I was surprised today to see that my REM shares (iShares Mortgage Real Estate ETF) are now worth more than $40 (US). The last time I looked those shares could be bought for something in the neighbourhood of $10 (US). Why the jump? A reverse split.
A reverse split of 1-for-4 took effect before the market opened this past November 7, 2016. Each REM share was converted to one quarter of a (New) share in the popular iShares capped ETF. In other words, if you owned 800 old shares, you only own 200 new shares today.
Why the reverse split? I have no idea but with a new president-elect Donald Trump led government in the States, an increase in interest rates may be in the offing. If so, an ETF like REM, with its high 13%-plus dividend, will come under downward pressure. The new value gives REM room to fall. (No matter who was elected, rates will go up at some point. Of that, there is no doubt.)
If REM rallies next week, I may sell. When the dust settles, after the inauguration in early 2017, I may buy back in if the price is right.
_____________________________
This post was taken down for examination. I have reposted it as of June 16, 2018. REM today is selling in the mid forties and yielding better than 12%. I should have held my ground. Selling REM was a mistake.
If and when REM drops back down into the thirties, I will give it serious consideration. Rates have started climbing and two more hikes are expected before the end of the year. There may be a buying opportunity in the future.
Remember I am not a financial adviser. I am a retired photojournalist. I post my thoughts on investing for a number of reasons. One big driver is a hope that I will get some feedback. I am out to learn from others and I hope my writing will promote discussion.
Friday, November 11, 2016
Sunday, January 5, 2014
REM may have farther to fall
I like REM. I take some of the income and reinvest it with caution. The remaining income I spend. I'm retired. I need money to live. (REM, if you don't know, is a U.S. mortgage REIT from iShares.)
I didn't pay too much for REM, I paid in the $12 range, and my wife paid even less. Even with today's low unit prices, my wife is in the black with her REM investment. Many investors cannot say the same. Some investors paid more than four times today's unit price just a few years ago.
The saying "a rising tide raises all boats" doesn't seem to hold for REM. As the market booms, REM has been sinking.
With the Federal Reserve stopping their quantitative easing program of buying bonds, interest rates should start to climb. This will impact adversely on both the bond market and the mREITs sector. REM may be in for another kicking. I have a chunk of my portfolio in various REITs but I didn't buy at the peak of the market. I have a cushion.
Still, one has to wonder how much damage raising rates will inflict on my portfolio. I have begun considering buying on dips and selling on little pops to make a little money in what I believe will be a falling market where REM shares are concerned.
Whatever I do, I will keep my overall exposure to this sector manageable. Don't risk what you can't afford to lose, I like to say.
______________________
This post was take down for evaluation: it passed. I re-posted it in mid-June 2018. REM proved to be a good investment. I eventually sold but, in retrospect, I am sorry I did.
I didn't pay too much for REM, I paid in the $12 range, and my wife paid even less. Even with today's low unit prices, my wife is in the black with her REM investment. Many investors cannot say the same. Some investors paid more than four times today's unit price just a few years ago.
The saying "a rising tide raises all boats" doesn't seem to hold for REM. As the market booms, REM has been sinking.
With the Federal Reserve stopping their quantitative easing program of buying bonds, interest rates should start to climb. This will impact adversely on both the bond market and the mREITs sector. REM may be in for another kicking. I have a chunk of my portfolio in various REITs but I didn't buy at the peak of the market. I have a cushion.
Still, one has to wonder how much damage raising rates will inflict on my portfolio. I have begun considering buying on dips and selling on little pops to make a little money in what I believe will be a falling market where REM shares are concerned.
Whatever I do, I will keep my overall exposure to this sector manageable. Don't risk what you can't afford to lose, I like to say.
______________________
This post was take down for evaluation: it passed. I re-posted it in mid-June 2018. REM proved to be a good investment. I eventually sold but, in retrospect, I am sorry I did.
Tuesday, November 12, 2013
Thoughts on REM
The iShares Mortgage Real Estate Capped Fund or REM was originally a $50 U.S. ETF. It didn't hold that lofty value long. It almost immediately began a slow and steady descent to the fifteen dollar level.
At the worst of the market crash, REM approached $10 U.S. but failed to break that barrier. If you put your faith in past numbers, you might think REM is coasting along just off the the bottom. Today, it is selling in the $11.50 U.S. range.
REM is composed of a number of companies in the mREIT business in the States. I have simplified the business model to the extreme when I say that money is borrowed at one interest rate and lent out at a higher one. The spread is the profit. These mREITs move massive amounts of profit straight to the investors' pockets.
Today REM is paying a dividend of better than 16 percent. This worries me. This payment falls into the "too-good-to-be-true" camp. Still I have owned REM for some time now, I was lucky and bought my shares of REM near the bottom. It has proven to be a wonderful addition to my portfolio.
I bought about 800 shares of REM yesterday at $11.50 U.S. and added this to my previous holdings. Will I buy more? Maybe. But unless it drops below $10 or I read something incredibly positive that I trust, I probably won't.
REM is a strong spice in my portfolio. It gives my income a much needed kick. Or, you might say REM is the high risk but high reward end of my barbell investment strategy. I've looked at the major players who make up the bulk of the REM holdings. All these mREITs ar fair to excellent investments on their own. Not a one appeared to be a poor choice.
Often ETFs have a few holdings one might consider dogs. I have a few ETFs like that. REM does not appear to fall into this trap, although there might be some small holdings of which I am unaware.
Today, holding REM makes my life easier. It provides me with much needed income in retirement. And in the small amount that I hold, it does not give me pause to worry. I can handle the loss if it should come. C'est la vie.
I wrote a follow up to this, REM might have further to fall, in Jan. 2014.
At the worst of the market crash, REM approached $10 U.S. but failed to break that barrier. If you put your faith in past numbers, you might think REM is coasting along just off the the bottom. Today, it is selling in the $11.50 U.S. range.
REM is composed of a number of companies in the mREIT business in the States. I have simplified the business model to the extreme when I say that money is borrowed at one interest rate and lent out at a higher one. The spread is the profit. These mREITs move massive amounts of profit straight to the investors' pockets.
Today REM is paying a dividend of better than 16 percent. This worries me. This payment falls into the "too-good-to-be-true" camp. Still I have owned REM for some time now, I was lucky and bought my shares of REM near the bottom. It has proven to be a wonderful addition to my portfolio.
I bought about 800 shares of REM yesterday at $11.50 U.S. and added this to my previous holdings. Will I buy more? Maybe. But unless it drops below $10 or I read something incredibly positive that I trust, I probably won't.
REM is a strong spice in my portfolio. It gives my income a much needed kick. Or, you might say REM is the high risk but high reward end of my barbell investment strategy. I've looked at the major players who make up the bulk of the REM holdings. All these mREITs ar fair to excellent investments on their own. Not a one appeared to be a poor choice.
Often ETFs have a few holdings one might consider dogs. I have a few ETFs like that. REM does not appear to fall into this trap, although there might be some small holdings of which I am unaware.
Today, holding REM makes my life easier. It provides me with much needed income in retirement. And in the small amount that I hold, it does not give me pause to worry. I can handle the loss if it should come. C'est la vie.
I wrote a follow up to this, REM might have further to fall, in Jan. 2014.
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