USA is back on a growth path.

Warren Buffett sent an open letter to the U.S. government recently thanking it for a job well done:

"Uncle Sam, you delivered... overall your actions were remarkably effective."

Warren Buffett thinks that the stimulus money and bailouts worked. Well, there is finally hard evidence that the U.S.A. is back on a growth path. This is taken from Yahoo!Finance:

“In October we were able to rule out this double-dip nightmare scenario,” he says. “We are able to see very clearly, with a good deal of conviction, a revival in growth,” Achuthan tells Aaron and Dan in this clip. The improvements are widespread, Achuthan says.

-- Profit growth and productivity are on the rise. Achuthan says that leads to more hiring and capital investment in equipment.

-- Housing has stabilized. The outlook may not be rosy, but “it’s not falling off a new cliff,” which means it’s not a drag.

-- Cheap capital as a result of low interest rates. The private sector continues to create jobs.

-- Pent-up demand. Thanks to the jump in jobs, people are less afraid of losing their positions, Achuthan suggests. And after two years of saving and worrying, consumers have “frugality fatigue” which is beginning to show in the improvements in holiday shopping data.

Posted Dec 01, 2010 03:50pm EST by Peter Gorenstein

This bodes well for U.S.A.'s trading partners like Singapore.

Related posts:
Comments on the US economy.
The US consumers are back!

First REIT: XR and fair value.

A friend called me yesterday and said he might buy into First REIT with a view of getting more excess rights. I gave him my full support and told him he is likely to make money in this exercise. It turned out that he didn't get any yesterday.

Assuming that he had bought 4 lots at 98.5c /unit, his average price including rights units would be:

98.5 x 4 + 50c x 5  /9 = 71.55c /unit

At the estimated annualised DPU of 6.4c for 2011, it would mean a yield of 8.94%.  Not bad.  If he managed to get 1 lot of excess rights later on, the average price would be 69.4c which means a yield of 9.22%! I like this.

My expectation is for the REIT to trade closer to an 8% yield.  That means I expect the REIT to trade closer to 80c per unit with the estimated annualised DPU revised upwards to 6.4c for 2011.

I had people asking me if they should sell their First REIT units when it went CR. My advice to them was to keep the units and to accept and pay for their rights.  The proposed acquisitions and rights issue is a good thing for existing unit holders: a strong yield on investment with a good chance of capital gains.  Of course, there were still some who sold which allowed me to buy more at 95c /unit.

In an earlier blog post, I mentioned that I did not see any reason why the REIT should trade below the TERP of 70c, XR, and if it did, I would buy more. Today, it touched 70c only to bounce higher. It closed at 73.5c after touching a high of 74c. Congratulations to fellow unit holders!

Allow me a little indulgence as this is something I have always wanted to do:

Rating: BUY.
Fair value: 80c/unit.

Related posts:
First REIT: Rights issue.
First REIT: Bought more at 95c.