Inflation and interest rates are once again becoming issues after a long era of extraordinarily low rates.
Recent days have seen both consumer and producer inflation indicators leap. Coming months will tell whether they were just spikes or the start of a trend that, in turn, will pressure the Fed into raising interest rates.
Over the long term, higher rates might be healthy by getting cost of debt back to normal after a long period of being artificially low, but in the mean time they are no friend to stock investors or corporate profits. They would bring the pain of higher borrowing costs, perhaps a slowing economy and make debt a more attractive investment, thus competing with stocks for investor dollars. And, of course, companies with high debt ratios could face some difficult adjustments if EBITDA falls below covenants in their loans and notes.
One group of stocks that could be most affected by higher rates are REITs.
Interestingly, in his cautious environment, Gaming & Leisure Properties CEO Peter Carlino and CFO Bill Clifford have stepped in as buyers of their stock, the first of the gaming REITs.
Clifford recently bought 85,000 shares at $33 each for a total of $2.805 million. He owns 351,068 shares.
Carlino bought 40,000 shares ranging between $33.24 to $33.39 each, for a total of $1.333 million. He owns 4.388 million directly and 6.822 million indirectly through trusts.
Those are serious amounts of money, not just token purchases for show, so Carlino and Clifford certainly buy into the long-term value of GLPI.
And Carlino and Clifford ought to know. They’ve been around a long time as prudent leaders of Penn National and, GLPI, the spin-off of PENN.
GLPI’s stock dipped after the company offered financial guidance that did not include rent escalators from its two primary tenants, PENN and Pinnacle.
And interest rates can be a concern for GLPI.
But a 7.5 percent dividend yield and serious investment by Carlino and Clifford make GLPI worth a look.
The North Shall Rise Again
The announcement by Witkoff that the firm is joining with Marriott to complete and open the former Fontainebleau project on the north end of the Las Vegas Strip as Drew, will raise an interesting question:
Will it, along with Resorts World and any new hotels or resorts that Wynn builds, create a critical mass and an energy that benefits all on the north end of the Las Vegas Strip, or will they cannibalize existing properties?
Our tendency is to say hooray for the new properties.
Las Vegas casinos have benefited from a decade of no new capacity while demand has resulted in record visitation.
In addition to hotels, the north end of the Strip is getting more attractions. Las Vegas Sands is building its 18,000-seat concert arena with Madison Square Garden and the Las Vegas Convention and Visitors Bureau has a $1.4 billion expansion to include new space right on the Strip where the Riviera once stood.
When the first projects open in 2020, it will have been a dozen years since the Great Recession put a screeching halt to what then was obviously over-building. The time is probably right to add a couple of mega resorts that generate even more visitation.
