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Valued Contributor

Re: TREA - Is the time to sell coming?


@Learner wrote:

I understand yogi's approach regarding TREA.  What is not clear to me is for how long he would stay with TREA if it remains flattish for a year or two or three or longer.  There is a theoretical possibility, just a possibility that it could linger in the 0% to -2.9% change range for years.  


I was drawn to T-REA during 2009-10 turmoil. If I get out [retaining a foothold position], I may get back in when another turmoil time comes. But I am hoping that I won't have to get out.

YBB
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Follower ○○○

Re: TREA - Is the time to sell coming?

All right, y'all helped to persuade me to sit out awhile too: a) it's hard to argue with a combination of liquid TRAD at 3.3% and continuing to throw more money after stocks, b) although TREA is getting more apartment-y and industrial, which I think will help counteract what I think is an inevitable blow to offices and a further blow to retail, there's still too much office and retail to make it likely to outperform TRAD in the foreseeable future and c) s**t is getting weird and although TREA is mostly good weird I'm not 100% positive they couldn't do something unprecedently bad weird -- not anything catastrophic like dropping the liquidity guarantee but certainly something minor in terms of appraisals or even something else medium-crappy if, say, the market itself closes for an unprecedented period of time... I hope to be back in sooner rather than later, but as my wife and I both have accounts and we didn't have *that* much in it won't take too long for us to rebuild 50% of our current position while staying under the $150k apiece limit...

Hang in there, all (which is also what I've been saying to my students)...

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Valued Contributor

Re: TREA - Is the time to sell coming?

Pete wrote:

"I'm not 100% positive they couldn't do something unprecedently bad weird -- not anything catastrophic like dropping the liquidity guarantee but certainly something minor in terms of appraisals or even something else medium-crappy if, say, the market itself closes for an unprecedented period of time... "

That's entirely possible, Pete.  I see there's trouble brewing, for example, with commercial mortgages.

Stay safe.  As I recall, you have a lengthy time horizon.

Bob

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Valued Contributor

Re: TREA - Is the time to sell coming?

3/23/20

QREARX  435.27 -0.13%;  TRRSX  -4.47%;  RE hybrid FRIFX  -6.64%

YBB
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Valued Contributor

Re: TREA - Is the time to sell coming?

3/24/20, some relief

QREARX  436.46 +0.27%,   TRRSX  +8.13%,   RE hybrid FRIFX  -1.28%

YBB
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Explorer ○

Re: TREA - Is the time to sell coming?

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Participant ○○○

Re: TREA - Is the time to sell coming?


@NittanyLion wrote:

WSJ has two ominous headlines:

https://www.wsj.com/articles/businesses-cant-pay-rent-thats-a-threat-to-the-3-trillion-commercial-mo...

https://www.wsj.com/articles/citi-could-be-stuck-with-troubled-casino-loan-as-mortgage-market-seizes...

I think it is question of time when TREA will accelerate its downward trend.

Stay safe folks!

--vp


 Based on the news I read about the various investments (bonds, stocks, and real-estate, etc.), there is no bright spot to be found anywhere in the investment world. 

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Valued Contributor

Re: TREA - Is the time to sell coming?

Exactly, Nat.

+100

Bob

P.S. I do like my Ben Franklins. 😉

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Follower ○○○

Re: TREA - Is the time to sell coming?


I think it is question of time when TREA will accelerate its downward trend.


Absent stunningly good news by Friday - something like a vaccine or a cure found - I shall sell 1/2 my TREA allotment.  Though I suppose I could wait till Monday (or Tuesday ?, not sure how the timing works on that) and still be able to make another sale as early as April 1.

 

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Valued Contributor

Re: TREA - Is the time to sell coming?

Hi Rusty,

It's been my (modest) experience that selling on Mondays should be avoided.  Lots of folks stew over the weekend.  Mind you: I Have NO empirical data to support my anecdotal observation.

On the other hand, I recommend to anyone in general  to consider the "disposition effect" prior to selling.  No snark intended.  I keep it always in mind under stressful circumstances.

 
Disposition effect

The disposition effect is related to the way investors tend to treat unrealised gains and losses on financial assets. In particular, research found that investors have the tendency to realize gains more quickly than losses. Investors tend to “hold on to losers, but sell winners”. From an investment perspective, this behavior does not make sense. A security’s future performance is unrelated to the price at which the investor purchased the security.

Potential explanations

The term ‘disposition effect’ is a shorthand for investors’ ‘predisposition towards get-evenitis‘. As such, the term refers to a likely explanation as to why people tend to behave like this; investors are hoping to get even. This is because selling a position at a loss would be the same as admitting that they were wrong on a trade. At the same time, realising gains ‘proves’ that the investor was right. In other words, investors avoid regret and instead seek pride.

The disposition effect is closely related to prospect theory and loss aversion.

 

All the best, Bob

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Explorer ○○○

Re: TREA - Is the time to sell coming?

Hi Rusty,

We are also selling TREA today so that after April 1 we can sell more if needed. Most of our units are in a Roth IRA and the funds will go into TIAA Traditional at 1.25% interest. Later, if needed we can move the funds to Fidelity or Vanguard for better returns. The realized gains since 2010 will be huge (way over $600K) and we do not want to risk losing the gains by holding through this viral disruption. We make this decision last night after considering what might happen in the next 6 months to one year. We hope that our view is wrong but feel we cannot take that chance.

