I thought about the homebuilder shorters when reading that. We seem to be in the midst of the most dynamic fundamentals for that industry during my lifetime. Granted, the builders must be darn close to peak earnings, but unlike tech 2 years ago the market isn't pricing in the continuance of such. I haven't looked at the balance sheets, but there appears to be considerable room for earnings to come down before enterprise values are negatively impacted from here. But, I felt the same way about the energy producers at the peak also.
Obviously, not all REITS are created equal. I'm staying long the healthcare REITS as these appear to be as solid an equity investment as exists in the public domain nowadays. In this environment, the present 8-9% yields are quite attractive from the steadiest type of realty, and I've been expecting them to come down to the 6% range for some time now. Another medicare reimbursement cutback is the only appreciable risk that I see with these.
I'm down to just the healthcare REITS, two remaining multifamily REITS and on prison REIT. Have always avoided retail and offices. Our society has appeared way over retailized to me for many, many years and this is where I would start looking for short candidates as time permits.
The internet and tech stock bubble is going to look like a pea compared to the mortgage credit beachball now being inflated. Think I'm going to vomit next time I hear that the refinancing boom is improving consumers balance sheets. Improving liquidity, yes, but for how long?, and what remains after that. All value now measured by reference to the monthly payment, with the increased absolute debt levels and decreasing equity levels seeming irrelevant. Time to trash my old finance texts??? NEVER!
BTW, anyone have an opinion on the refiners here? They still look awful cheap at 4-5X current earnings. With those cash flows, it seems that managements could raise market caps significantly by sharing some of it with equity holders. Surprised there haven't been more acquisitions by the majors and mini-majors since P's takeout of TOS. Ugly business, though.
Cheers!
T |
