stocks vs. bonds when interest rates are rising (ii)

yesterday’s post: bonds



What about stocks?

Here the issue is a bit more complicated.


This means rising rates puts downward pressure on stocks, too.








If the currency rises, the opposite will most likely happen.

the S&P 500 in past times of rising rates



Tomorrow, REITs.



3 responses

  1. I think my lesson learned is ask a stupid question, you get a worthy answer.

    (You can’t see it right now, but I am bowing right now).

    The more granular aspect of Vornado is of course the owner, Steven Roth, who is a very good friend of Trump’s.

    Kleptocracy in the US has been going on a long time (Aaron Burr? Nelson Aldrich? Clinton Foundation?) but it is usually being the scenes enough to be decorous. I doubt that is the case going forward.

    I’ve been reading their investor presentations. Vornado/ Charles E Smith is not contributing the Skyline (Alexandria, Virginia) properties; they are a real dog. JPG is not contributing about $3B with of stuff — they summarize it as condos, highly leveraged properties, and properties not served by Metro stations.

    There are two big real estate deals in play. The FBI HQ, which has been part of a GSA process but may change. Basically GSA wants to swap the FBI HQ with another property to get outside Congressional republicans. That may not be necessary.

    The Department of Labor also needs to move and has a huge building downtown.

  2. Thanks for your comment. The short response to your question last week is that I don’t know much about Vornado, although at one time I knew JBG relatively well. In theory, the creation of separate securities offering NYC and Washington, DC real estate should increase the price of the total package. So that’s good. On the other hand, one very big attraction of Washington real estate is that government–including its camp followers–never gets smaller, it always gets bigger. Is there any chance that a Republican administration would get it into its head to try to trim some of the fat?

  3. When Republicans talk about “fat” trimming, what they are really saying is “Trimming the fat in programs that we don’t like”.

    Any sort of relaxation on hiring freezing, sequestration, or military budgets would be good from the DC CRE market, which is one the worst performing in the last 4 years.

    If you remember JBG, you might remember the competition — Charles E Smith — which is what Vornado bought. Again mostly their holdings are in the Crystal City area. (By national airpot, virginia side) This was all 30+ year old buildings that were leased to various Pentagon agencies. BRAC forced them to move, and they have been pretty empty since then.

    Vornado seems to be known here more as a pump and dump operation (vs. JBG). So the narrative is with better JBG management the Crystal city properties can shine. Hence that magic word growth which you use in the third REIT post.

    (In reality, Vornado has been pretty good as a landlord there, and the issue is you need to rebuild those old buildings before tenants look at them.)

    The new entity (JBG-CES) will of course be run by Steven Roth, Trump’s business partner is dismantling Alexander’s.

    Pretty depressed today, my little refinery that could (NTI) that got bought by WNR (still a very decent 5% yield) now is part of Tesaro, which is horrible. I hate mergers.

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