S

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Valued Contributor

Re: TREA - Is the time to sell coming?

Sounds awfully sensible to me, S.

Bob

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Valued Contributor

Re: TREA - Is the time to sell coming?

With deterioration in residential housing and commercial RE markets, it looks to me that my personal trigger for T-REA will occur, it is a matter of when, not if. Below is the T-REA chart of 6-mo.

T-REA has reduced its REITs [good] but has expanded its CRE loan activity [not good timing]. Office rentals may suffer - if rental/lease payments are skipped or deferred. Although unrelated, Burger King in UK has announced publicly that it will skip rents for the month but pay its workers; such gestures may spread or be decreed by governments [Italy suspended mortgage payments for a while]. T-REA RE valuations would fall with some delay. Home sales are now slowing down - Zillow has suspended its national online house acquisition program - buyers are worried about possibly infected houses, probably an irrational fear but most fears are so.

In recent daily tracking data, I have included T-REA, RE equity TRRSX [so we don't have to endlessly talk about V-something], and RE hybrid FRIFX [mix of RE equity and RE debt]. In the past, I and others have suggested FRIFX as the next best alternative to T-REA for those who don't have access to T-REA and cannot tolerate volatility of RE equity. Action of FRIFX is a bit concerning - on Monday, it fell more than RE equity and on Tuesday, when RE equity moved up sharply, RE hybrid still fell. So, right now debt is stressed in general, but RE debt, oil patch debt, HY debt are specially stressed.

So, like several others, I am also more inclined to move at least half of my T-REA into Traditional by March 31 [Tuesday] and then see what happens in Q2.

 

Screenshot 2020-03-25 07.23.47.png

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Participant ○○○

Re: TREA - Is the time to sell coming?


@yogibearbull wrote:

With deterioration in residential housing and commercial RE markets, it looks to me that my personal trigger for T-REA will occur, it is a matter of when, not if. Below is the T-REA chart of 6-mo.

T-REA has reduced its REITs [good] but has expanded its CRE loan activity [not good timing]. Office rentals may suffer - if rental/lease payments are skipped or deferred. Although unrelated, Burger King in UK has announced publicly that it will skip rents for the month but pay its workers; such gestures may spread or be decreed by governments [Italy suspended mortgage payments for a while]. T-REA RE valuations would fall with some delay. Home sales are now slowing down - Zillow has suspended its national online house acquisition program - buyers are worried about possibly infected houses, probably an irrational fear but most fears are so.

In recent daily tracking data, I have included T-REA, RE equity TRRSX [so we don't have to endlessly talk about V-something], and RE hybrid FRIFX [mix of RE equity and RE debt]. In the past, I and others have suggested FRIFX as the next best alternative to T-REA for those who don't have access to T-REA and cannot tolerate volatility of RE equity. Action of FRIFX is a bit concerning - on Monday, it fell more than RE equity and on Tuesday, when RE equity moved up sharply, RE hybrid still fell. So, right now debt is stressed in general, but RE debt, oil patch debt, HY debt are specially stressed.

So, like several others, I am also more inclined to move at least half of my T-REA into Traditional by March 31 [Tuesday] and then see what happens in Q2.


So logical and good information to all.

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Participant ○○○

Re: TREA - Is the time to sell coming?

Left at their own means, the economy will go into a long long winter. However, Washinton just passed a 2T package that, along with the FED stimulus, can go a long way to blunt this cataclysmic outcome. My question would be, how could the 358B (small business) + 500B (large corporations) aid package be factored into the TREA value? My feeling is nobody knows. 

I am not touching TREA in Q1.

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Valued Contributor

Re: TREA - Is the time to sell coming?

Ditto, Carlos, but I'm operating  from an annuitant framework.  My annual reset is in a matter of days. It's hardly make or break--no criticism implied in any way in any direction. 

Bob

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Participant ○○

Re: TREA - Is the time to sell coming?

Carlos, I don't know.  Looking at the amount of the money in your post, what it is for, the size of the U.S. economy, and the problem we are facing; my guess is not much.

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Valued Contributor

Re: TREA - Is the time to sell coming?


@CarlosDS wrote:

Left at their own means, the economy will go into a long long winter. However, Washinton just passed a 2T package that, along with the FED stimulus, can go a long way to blunt this cataclysmic outcome. My question would be, how could the 358B (small business) + 500B (large corporations) aid package be factored into the TREA value? My feeling is nobody knows. 

I am not touching TREA in Q1.


Deal between WH and Senate has been announced. Senate vote is pending. House may tinker with it more before voting.

The Fed stuff is unprecedented and indeed done [even more than what was done in 2008-09].

YBB
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Participant ○○○

Re: TREA - Is the time to sell coming?

US GDP 2019 about 21T. 

The FED will inject up to 4T!! (I read somewhere). 

The only way to regain normalcy in the economy and its markets is to find some preventive, curative or palliative medication for COVID19. The stimulus package should give us some time to find it. IMO 

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Participant ○○

Re: TREA - Is the time to sell coming?

Carlos, as you know, your question was (red added by me):  "My question would be, how could the 358B (small business) + 500B (large corporations) aid package be factored into the TREA value?".

I answered this question.  I was silent on its effect on the economy.

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