Michael: a few thoughts.
REITs and real estate: We have seen 150% increase in S&P in three years, and yet real estate has not kept up, and according to Sam Zell the typical rent is still at 1988 levels. REITs are cheap---really cheap if you look at the combination of their dividend return (better than bonds) and screaming earnings growth, and book values of 1.x. I'm looking for this correction to move into the REIT sector....the boomers have a problem, they either have to sell stocks or live on dividends - but not many stocks offer dividends. I see a potentially huge demand for REIT securities.
MORTGAGES: The boomers are trading up to bigger houses with bigger mortgages. The cost of stuff that goes into houses and the mortgages is good business, the little S&Ls and mortgage REITs should do well unless we get into double-digit unemployment. Most of the boomers will be slaves to their mortgages, insurance and home remodels. I own a mortgage REIT- RWT- that is UP today because interest rates are going up, the lack of spread has been hurting the ARM mortgage business and they're happy to see rates go up. If the market goes down, it's either because boomers need the money for their mortgage or they lost their jobs. Remember the CBOE now has Consumer Bankruptcy Futures.
MICROCAPS: All I can see around me here in Silly Valley is screaming inflation, so I have put some money in the market just in case the gov has decided to do nothing until it is far too late. The corner gas stations are still at $1.40 for gas, out Home Depot just raised prices on imports because they are passing along wage inflation. Not to mention our 5%-a-month house price inflation. Either we are stuck with screaming inflation or we will see 8-9% interest rates to fix the problem. The fed just doesn't want to see it. To stay in I bought some microcap funds- FUND, OTCM (still at good discount to NAV) FBRSX (hedged with mortgage REITs) The history on the microcap sector during past bears is quite good, it's only been this bull market where large-caps outperformed.
MEXICO: My mother lived near the Mexican border because she could buy medicine for a few percent of its American cost...could Mexico become the mecca for our seniors? Health care and medicine is affordable without the malpractice insurance and ambulance-chasers. The food is cheap, the weather is wonderful, the people are friendly....(.why is grupo casa autrey so cheap? ) Mexico will do well if gas prices go up, as they eventually must. And closed-end funds are selling at huge discounts right now.
FARMLAND: the gov lets you escape estate taxes for farms/ranches up to 1.5mil. Buy a farm, build a house on an acre, live in it two years, sell for tax-free profit. Repeat every two years. Raise potbelly pigs and use it as tax writeoff. etc, etc. I bought FAMCK, somebody in congress wanted a bank so they could get rich legally.
GOLD: rich yuppies and asians still like gold jewelry- gold is below the price it should command to meet global jewelry demand.
So I'm bearish on the Dow, but bullish on these few things....
dinner is calling....B |
