General Growth REIT in peace
Research for Online Investors

by John Dalt

4/17/09

Last month consumer prices fell by 0.1% in the U.S., leaving them down 0.4% compared to the previous year.  This deflation was primarily fueled by plummeting costs of energy and lower costs for food commodities.  This was the first time U.S. inflation has recorded a negative annual rate since 1955 according to the Times Online.

Copper has been rising in price for the last 4 months.  After bottoming at $1.20, it is now pushing $2.00 per pound.  This may signal anticipation of a rebound as copper is used in a myriad of manufactured goods.  China has quietly been a buying copper and other commodities at cheap prices and stockpiling them for when their economy rebounds.  Copper is sometimes referred to as “Dr. Copper with a PhD in Economics” because of its price reacts to future expectations of economic activity.

We have a buy on the world’s largest copper producer in our Long-Term Portfolio. They are up over 200% in the last 5 months.  You can join today at a special discounted price and get our take on this company, and the correct buy point to maximize your future profits.

General Growth Properties (GGWPQ) filed for Chapter 11 bankruptcy yesterday before the market opened.  They were the second largest shopping mall owner in America, and the largest bankruptcy ever filed.  GGWPQ was founded over 50 years ago in Cedar Rapids Iowa. The filing involved 158 regional shopping centers.  Assets were listed as $29.5 billion with liabilities of $27.3 billion.  Chapter 11 bankruptcy allows the company to extend and renegotiate loans.  They may come out of it, but shareholders will probably be wiped out.  One of their largest shareholders, Pershing Square Capital Management, has extended debtor in possession financing.  The terms allow Pershing to capitalize on the backside with equity.

General Growth reveals the problems in the commercial property sector.  The economic downturn is subtracting sales (Circuit City), and creating vacancies.  Availability of loans to new retail ventures is restricted due to the banking crisis, which dries up potential renters.  The malls still have long-term debt that still must be serviced, but they do not carry enough available cash balances to survive a downturn.  The current credit crisis made it hard for General Growth to rollover their maturing long-term debt.

Real Estate Investment Trusts (REIT) get favorable tax treatment if they pay out 90% of income in dividends.  This keeps them from building a cash cushion.  They pay no income taxes.  REIT’s are attractive to investors because we also get a share of the depreciation to shield our dividends from full taxation.  This same tax treatment applies to many pipeline companies that are organized as partnerships.  Terra Nitrogen (TNH) is a fertilizer producer organized as a partnership and pays almost $12 in tax-sheltered dividends per year.

Did you drop a $20 in the collection plate Sunday? You will be happy to hear that AID sent some of your bailout money overseas. While we are bailing out banks, why not the world? AIG made payments to France’s Societe Generale of $11.9 billion; Germany’s Deutsch Bank got $11.8, Britain’s Barclay grabbed $8.5 billion, Switzerland’s UBS picked up $5 billion. It is wonderful that Uncle Sugar can spread so much wealth around the world.  Wait a minute, we are broke.

There is an interesting article by a physician from New York.  What will patients do when doctors drop out of insurance goups?  He explains the problems he faces as a doctor, and how it will impact you if OH! Bama is successful instituting national health care.

We closed another position today in the Swingtrader for 10% in 15 trading days.

Ima wrote:

“I am a Liberal…I have some Conservative Views.  I Like to Work...I have Been Working since I was 17 Years Old, and am Tired, that is why I….Learn to Swing Trade, to Start Building an Income, Perhaps Retire….”

Political views have nothing to do with investing in the stock market.  The problem we have now, the government is inserting politics into the businesses that take bailout money.  These businesses should go broke.  Bankruptcy is in the constitution, it works.  The government is printing money like a drunk shoots tequila.  It's not politics, it's common sense.  I am happy to arm you with knowledge to protect your savings from the government, just like any libertarian.  I welcome liberals and conservatives.

Just no child molesters.

John

Send me your comments at feedback@galtstock.com   I like to hear from you.

Under the heading, the more things change, the more they stay the same.  Dick sent in a copy of this cartoon from The Chicago Tribune in 1934

My grandparents would not recognize the country today.

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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