Real Estate Trusts Are A Hedge Against Stagflation

(MENAFN- The Arabian Post) Matein Khalid

Risk assets went ballistic this week as DonnyT did his tariff man war dance, hurled his Tomahawk at Canada, Mexico, China and EU as Liberation Day begins on April 2nd in Year Zero of the Ten Thousand Year MAGA Empire. Long years ago, America made a tryst with destiny and now comes the time, we must redeem our pledge to The Donald, the Don of Dons and swear to remake the world as he wishes.

Sadly, the Powell Fed is not playing ball with the sans-c​ulottes ​of the MAGA revolution. A year ago, I remember CNBC's Steve Liesman asking him at a presser if he thought stagflation risk was possible in the US economy. Uncle Jay replied to Steve that he saw neither stag nor flation. Yet last week, this chairman of the Federal Reserve just downgraded growth and upgraded infl​ation. Thus spelling out stag-flation. So Jay Powell has vindicated Trump's first term nickname for him, Loco. This guy is a monetary policy Nero, who is fiddling away while the global economy does a kamikaze dive into the abyss of stagflation.

So the macro crystal ball in my head has begun to throb again just as it did in the autumn of 2008, the summer of 2014 and the winter of 2020. We all live in a yellow submarine, we just got hit by a torpedo and the gurgling sound coming from the peephole tells me that the sirens and the wetness is not transitory. Hello darkness my old friend...​

So what do I want in stagflation? A leveraged asset that benefits from tanking US dollar yields and rising US ​dollar rents. This means REITs'. Resi​? No way. The last thing I want is a ​RE segment with zero​ moat, zero barrier to entry, Stone Age IQ chap​pies ped​dling overpriced/overhyped houses, just as recession risk looms and tenant credit risk will soar. Only if lease economics will get a steroid shot once permanent capital takes out the hedge fund quickies and Brookfi​eld style exit obsessed landlords in the capital structure in Grade A buildings located in America's top six ​mega ​city downtowns. The only emporia of finance and business that will thrive in the Age of Trump. This means 95% occupancy rate in the best buildings in New York, Bean Town, DC/Virginia, San Fran and Los Angeles.

See also Party time in China and crying time in India!

I also want a 40% discount on the share price, 5.8% div yield and at least $2 billion of financial firepower to take out joint venture partners at 40 cents to the dollar when the music stops as it has done now. Who lov​es you Matti Chokra​boy? BXP, my sweet lady.

A real estate developer who builds customized medical offices and life science labs for the world's most powerful Big Pharma/biotech startups at a time when AI will transform the drug discovery sweepstakes an​d the FDA approval processes will accelerate/roar like the Ferraris and McLarens at the Monte Carlo/Yas Marina race track.

So who is the only builder who can develop the sophisticated, high tech spaces for t​he world's top research scientists, the biotech eggheads at Genentech, Novartis, Eli Lilly, Amgen, Chiron, Stanford, MIT, Cal San​ Diego and the Golden Triangle in North Carolina​, once the hill country where Scott Bessant, MAGA's finance grand vizier, an old New York bud hails from. This means Alexandria, the capital of Egypt under the Ptolemy Pharaohs until Cleo VII lost it all with lover boy Marcus Antonius Caesar at the Battle of Actium 2,000 years ago.

Mr. Market has given the AI mega cap aristocracy of Silicon Valley a big kick in the derriere and Digital Reality is collateral damage. At 150, I can sell 6-month puts and bank $14 in premium with a buy price of 136 as my worst case scenario or 16X forward earnings val for a 20% growth business with 30% project IRRs in one of the world's largest legal oligopolies leveraged to the hottest foundation technologies the world has ever seen since fire, the discovery of the steam engine and the dawn of the Digital Age. Which landlord in the Gulf can claim AAA tenant, zero credit risk, 5% guaranteed rent increase when inflation is 3% and no competition from every Tom, Dick and Imtiaz wanting to muscle in on my turf? This is the real smart money property golden goose on the NYSE.

See also Stan Chart, banking risk and the Age of Trump 2.0.

Also published on Medium .

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