Are REITs Ready to Break Through to 18-Month Highs?
Avi Morris submits:
Stock markets are in rally mode and the higher yielders are getting a lot of attention as they did last year. The Alerian MLP Index is still close to the 300 ceiling which has held twice. Junk bond funds are at or near roughly 18 month highs (bringing more modest yields). REITs over the last 6 months have been stumbling while trying to make new highs. The Dow Jones REIT Index had been near 330 three years ago and then held well in the first 8 months of 2008. But in September it fell one third to the 180-190 area, which has served as ceiling since then. The Dow Jones REIT Index hit a 181 high in September 2009, then slipped back. In December it reached 190 only to pull back again. Since February, the index has been in a rally mode and only needs another 3 points for another post Lehman collapse peak.
While REITs benefited from higher stock prices they also received a significant boost when Simon Property (SPG) made a bid last month for General Growth Properties, the only REIT forced to file for Chapter 11 in this recession. The offer was rejected with the hopes of even greater rewards after emerging from bankruptcy. The optimism about General Growth Properties was based on recognition that strong underlying values remain in owning real estate. An old rule of thumb for real estate said that in a decade there are 2 very good years, 2 bad years and the rest are middle years. This time the bad period is worse, longer and deeper than any since the depression. And all indications are that the bad period will not end soon.
Investing, Long Term Investment, stock market | admin March 8, 2010
RSS feed for comments on this post.
