A Win for the Little Guy

As we all know, Wall Street is not always synonymous with Samaritanism.

When you look at the recent schemes involving Robinhood – or the Pelosi-style pay-to-play antics that advance only the most powerful among us – it’s easy to become discouraged when deciding whether or not to enter the market.

Recently, we learned that the Securities and Exchange Commission (SEC) scrutinized various trading practices to try leveling the playing field. However, many believe that will only end up benefiting a select few.

As history shows, the devil is in the details when discerning whether or not regulation is really going to aid the everyday investor. But here’s what The Wall Street Journal reports on the subject:

“Chairman Gary Gensler directed SEC staff last year to explore ways to make the stock market more efficient for small investors and public companies. While aspects of the effort are in varying stages of development, one idea that has gained traction is to require brokerages to send most individual investors’ orders to be routed into auctions where trading firms compete to execute them, people familiar with the matter said.

“SEC staffers have begun floating plans with market participants in recent weeks, and Mr. Gensler is planning to detail some of the potential changes in a speech Wednesday, these people added.”

Under our current system, orders don’t necessarily specify the exact amount an investor is willing to pay for a trade. For instance, I could ask my broker for 12 shares of Twitter (TWTR), which could be trading around $40. But my broker may get a kickback from a wholesaler selling the shares for $40.02.

That might not seem like such a big deal. But what if I wanted 1,000 shares?

So the SEC’s measures would serve to give investors the best prices immediately after placing market orders. Different brokerages would compete to fill an individual investor’s trade, altering wholesalers’ business model – that can make more money by trading against small investors than they do on public exchanges.

Of course, several Wall Street firms threw a fit when this was first proposed. The current model generates billions of dollars for the big guys.

But my guess? They’ll find a way to make money anyway. They usually do.

More Non-REIT News to Know About

I recently reported on the rather dismal earnings Target (TGT) released last month. The retail giant has been grappling with a drop in demand for discretionary items, causing revenue to plummet even though shopping has stayed consistent more or less.

Well, as we learned yesterday, this supply and demand imbalance is again rearing its head. Target has a backlog of goods and warned that profits would wane significantly if they can’t offload recent vendor orders.

It’s not the only one dealing with these issues.

As the pandemic put the retail world in overdrive, consumers rushed to purchase everything from flat-screen televisions to expensive exercise bikes. Retailers everywhere rose to the occasion, ordering a surplus of goods – especially in the face of never-ending supply issues.

And now those excess orders are piling up and proving useless as our economy contracts.

In this though, Target might have it worse. It has a bigger mix of essential items and high-cost extras like electronics than its close competitor Walmart (WMT). So it’s now taking the brunt of this supply and demand disparity.

Its apparent solution is to hold a fire sale on excess items. That way, it can make way for food and beverage, household essentials, and beauty products.

The good news here is that maybe Target’s clearance campaign will benefit cash-strapped families suffering from inflation. We may even see a Black Friday in June!

The World According to REITs

When it comes to real estate investment trusts (REITs), most of the fast-paced investment activity is in:

• Office spaces
• Industrial assets
• Retail properties.

Really, agricultural REITs are few and far between. But one standout startup is putting its focus on organic farming.

The so-far private Evanston-based Iroquois Valley Farmland REIT work with socially responsible investors in providing organic and regenerative farmland security through long-term leases and mortgages.

This B-corp REIT makes investments of anywhere from $250,000 to $4 million, with the average under $1 million. This gives it farms ranging from 30 to 3,000 acres.

Its total assets are $83 million, with annual revenue more than doubling since 2017 to $3.2 million. And Iroquois shares were privately appraised recently at $686 each, up from $260 in 2008.

This up-and-coming private REIT harvests its capital mostly from high-net-worth individuals who identify themselves as socially responsible investors.

As we’ve seen in the last couple of months, our dependence on foreign commodities is starting to catch up to us. Investing in American-owned farmland might just be the best idea as exports shrink and our economy begins looking inward.

While I’m not about to recommend a REIT that isn’t publicly listed, I thought I’d mention Iroquois as food for thought.