Real Assets Adviser

February 1, 2019: Vol. 6, Number 2

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From the Current Issue

REIT outlook still bullish: A look back at 2018 inspires confidence in a look forward to 2019

REITs were undervalued at the start of 2018 and poised for outperformance. At the end of the year both statements were still true — but less so. Investors can be excused if they forget about 2018 entirely: Through mid-December total returns in the broad U.S. stock market were slightly negative at –1.7 percent, and REIT returns were positive but equally forgettable at 2.6 percent. That tepid summary of the year, though, masks two important developments: the end of a tech stock “bubblet” and the beginning of a rediscovery of companies with more favorable valuations, including REITs.

Roundtable: Understanding investor benefits from opportunity-zone funds

Opportunity-zone funds have become the topic of fevered conversations among investors and their investment advisers. But what are the predominant structures for qualified opportunity-zone funds, and what are the benefits to investors? How can financial intermediaries gain greater access to education and training? What was the original intent of the program, and how do these funds fit into the ESG bucket? What are the tax and accounting impacts and considerations that investors need to take into account? To better understand the program and its opportunities, we turned to some of the experts for their input.

Seaports on autopilot: Challenges are significant, but careful planning can surmount them

Although ports have adopted automation more slowly than comparable sectors, notably mining and warehousing, the pace is now starting to accelerate, according to a report from McKinsey & Co. Automated ports are safer than conventional ones and can be less expensive and more productive. The problem is upfront capital expenditures are high, and the operational challenges are significant.

Retail energy report: A look to the past and future of nontraded energy plays

Eight sponsor companies raised about $401 million for use within various nontraded energy programs, during 2018. That represents a year-over-year increase of 21.5 percent from $330 million raised by the sector in 2017, a commendable result considering the oil market pricing volatility observed in the fourth quarter of 2018.

Signs of the time: Is the U.S. housing market headed for a correction?

The median price of a U.S. single-family home has risen just over 40 percent since the last housing-market crash. While newspaper headlines may put readers on edge, an analysis of market conditions indicates a gradual slowdown — not a bursting bubble — in most regions. That’s largely because inventories remain tight and future demand looks healthy. Some market observers worry that recent declines in new and existing home sales are a possible warning of an impending crash. But a deep dive into the market’s fundamentals to better understand the risks shows the recent slump in home sales is due to lower housing affordability.

Surprise! 10 unexpected things predicted for 2019

Every year I seek help from many sources in preparing my annual 10 surprises list. My colleague Joe Zidle played an important role in this year’s Surprises and will be a major collaborator on the Surprises going forward. George Soros reviewed my ideas as he has since they began back in the 1980s. Gideon Rose and Dan Kurtz-Phelan of the Council on Foreign Relations gave me their thoughts on the geopolitical surprises. My Third Thursday group of former research directors provided their annual observations, and many friends and associates at Blackstone and elsewhere contributed their ideas. In the end, however, the surprises are mine, and I am accountable for the results. Now, here are my 10 surprises for 2019, which I will discuss in an upcoming essay.

Death of the 60/40 portfolio: Brian Spinelli and the team at Halbert Hargrove read the tea leaves and moved their clients into alternatives and real assets

During second quarter 2017, Brian Spinelli and other members of the Halbert Hargrove executive team officially declared the traditional 60/40 portfolio “dead” in their quarterly market view report. The report, specifically titled The Death of 60/40, reasoned that two-dimension stock-and-bond portfolios are not going to deliver the returns required for the firm’s clients to build a retirement-scale garrison of assets, let alone one that serves more ambitious financial goals, such as philanthropic pursuits or paying college tuition for grandchildren and great-grandchildren.

Cannabis legitimized: The legal marijuana market is maturing and creating ever-greater investment opportunities

Here are two words that illustrate just how far the legal marijuana market has come in a relatively short period: John Boehner. In April 2018, the Republican and former Speaker of the House joined the advisory board of Acreage Holdings, a company that cultivates, processes and dispenses cannabis in a dozen U.S. states. Boehner — who once said he was “unalterably opposed” to laws that would decriminalize marijuana — now serves on the company’s board of directors, alongside former Massachusetts Gov. William Weld.

The truth would set us all free: Recession is inevitable, and so is uncertainty, and that is the problem

A former boss once told me, “People can deal with the truth; what they cannot deal with is uncertainty.” That kind of transparency made for a better workplace. Economic uncertainty isn’t easy to deal with either. Unfortunately, business leaders and investors live professional lives of constant uncertainty — more today than ever. Since the near-cataclysmic global financial crisis ended, there has been more than the usual uncertainty. It isn’t just the knowledge that recessions are inevitable, albeit unpredictable; it’s the specter that something is rotten at the core of our economic system. Perhaps it’s the unremitting growth of public and private debt. Perhaps it is people’s loss of faith in society’s organizing institutions.

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