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Strategies & Market Trends : REITS - Buying 1 - 2 weeks before going ex-dividend
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To: gregor who wrote (2481)11/26/2003 1:29:56 PM
From: Richard Barron  Read Replies (1) of 2561
 
Gregor,
I have no idea whatsoever when REITs will be peaking out.
I would consider lightening up my positions when they are trading 20% above book value and/or more than 15 x FFO.
I haven't studied the 10 year bond, so don't know what happens when the yield breaks 4.5%, but I imagine that could be a good indication that inflation is a worry for the feds.
If inflation is occuring, REITs get to raise rental rates.
If the REIT has very little floating debt and long time frames before debt becomes due, then FFO could rise rapidly to counter the negative effect on REITS of rising interest rates.
If the 10 year bond rises to cut off inflation, then REITs are going to get pounded, as other interest rate vehicles will be more attractive, and there won't be much inflation to raise the REIT dividends.
So... you can see I have no feel of the direction, but I imagine we are much closer to a top than a bottom. If one has a 10 year time frame, the 5-10 year return at a top will probably be 5-8% instead of the normal 9-12% rate I expect from quality REITs.
Technically, I would worry about a break under the 50 day moving average of the ^RMS which is about 547.50 now, and rising a few points a week. It looks like we are running out of steam as the ^RMS almost hit a high today, but the stochastics are nowhere near a high.
Good luck on the timing.
Richard
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