Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Bear! -- Ignore unavailable to you. Want to Upgrade?

To: Worswick who wrote (56)	5/4/1998 1:36:00 PM
From: Terrapin	Read Replies (2) \| Respond to of 271

Worswick, I share your concerns about REITs as a relative safe haven. It just seems like too much of a "sure thing" when you can invest in a REIT at a good dividend and also stand a chance of appreciation of capital when you buy at or below the value of assets. I ask myself what the catch is and it must be in what the REIT invests. Say I buy a REIT that handles home mortgages - then the big bear comes. It seems that so many people are invested so heavily in the market that they may lose the ability to pay off that mortgage and my REIT suffers (I won't even mention record levels of consumer debt). I'm still learning about REITs so these concerns may not be valid. I guess I'm just trying out the bear argument on everything I can find! I look forward to Jim's response to your question. Bear with me, <g> John

To: Worswick who wrote (56)	5/4/1998 6:49:00 PM
From: James Clarke	Read Replies (1) \| Respond to of 271

Skepticism is always welcome. Thats the way to avoid mistakes. Will REITS fall with the market? A few points: 1. The last few little corrections saw REITS hang tough or even go up as the "smart money" fled to a safe haven. 2. As long as the real estate cycle is still OK (we've got at least another year to 18 months worst case), how much is a 7% yielding stock going to drop? 3. The caveat is a big interest rate spike. A safe 7% yield won't look so great if the long bond yields 8%. In this case, REITs would drop, but I think the rest of the market would still drop much more. If you're looking for total safety, stay in a money market fund. I do not mean that facetiously. I have close to 50% of my investments in cash. Jim