200 Down, 800 to go

[Brisbane Bear]

Wonder if anyone's still long the Nikkers from 39,000?

 

I think that guy from Barings is still long the Nikkers in the five 8s account...

[LeeWhee]

Sad news tonite.

 

S&P is solemnly reporting that Goldilocks has died, apparently due to complications from debt-leveraged arterialschlerosis.

 

"The golden age of leveraged finance volumes and returns is now at an end," according to a report Monday issued by Standard and Poor's.

 

Services will be held on Tuesday at Wall and Broad.

 

In lieu of flowers, the family is requesting that donations be sent in care of the Goldman's Sac Retirement Village for Destitute Pigmen? in the Cayman Islands.

 

http://biz.yahoo.com/ft/070729/fto07292007...56914.html?.v=1

[linrom]

Wonder if anyone's still long the Nikkers from 39,000? 

 

I think that guy from Barings is still long the Nikkers in the five 8s account...  

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Wasn't he long copper.

[linrom]

delete____

[Jimi]

You'll hear it from bulls and bears alike. The only thing they have in common is that none of them know what happens next.

 

http://www.safehaven.com/showarticle.cfm?id=8069

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Amen.

[Whadda I Do Whadda I Do]

Sad news tonite.

 

S&P is solemnly reporting that Goldilocks has died, apparently due to complications from debt-leveraged arterialschlerosis.

 

"The golden age of leveraged finance volumes and returns is now at an end," according to a report Monday issued by Standard and Poor's.

 

Services will be held on Tuesday at Wall and Broad.

 

In lieu of flowers, the family is requesting that donations be sent in care of the Goldman's Sac Retirement Village for Destitute Pigmen? in the Cayman Islands.

 

http://biz.yahoo.com/ft/070729/fto07292007...56914.html?.v=1

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I think what they are trying to say it that all the life rafts filled up late at night with CEOs, CFOs, managers and brokers of the lending stores and are now a safe distance from the sinking ship leaving investors to fend for themselves. Each life raft has one lawyer to beat away any losers still swimming around with the fine print.

[linrom]

mmoy:

 

the REITS looks like a free fall :

 

 

 

 

Delinquencies on loans that back commercial mortgage-backed securities rose for the first time since 2003 in the second quarter, potentially a sign that real-estate problems are broadening to the commercial sector.

 

CMBS delinquencies rose 13% in the second quarter to $1.65 billion from $1.46 billion in the first quarter, according to a new report by Standard & Poor's, which attributes the rise to overaggressive loans made in 2006, as well as increased problems in the retail sector.

 

http://online.wsj.com/article/SB118554771673180353.html

 

Q2 GDP Investment in non-residential structures increasing at a 22% annualized rate in Q2 2007.

 

Based on the Q2 GDP report it seems odd that we are seeing this kind of selling in the REIT sector but from historical point of view non-residential structures generally lag RI up to 8 months out.

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Check out some of the REIT etfs that specialize in non-U.S.

 

They finally gave up the ghost after running wild well after the U.S. REITs topped.

 

There will be some good value in these down the road. They all throw off 6-7% right now. Let's get it up to 10-12% and we'll chat.

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I guess that would mean cutting them in half. That is a pretty good haicut.

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Well, a 50% haircut from here might be stretching it, but who knows.

 

An 8-10% return on a REIT fund sounds about right to me. In the olden daze, a 7-8% return was pretty standard and a 10-12% return was not uncommon. And this was for U.S. REITs. Of course, not so very long ago, folks bought REITs for the income, not the appreciation. We might get back to that.

 

Take a look at the IYR, the etf that tracks the U.S. $REIT fraudex. It's over halfway to retracing 50% of its gains since 2000. The etf has lost 27% since February.

 

It might take a while for the REITs to come back in, especially given that they've been rallying for seven years straight. Ultimately, the fact that they will be throwing off decent income will save their bacon. But it's hard to say how long that will take.

 

The non-U.S. REIT funds are a different story. They haven't been rallying as long and the comm RE landscape is a bit different country by country. These funds have nothing to do with residential RE.

 

At the recent Feb top, the IYR was only throwing off 3.4% dividend. This is fully taxable, by the way. It doesn't qualify for the 15% dividend rate.

 

At the Feb top, the REITs (broadly speaking) were throwing off almost 2% less than a 10-year note. That was a 15-year low. At the IYR price bottom in 2000, the REITs were throwing off 1-2% more than a 10-year note. The average spread from 1992-2006 between the TNX and the REIT dividend yield was 105 bps. The biggest spread was almost 350 bps in early 2003.

 

Currently, the IYR dividend yield is 4.24%, according to etfconnect.com. The TNX is at 4.78%. So the spread is still negative.

 

When the REIT div yield gets back to 1% above the TNX, or even 2%, then REITs might find some income support on an historical basis. This doesn't mean that the REIT schlocks or etfs will bottom exactly coincident with this higher spread. Schlocks don't work that way. But it would certainly give you something to look for when considering investing in these REIT vehicles.

 

Right now, though, even though the spread has narrowed, it is nowhere near historical norms. And, of course, bond yields might rise. So the REIT yields would have to go even higher to catch up. But assuming the 10-year yield remains the same, the IYR, for eg., would need to throw off 5.83% to get back to the 15-year spread average of 105 bps. That would mean another 25-28% decline in the IYR.

 

Over the past couple of years, this historical connection b/w T-note yields and REIT div yields has broken down as folks chased the REITster stocks higher and higher largely because they were going up and real estate was "hot", tiny divvies be damned.

 

Now that the hoopla has ended, I would imagine folks will look a little more closely at the income they produce vis-a-vis other income-related vehicles.

 

This applies primarily to the U.S. REITs. The foreign ones compete with the income-asset dividend yields of the countries they do business in. That's why the foreign REIT etfs/funds throw off significantly higher div yields than their U.S. counterparts.

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Not all REITs are equal. I am not a fan of overpriced hotel companies trading at exorbitant P/Es. But, I was rather surprised that DJ REITs-Hotel payout is now 5.1%.

 

DRH is an example of a stock that I am now interested in. It trades at $16.5 and it will payout 5.1%, or $0.96 dividend. The stock took a dump from 22 to 16.5 in less than a month-- that's is a 25% decline. Its estimated earnings for next year are $1.83, so even if I pare it down by 30%, that's still only a P/E of less than 13. As far as I can determine they own and operate hotels and resorts and are only a REIT because of its advantageous tax treatment. But, the group is definitely out of favor and any economic slowdown will have a disproportionate effect on its operations.

 

I am also curious about some REITs that operate in health care space. I wonder if the push towards nationalized health care could make these attractive again.