Member Info for GetRichSlooow

Yes the Indonesian government does talk a lot of hot air but they are normally pretty serious about protectionist matters. Raw nickel exports and even AliExpress is banned here. I live in Bali Indonesia so am in touch with the local political news. The irony is setting up state owned enterprises to combat non state enterprises commiting tax fraud through under invoicing. Only recently the state owned oil/petroleum company Pertamina had a load of execs jailed for exporting oil at under market prices for backhanders and importing refined fuels for over market prices for more backhanders. Corruption is endemic here. The government could actually lose even more as the non state and state companies are both on the fiddle colluding with each other. The final declared export prices will have to be even lower to cover both parties cut!! Lol. I expect the government will follow through on this but they'll probably mess it up. There's always a risk of further protectionist policies regarding foreign ownership and such, thats the real risk to AEP imo. The last president was a lot more clued up on business matters.

Yes this could be a great time to buy more for the near 8% yield as an income investor. I'm not expecting the share price to do anything too soon though. Technicals are still bearish and there's pressure from rising gilt yields. REITS are out of favour and will be likely be for a while. I thought the share price would go down to at least 90 once the shorts piled in, we've surpassed that now and I think we've hit about the bottom. Just enjoy the dividend and dont expect much else for a while. Possibly a period of tight range sideways movement. If you park your cash until the share price looks like its going to spring into life, you probably wouldn't be getting near 8%pa on your cash, so you might as well pile in and buy now.

Exactly. However considering many of us believe PHP overpaid a bit, by divesting assets immediately, the overpayment will be crystallised as losses so to speak. In simple terms they paid a bit over market value, but if forced to sell they'll be lucky to get fair market value. Private equity wont be queuing up to by just a handful of properties and its public knowledge they're being forced to sell therefore revealing their hand and lessening their bargaining power.

With time the benefits of merger synergies, management strategies, rental income, and capital appreciation would take effect and that overpayment will be forgotten about. In a couple of years the takeover will be seen as a shrewd buy. So any divestment will be slightly negative as opposed to neutral from making a contra entry against debt. A bit of forced divestment might be rather immaterial, but too much might make the whole takeover look expensive.

Gotcha thanks. I guess in the corporate world an advantage of short term is the certainty of the capital return amount as GILTS are held to maturity. For financial planning the certainty to cover the liability the GILT was purchased for outweighs the lower coupon. For individual investors/savers like me, the higher yielder would probably hold more sway.

I still think all the fixed income is unattractively priced at present. I've got a few stocks going but REITS look great value to me. PHP is the pick of the bunch. 3.75% is the GILT "risk free" rate but PHP pays a 4% premium to this for the added risk, despite their biggest tenant the government (NHS) being the same entity that backs the risk free rate. If the government couldn't afford to pay PHP their due rent, I doubt the GILT holders would be getting paid either lol.

Still not for me though. I wouldn't want to lend this government for only 3.75% or even @5.5% lol. How would I get my capital back it X years time when it's all tied up in Hove property?!

My first post on here so hello.

I was thinking exactly all of what you said yesterday. GILTS at over 5.5% is ok, but barely above real inflation (RPI is a joke). If you didn't reinvest all the income the capital value would erode quickly. Fixed income isn't really my thing but the high "risk free" rate got me thinking and looking at fixed income yields on Hargreaves Lansdown.

I like my PHP shares which I've just topped up for the over 7.5% yield and real inflation protection you mentioned. So there's 2 safe income investments right there in GILTS and REITS between 5.5-8% ish. Many REITS are quality low risk asset backed companies like PHP. So at 7.5-8% for a quality UK REIT what yield would you want from sub investment grade (aka junk) bonds or bond funds. If you want more you're out of luck. 7.5% If you're lucky before fund fees. Who's buying at these prices? Surely you'd want a 9% minimum yield for the added risk, probably more? There's sub investment grade bond funds out there from top fund managers yielding under 6%. Investment grade bonds like Tesco yielding under GILTS prices. Its all out of whack. I can't get my head around who'd buy say a Tesco bond at 5.3% yield, when there's a better paying GIlT, and getting barely 1% more than a GILT for the risk of junk bonds is more ludicrous. Especially when the likes of PHP are out there offering security and higher income.

Markets should find their price so it makes sense PHP should yield higher to reflect the higher GILT yield and we've started to see that with share price recline. But surely the corporate bonds and their funds should by adjusting more quickly and aggressively as their closer to the GILT yield? Thoughts from any of you income guys?