The 2 Economic Forces Benefitting REITs and BDC

Category: Short-term Lending
Published: Tuesday, 23 February 2016
Written by Super User

A little over a week ago, European Central Bank (ECB) President Mario Draghi made headlines by reiterating his organization's commitment to reinvigorating the euro zone by whatever means necessary. He said euro-zone rates would "remain at present or lower levels for an extended period" and there would be "no limits" on action to reflate the euro zone. Mr. Draghi told a news conference: "As we start the new year, downside risks have increased again amid heightened uncertainty about emerging market economies' growth prospects, volatility in financial and commodity markets and geopolitical risks."

His comments followed the ECB's regular meeting, where it kept the bank's benchmark rate unchanged at 0.05%. The overnight deposit rate was also left unchanged at -0.3%. In December, the ECB had also extended its EUR60 billion-a-month stimulus program by six months to March 2017. Euro-zone inflation is currently running at 0.2%, way below the ECB's target of near 2%. "We have the power, willingness and determination to act. There are no to limits how far we are willing to deploy our instruments," Mr. Draghi said. Expect the ECB to add more fiscal firepower at its next meeting in March.

On Friday, markets got another jolt when the Bank of Japan (BOJ) said that it would adopt a negative interest rate policy for the first time, as a sputtering economy, stubbornly low inflation and turbulent global financial markets threaten to undermine Prime Minister Shinzo Abe's economic revival plan. The central bank said it cut the deposit rate it pays on cash parked at the BOJ by commercial banks in excess of legally required reserves to negative 0.1% from the previous positive 0.1%.

The goal is to push down borrowing costs across a broad time spectrum to stimulate inflation, the BOJ said. The bank decided to introduce negative rates to "pre-empt the manifestation of [downside] risk and to maintain momentum to achieve the price stability target of 2%." "We will cut the interest further into negative territory if judged as necessary," the central bank said.

This directive, dovetailing with that of the ECB, in also in concert with further stimulus measures announced by the People's Bank of China (PBOC). China's central bank added cash to the financial system via a short-term lending tool after the government signaled the likelihood of more stimulus at the end of an economic planning meeting attended by the nation's leaders.

The PBOC injected 30 billion yuan ($4.7 billion) into its open-market operations last Tuesday at a yield of 2.25%, up from 10 billion yuan a week earlier. The central bank stated monetary policy must be more "flexible" and fiscal policy more "forceful" as leaders create "appropriate monetary conditions for structural reforms." Persistent downward pressure on economic activities and lasting deflationary pressure in the industrial sector have given the central banker debate more of a bias toward easing and will likely pressure the PBOC to ease monetary policy further. The yield on China's 10-year government bond has dipped below 3.0% to trade at 2.9% the lowest level since 2009.

The coordinated central bank push towards more fiscal stimulus is good news for equities in general and is especially good for dividend stocks as the threat of the Fed raising rates during the next 60-90 days is greatly diminished. When the ECB, BOJ and PBOC are attempting to vigorously devalue their currencies and pressure borrowing rates lower, there is no need for the Fed to induce a further rally in the dollar that only hurts US export profits from Europe and Asia.

Against this highly dovish backdrop the glide path is clear and the sky blue for income generating assets tied to the domestic economy in defensive sectors. I've pointed out in recent weeks that in the blue chip space, consumer property real estate investment trusts (REITs), skilled care REITs, electric utilities and telecom providers offer yields above 4% where preservation of capital is first and foremost.

Moving up the risk scale, select Business Development Companies, or BDCs, with low exposure to energy lending should decouple from the demise of the junk bond market meltdown and rebound with a US economy where gross domestic product (GDP) is forecast to grow by 1-2% for 2016. Heading into February, there are some very well positioned BDCs that subscribers to my Cash Machine investing newsletter have in their portfolios with no loans in default or arrears that are sporting yields north of 11.0%.

BDC valuations face a real disconnect from the real-time sectors of the US economy they make loans in. Last week's attempt by the market to recover a portion of the heavy losses for the month of January was a welcome event, and it will be even more welcome if it sticks and builds on itself. Much of the market's activity is tied to the rebound in WTI crude getting back above $34 a barrel in conjunction with the central bank moves noted above. The upshot of these recent happenings is that there are good places in this volatile market to invest for yield, and Cash Machineis a great resource regarding where those good places are.

