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Resource Capital Corp. Message Board

  • bountyofmylord bountyofmylord Aug 13, 2010 9:58 AM Flag

    Keep Your Powder Dry

    Talking heads are talking "double dips". Most of these heads wouldn't know a double burger from a double bun, but hey they are paid to talk. If the sentiment is that bad, it may present us some great "price/value distortions".

    I have a feeling that going forward we may come across some good "bottom fishing" opportunities.

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    • Addiction to posting is somewhat less harmful than addiction to ethanol, but yeah, same idea. I've managed to hold on to this name for quite awhile, it's been relatively quiet in the markets recently, and a lot of the MLP boards are without active posters.

    • 999 is that like getting 86'd from a bar?alf

    • That's a problem, I post too much, get "999"'d by Yahee, and have to switch to another name, and my ignore list starts over. All of a sudden I'm reading these worthless posts by trolls and idiots again.

    • Thanks Ruby. You sound like you have been around the block with stocks. I guess I need to expand my ignore list again.alf

    • shorty,

      >"Everyone here thinks that RSO is invincible because of its dividend."<

      Nobody here thinks RSO is invincible. There are any number of problems that could hurt this company, just like any other company. We simply believe the odds are in our favor with RSO, obviously that is why we own the stock.

      >"Can they cut the dividend next year?Sure they can."<

      They do not just come up with an arbitrary number or decide to cut the divy to "save" some money for a rainy day. It's a REIT and must pay out 90% of its taxable income.

      So, all we have to go on is past performance:

      They have always paid a meaningful dividend even during the crisis.

      And visibility:

      The CEO has said the dividend is good throughout the rest of the year. As for next year, the CEO has already mentioned "growing the dividend."

      Has he ever steered us wrong? NO!

    • Magdala,

      Each Federal Reserve Regional Bank elects its own President. That person is not beholden to the Washington D.C. power structure, as is the Federal Reserve Chairman (appointed by the President). Thus, each Federal Reserve President has the ability to speak freely and openly about their opinions, so long as they do not reveal the restricted information that occurs at the FOMC meetings. However, there is a minority of Regional Bank Presidents on the FOMC, while the majority is appointed by the Washington politicians.

      Mr. Hoenig, has been the President of the Kansas City Regional Federal Reserve Bank since the early 1990s, and, is quite intelligent and experienced-- probably more so than the academics who are currently running the Federal Reserve Board.

      His point is relatively simple. By keeping rates down near zero, it penalizes savers because they obtain no income (decreasing their purchasing power), and, encourages the commercial banks to obtain "free money" from the Fed Rsv and fund the U.S. government debt (spread of about 2% with no risk), thus shutting off credit to the private sector (no reason to make a "risky loan" to a private party when they can make the spread with no risk). I believe that is what you cited as one of the problems currently plaguing the U.S. economy. His proposal is to gradually raise the interest rate (first to 1% then after a while to 2% etc) to restore the normal balance in the credit markets, and, encourage lending by the banks to the private sector again.

      The difference between a .25% Fed Funds rate and a 1% Fed Funds or Discount Rate won't make any difference at all in a credit card interest rate of 19.99%, but it will force the U.S. government to consider the long term consequences of continuing to borrow 75% of its annual revenues each year. Currently, we have about $1.4 Trillion dollars redirected from the private sector to the U.S. government to fund the annual deficit. The "crowding out" effects of that redirection of lending is obvious.

      Many of the Federal Reserve Regional Presidents give speeches and express opinions that may be contrary to the actions or rationale of the FOMC. However, they always are clear that they are not speaking for the FOMC, or Federal Reserve Board as a whole, but are expressing their own personal opinion. The First Amendment to the United States Constitution was added for the specific reason of allowing dissenting voices to be heard, regardless of what the government wants.

      Japan has been using the "Helicopter Ben" approach for almost 20 years. I am wondering how long it will take for the believers in that methodology to decide it doesn't work.

      IMO the problem is the doubling of the debt load on the citizens of the U.S. in the last 10 years, without an increase in aggregate incomes. The real problem is the amount of debt service that must be funded in the U.S. each year. The Federal Reserve policy of lowering interest rates to encourage borrowing by consumers, simply increases the distortion if successful.


    • Magdala,

      These low interest rates are not helping the housing market and are hurting gravely people who are living on fixed income like senior citizens.

      Many people who have money are not spending because they are getting nothing on their money.

      What would you advise them to do?Gamble with their money and buy RSO or other stocks?Not every person wants to invest in stocks and gamble with their savings.Everyone here thinks that RSO is invincible because of its dividend.Can they cut the dividend next year?Sure they can.

    • I like buying SPY puts out as far as I can when the market's in an "exuberant" mode. I'm currently holding Dec 95 puts I picked up for $2 during the last wave of optimism. It's good insurance against a crash, because the leverage is huge if the market takes a dump, which provides you with a lump of cash to make buys in the depths.

      The timing of sells is tricky, but it doesn't cost much, and it's more productive than leaving huge chunks of cash on the sidelines that could be earning 10-15% in MLP's . . . and here, if you're into retirement cash flow. I'm always hoping for a crash to take a victory lap and bump my income more, screw my account value! What difference does that make?

    • Bounty, I'm not sure what the relationship is between the Chairman and the various FED regional bank Presidents but it seems very unprofessional for Mr. Hoenig to be making these grandstanding remarks in public. It's akin, IMHO, of Gen. McCrystals remarks that got him fired. I don't know if the Chairman has the authority to remove a regional FED bank President.
      The other thing that bothered me is his idea that the statement is too accomodative. The statement should be accomodative to remove some of the fear in the consumer and investor market. The interest rates should be kept low until inflation gets over 2% and not raised just out of fear of future inflation. I think Mr. Hoenig is just grandstaning recklessly and not looking for the interest of the US economy or consumer. He's really unprofessional and should be removed from office.

    • I am sitting on a sizable pile of cash and will continue to wait for the right moment before pushing the buy button. No doubt that moment will be coming soon. Magdala is absolutely correct in what she is saying about the economy. Everything is either lower than desired or just plain flat. Exciting. GLTA.

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