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Pastimes : Ask Mohan about the Market -- Ignore unavailable to you. Want to Upgrade?

To: Cynic 2005 who wrote (14909)	3/16/1998 11:32:00 PM
From: Bonnie Bear	Respond to of 18056

That's how far/fast interest rates dropped. And the CEF went from selling at a discount to selling at a slight premium, so you're probably right. The question in my mind is if interest rates could actually continue to drop from here. I'm inclined to think we'll see 7% before we see 5%. But I've been dead wrong for the last year, so I need to just jump in a little at a time. Muhlenkamp points out that people won't take out a mortgage above 8%, so that's the fed limit for interest rates (it's a recessionary limit). So you can look at the history of the fund and see how far it might drop in a rate increase. With some trouble I found the portfolio of this fund (DNP), it's invested in a variety of domestic and some foreign utility stocks, some utility bonds, and some REITs. REITS are an interesting hedge. I'm willing to guess the worst-case drop on the fund is something like 10% in a year and the yield makes up for it. REITs are an interesting asset class- their historic correlation with the stock indexes is quite low. The likes of Forbes and the chief strategist at Morgan stanley have repeatedly opined that REITs are the place to put the smart money. The amount of securitized real estate in the U.S. (or the world, for that matter) is quite low, so REITs can grow rapidly without competition. I think there's a glut of hotels but there should continue to be a healthy market for apartment complexes, mobile-home parks, retail shopping centers and self-storage. Besides, buying a REIT at close to book value gives me a warm fuzzy feeling- I'm buying real property and a corporation to manage it for little more than the cost of the building. And a big dividend, too.