Well, when you’re wrong, you’re wrong.
And I apparently got it wrong in Thursday’s piece: “We Have a Rare Earths Deal.” In it, I wrote about the agreement President Donald Trump and Ukrainian President Volodymyr Zelensky had reached on cultivating Ukrainian natural resources.
… after a lot of back and forth – which came complete with presidential name-calling on both sides of the Atlantic aisle – Presidents Trump and Zelensky have officially reached a rare earths deal they’ll be signing [on Friday].
As it turns out though, the fiery exchanges weren’t over, and Friday’s meeting ended disastrously.
You probably saw a segment of it, from where Vice President J.D. Vance started openly disagreeing with Zelensky. But the interaction was off to a rocky start from the literal beginning, when Zelensky handed Trump a file of photos showing Russian aggressions against Ukrainians.
He then proceeded to call Russian President Vladimir Putin “a killer” several times as the minutes ticked on. And he made it very clear that he wasn’t interested in a cease fire alone.
Here’s the thing: I respect his right to govern Ukraine as he sees fit as a duly-elected representative. And I share his opinion of Putin. However, I’d like to point out how:
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Disliking Putin wasn’t supposed to be the point of the meeting, despite Zelensky’s seeming attempts to redirect it that way.
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There is absolutely no way the Ukrainian president didn’t know about Trump’s efforts, particularly in the last week, to cool anti-Russia rhetoric in order to bring everyone to the negotiating table.
If Zelensky didn’t like those efforts so much – which I can completely understand – then he shouldn’t have indicated that he was ready to negotiate on his end. He should have stayed out of the Oval Office and let the world know that he wasn’t ready to negotiate. As he had every right to do.
As it is, regardless of who had the moral high ground, the rare earths deal is now on hold.
I do think it will happen eventually. And maybe the U.K. and France getting involved will help rebuild ties between Trump and Zelensky.
But, even so, it could take weeks or even months more before another talk is scheduled.
What I can say right now is this: Knowing President Trump like I do, I am sure he hasn’t given up on negotiating the best deal he can for the U.S. I obviously would have liked it if those negotiating skills would have seen more immediate progress…
But the world is clearly witnessing exactly how he plans to handle global disagreements. He’s got his do-not-cross lines in his pursuit to make America great again.
The U.S. Versus the EU
In a preceding international dustup, Trump told reporters that the European Union (“EU”) was created to mess with America.
Despite professing his love for the countries within the bloc, he said the larger coalition “was formed in order to screw the United States. That’s the purpose of it. And they’ve done a good job of it. But now I’m president.”
To back this claim, he cited how:
They don’t accept our cars; they don’t accept our farm products. They use all sorts of reasons why not. And we accept everything of theirs. And we have about a $300 billion deficit with the European Union.
As such, he’s planning a 25% tariff “on cars and all other things.” And if the EU wants to retaliate with tariffs, then he says it’s no skin off his nose. “Because [we’ll] just go cold turkey. We won’t buy [from them] anymore. And if that happens, we win.”
The E.U., unsurprisingly, disagrees with that assessment. A European Commission spokesperson immediately fired back with:
The EU will react firmly and immediately against unjustified barriers to free and fair trade, including when tariffs are used to challenge legal and non-discriminatory policies. The EU will always protect European businesses, workers, and consumers from unjustified tariffs.
In which case, I guess, may the best union win.
The U.S. Versus Canada and Mexico (and China Too)
Speaking of tariffs, Trump wrote on Truth Social on Thursday that:
Drugs are still pouring into our Country from Mexico and Canada at very high and unacceptable levels. A large percentage of these Drugs, much of them in the form of Fentanyl, are made in, and supplied by, China. More than 100,000 people died last year due to the distribution of these dangerous and highly addictive POISONS. Millions of people have died over the last two decades. The families of the victims are devastated and, in many instances, virtually destroyed.
We cannot allow this scourge to continue to harm the USA, and therefore, until it stops, or is seriously limited, the proposed TARIFFS scheduled to go into effect on MARCH FOURTH will, indeed, go into effect, as scheduled. China will likewise be charged an additional 10% Tariff on that date. The April Second Reciprocal Tariff date will remain in full force and effect. Thank you for your attention to this matter. GOD BLESS AMERICA!
Presumably, both Canada and Mexico will protest their positions until tomorrow. In fact, I’ve heard there are already deals in the making. But don’t expect any such thing from China.
That’s especially true after Trump told a key government committee to start curbing Chinese spending on several key sectors, including tech and energy. And he’s floating additional fees on commercial ships made in China.
A Definite Tariff Win
While all of that remains up in the air… at least as I’m writing this… there were two definite tariff wins for Trump as February came to a close. Two major companies announced American expansions to capitalize on the president’s MAGA movement, starting with Eli Lilly (LLY).
The big-pharma player says it will spend at least $27 billion on building four U.S. manufacturing plants. These new facilities should all be up and running by 2030, creating over 10,000 construction jobs in the process.
Eli Lilly also expects to hire around 3,000 people for longer-term scientific and engineering positions. Altogether, CEO David Ricks said, “This represents the largest pharmaceutical expansion investment in U.S. history.”
This is an obvious win for Trump’s America First agenda, complete with tariffs. And the same applies to Apple (AAPL), which had a similar announcement to make.
Over the next four years, it plans to spend some $500 billion on U.S. investments. This will include producing AI servers in Houston, Texas… creating a supplier academy in Michigan… and opening up 20,000 jobs in the process.
CEO Tim Cook said that:
We are bullish on the future of American innovation. And we’re proud to build on our long-standing U.S. investments with this $500 billion commitment to our country’s future. We’ll keep working with people and companies across this country to help write an extraordinary new chapter in the history of American innovation.
Sounds like a plan to me – and, I’m sure, to Trump as well, who met with Cook only a few weeks ago.
This Week’s REIT Roadmap Update
I know I have a number of new readers here: readers who have followed me for a long time elsewhere for real estate investment trust (“REIT”) specific recommendations.
That’s why I want to start including more REIT-specific information in these Monday recaps. This time around, that includes some massive mergers and acquisitions movements.
Sun Communities (SUI), best known for its mobile home communities, announced a $5.65 billion marina sale to Blackstone. I view this transaction as a good one for SUI. It will allow SUI – which has been expanding into the marina business for several years – to simplify its business model and reduce expenses.
The purchase represents a 21 times price-to-FFO (funds from operations) multiple on a 5.8% implied capitalization rate. That’s a clear premium to SUI’s current FFO multiple of around 19 times. Moreover, the transaction should generate $5.5 billion in pretax proceeds after transaction costs.
AvalonBay Communities (AVB), an apartment REIT, also had some big news, only on the buying side. It’s acquiring eight residential communities in Dallas and Austin from competitor BSR Real Estate Investment Trust (BSRTF) for $618 million.
In this case, I’m not as impressed. The price appears to amount to a 4% cap rate, which is a tad rich in my opinion.
Looking more broadly at the entire REIT space…
Nareit’s latest analysis shows that REITs rose 4.2% in February, with the Russell 1000 declining 3.2% and the Dow Jones falling 3.1%. Last month’s outperformance reflects various factors, including a strong earnings season.
We’ve been patiently waiting for a REIT rebound after a bruising few years. But I’m on record predicting several “green shoots” popping up in the REIT space. I’ll keep readers apprised in the weeks and months ahead.
Regards,
Brad Thomas
Editor, Wide Moat Daily