February 15, 2022

On Tuesday markets rebounded on news of easing tensions in the Ukraine situation. 

The S&P 500 rose 1.6% and Toronto rose 0.7%. Oil fell modestly to U.S. $92.

There are always reasons to fear a sizable decline in stock prices. But that rarely happens and so getting out of the market is usually a bad strategy. But having a balanced approach with a good exposure to equities along with a reasonable allocation to safer investments and some cash is usually a good and prudent approach. Historically, bonds were a good choice and for the last 40 years have been a very good choice most of the time becasue falling interest rates provided capital gains on bonds. Currently longer term bonds are probably a bad idea as they will fall hard if interest rates rise significantly. Therefore REITs and preferred shares and short term bonds may bea  better choice for the fixed income portion of a portfolio. 

Speaking of REITs, my next update will be for RioCan. It turned out to be a great investment if bought after it fell in 2020 with the pandemic panic. It got under $15 and remained under $18 for almost a year. There was a long opportunity to buy at the depressed price. Now its back at $24. At this price it may not offer a lot of upside but offers a 4.2% yield with a distribution that will likely increase and a unit price that will likely continue to increase modestly with a possible more substantial gain in the next year. Of course, there are always risks to that scenario. Having bought a good number of units near the lows in 2020 I may reduce my position in my RRSP to build up some cash but not in my taxable account. My updated rated will be likely be a Buy rating. 

The Melcor REIT this evening announced an unchanged distribution for February. Sometimes they announce three months of distributions at once. Hopefully this is a signal that they will increase the distribution somewhat when they report Q4 results in early March.

Meanwhile, Melcor Developments announced that it has changed its stock transfer agent. It’s hard to know if there is any significance to that. My assumption is it is just a housekeeping matter with no impact on investors.

Today, CMHC released the latest housing start numbers. In January, starts were down in almost every City across Canada with an average decline of 22% for single family starts. Alberta was down 30%. This is a negative thing for Melcor Developments but it’s too early to conclude that it is a negative trend. Housing prices are sky high and logically starts should be strong. I’ll watch for other reports including building permits. Housing starts can be volatile on a month to month basis.

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