance. The analyst added that the company may have incorporated a degree of conservatism into its projections following that weaker quarter. Demand for the company’s unmanned aircraft systems (UAS) and related technologies remains strong, the note said, with geopolitical tensions, particularly in the Middle East, driving increased interest across its product portfolio. AeroVironment ( AVAV ) produces a range of systems used for surveillance, targeting and strike missions, including counter-drone technologies and loitering munitions. BNP Paribas said this demand environment could support growth into fiscal 2027 and beyond, particularly in areas such as counter-UAS systems, long-range reconnaissance and one-way attack platforms. The research note also pointed to the U.S. government’s initial budget request, which includes $54 billion for autonomous warfare programs and continued funding for unmanned systems, as a potential tailwind for the company. Further details on allocations are expected in the coming weeks. Separately, AeroVironment’s ( AVAV ) recent acquisition of engineering firm ESAero for $200 million is expected to expand its technical capabilities and help accelerate the transition of products from development to full-rate production. BNP Paribas estimates the deal could contribute $80 million to $100 million in annual revenue and $10 millio...
If Nvidia and Broadcom stocks rejoin the advance, their rise could signal a more sustainable phase of the broader rally. Here’s a technical look at the shares.
If Nvidia and Broadcom stocks rejoin the advance, their rise could signal a more sustainable phase of the broader rally. Here’s a technical look at the shares.
Investors itching to jump on Anthropic, if and when it goes public, should in the meantime scoop up shares of Zoom Communications , Virtus Investment Partners chief market strategist Joe Terranova told CNBC's "Halftime Report" on Monday. Zoom offers indirect exposure to Anthropic because it's a large investor in the artificial intelligence darling, Terranova said. The video call company, which par...
Investors itching to jump on Anthropic, if and when it goes public, should in the meantime scoop up shares of Zoom Communications , Virtus Investment Partners chief market strategist Joe Terranova told CNBC's "Halftime Report" on Monday. Zoom offers indirect exposure to Anthropic because it's a large investor in the artificial intelligence darling, Terranova said. The video call company, which partnered with the maker of the AI assistant Claude in 2023, has a stake in the startup that is likely worth between $2 billion and $4 billion , according to some analysts. "If you want a publicly traded mechanism to get some exposure to Anthropic, it is through Zoom," Terranova said. "People don't understand the demand right now is insatiable for Claude." Using Zoom as a way to play Anthropic comes as the private company is reportedly preparing to debut an initial public offering as early as this fall. ZM 1Y mountain Zoom shares over the past 12 months Earlier this month, Anthropic launched Claude Mythos to a limited group of users — an offering that could disrupt traditional software companies . The roll out should contribute to Anthropic's growing market value, which has skyrocketed to nearly $400 billion, based on the implied valuation in the company's latest funding round . That large valuation has increased investors' appetite for Anthropic, but they'll have to settle for buying shares of Zoom for now. That's not necessarily a bad thing, according to Wolfe Research analysts. They recently noted Zoom is poised to see a ton of upside if and when Anthropic goes public. "We … want to highlight Zoom's exposure to Anthropic, which we estimate could be worth [roughly] $1.1B to $3.4B based on current valuations, with substantial upside if Anthropic pursues an IPO at a premium to its latest private market valuation of $350B, representing ~6%-17% of current [enterprise value]," Wolfe Research analyst Alex Zukin said in a note to clients dated in early February. Of 31 analysts cove...
Even before the Iran war, I was critical of the Trump administration's policies to double down on fossil fuels while simultaneously rolling back practically all of the Biden administration's EV, solar, wind, and battery backup initiatives to more effectively compete with China. Nothing has exposed the flaws of the administration's energy strategy as has the war on Iran. It is the biggest disruptio...
Even before the Iran war, I was critical of the Trump administration's policies to double down on fossil fuels while simultaneously rolling back practically all of the Biden administration's EV, solar, wind, and battery backup initiatives to more effectively compete with China. Nothing has exposed the flaws of the administration's energy strategy as has the war on Iran. It is the biggest disruption and destruction of oil and gas assets in world history, in my view, and has had a very negative impact on the United States and the world. Indeed, despite being the biggest petroleum producer in the world, the United States is not immune from the fallout: gasoline prices have jumped 15% since the war started (see chart below), while the March CPI inflation print surged 0.9% - likely pushing additional interest rate cuts further into the future. As a result, China is arguably winning the underlying energy war, while the United States seems determined to fritter away the gift of domestic shale oil (more on that later). What is frustrating to many (including myself) is that America seems to know what the solutions are because NextEra Energy ( NEE ) has become the largest utility company in the United States by specializing in those solutions. And, despite the Trump administration's de-prioritization (if not outright hostility...) toward clean energy, NextEra will continue to be very successful by deploying these low-cost solutions for decades to come. Today, I'll explain why that is the case and will give a preview of NEE's Q1 earnings report, which is due out on April 23rd. Data by YCharts Investment Thesis An article in Fortune quotes Jacky Tang, emerging markets CIO at Deutsche Bank , as saying that the war on Iran has set off a global race for energy security that makes China stronger (see "Deutsche Bank Says China Is Energy 'Winner' In Age of War" ). While acknowledging that China will be tested by its reliance on Iranian oil imports, its status as the largest supplier ...
Hezbollah leader Naim Qassem on Monday urged Lebanon to cancel a planned meeting with Israel in Washington the following day, reiterating his group’s rejection of direct negotiations with its foe. “We reject negotiations with the usurping Israeli entity … We call for a historic and heroic stance by cancelling this negotiating meeting,” Qassem, whose Iran-backed group has been at war with Israel si...
Hezbollah leader Naim Qassem on Monday urged Lebanon to cancel a planned meeting with Israel in Washington the following day, reiterating his group’s rejection of direct negotiations with its foe. “We reject negotiations with the usurping Israeli entity … We call for a historic and heroic stance by cancelling this negotiating meeting,” Qassem, whose Iran-backed group has been at war with Israel since March 2, said in a televised address. The Lebanese and Israeli ambassadors to the United States...