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Central Bank injects more than 1 trln yuan into market

Category: Short-term Lending
Published: Monday, 01 February 2016
Written by Super User

Chinas central bank has injected more than one trillion yuan into the market this week, and promised to supply more liquidity in medium term.

On Monday, the Central Bank put 55 billion yuan via 3-day short-term lending operations. A day after, it carried out reverse repurchase agreements operation, releasing 155 billion yuan and another 410 billion via medium-term lending facility. In the meantime, in a meeting with commercial banks, the Central Bank said it would pump more than 600 billion yuan to support the real economy via medium term operations. On Wednesday, the bank conducted reverse repo agreements for the second time, releasing 150 billion yuan. And on Thursday, 400 billion yuan was injected into the market via the same channel. In fours days time, the central bank had supplied a total of 1.17 trillion yuan.

China Swaps at Four-Week High as Odds of Reserve-Ratio Cut Fade

Category: Short-term Lending
Published: Monday, 01 February 2016
Written by Super User

"The central bank has become more cautious in cutting the reserve ratio and benchmark interest rates," said Yu Yuanbo, an analyst at Bank of Dongguan Co. in Guangdong province. "The currency market now seems to have become its top concern" and easing is unlikely before at least March, he said.

The central bank has used various short-term lending facilities and open-market operations to inject about 1.6 trillion yuan ($243 billion) into the financial system this month as demand for funds increase before the week-long Chinese New Year holidays starting Feb. 8. The additions areacting as a "substitute for a reserve-ratio requirement cut,"according to PBOC economist Ma Jun.

The benchmark seven-day repo rate, a gauge of funding availability in the financial system, was little changed at 2.30 percent, a weighted average from the National Interbank Funding Center shows. The yield on sovereign bonds due October 2025 climbed one basis point to 2.91 percent, the highest since Jan. 6, according to National Interbank Funding Center prices.

Xponential, Inc. Announces Final Distribution

Category: Short-term Lending
Published: Saturday, 30 January 2016
Written by Super User

DALLAS, Jan. 21, 2016 /PRNewswire/ --Xponential, Inc. (OTC Bulletin Board: XPOI) announced that as of December 31, 2015, the Company closed the sale of the two properties owned by PawnMart, Inc., its wholly owned subsidiary to Cash America, Inc. and received the release of the remaining $2,250,000 held in escrow related to the December 2013 sale of the assets of PawnMart to Cash America.

After calculating reserves for federal and state income taxes, the Company is making a final distribution of $1.45 per common share distribution to its common shareholders. The record date for the distribution is January 17, 2016. Effective on that date we have notified the transfer agent, Continental Stock Transfer to discontinue all trading and have notified the appropriate agencies and market makers to discontinue trading the Companys common stock.

This will be the final distribution from the Company as all assets have been liquidated. The funds will be released to shareholders on January 27, 2016.

Robert Schleizer, Chief Financial Officer of Xponential, Inc. stated we are very pleased to close the final sale of assets, obtain the release of all of the escrow funds and make a distribution to our shareholders. The end result exceeded our expectations and we grateful for the support of our shareholders through this process.

This release may contain forward-looking statements about the business, financial condition and prospects of Xponential, Inc. Security holders are cautioned that such forward-looking statements involve risks and uncertainties. The forward-looking statements contained in this release speak only as of the date of this statement, and the Company expressly disclaims any obligation or undertaking to release any updates or revisions to any such statement to reflect any change in the Companys expectations or any change in events, conditions or circumstance on which any such statement is based. Certain factors that may affect the Companys future results are difficult to predict and many are beyond the control of the Company, but may include changes in regional, national or international economic conditions, the ability to maintain favorable banking relationships as it relates to short-term lending products, changes in governmental regulations, unforeseen litigation, changes in interest rates, changes in tax rates or policies, changes in gold prices, future business decisions, and other uncertainties.

Xponential, Inc.
901 Main St., Suite 600
Dallas, TX 75202
Company Contact: Robert W. Schleizer

SOURCE Xponential, Inc.