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Tuesday, June 28, 2016

Resurgent Run For Reits Companies

The past two days have resulted in quite an amazing activity in particular the resurgent run for Reits as the odds for a rising rate for this year were slashed virtually to zero as a result of further uncertainty due to Brexit. There were even news that the Fed could launch another quantitative easing (QE4) on the back of all these uncertainties.

What has resulted from the news is a flight to safety to Reits as a potential safe haven for investors. It is interesting because the traditional safe haven used to be the gold and treasury bond but demand have been so rampant that investors are running to Reits as an alternative.







If you recall a few years back, the run was somewhat similar to what happened back then in 2013 when Reits were running high to such an amazing level that the spread between the yield it offered vs the treasury yield were compressed to the lowest. That was a sign that prudent investors should take profits off the table, regardless of whatever happens afterwards because it was simply unsustainable.

The run this time has a lot of room to run if we were to witness something similar to 2013 and given that the alternatives are poor and economic driven in nature, it appears that Reits are a safety net which investors are comfortable with.

Having said that, my approach has always been more towards taking off profits when I see there are opportunities to do so. I will definitely miss to sell at the highest but divesting them also means passing on the risk to the next person who thinks it's prudent to do so at this time. I could be dead wrong at the end of the day and miss those gains other people are enjoying but at least this prudent approach has served me very well over the past few years since I started investing.

I have taken profits off the table for FCT partially over the past couple of days at $1.985 and will continue to divest the other Reits that have been either fair or over valued at this time. You can be sure I will divest more as they continue to give me the opportunity to do so over the next couple of days.

Be fearful when others are greedy. This is herd investing at the very best.

9 comments:

  1. you may be right... or that this is a secular shift....

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    1. The secular shift can drag as long as they'd like but investors got to admit that this is pushed based on a drugs and not real economic turnaround. One of these days someone will pay for it and i just hope investors are prudent enough to take care of it.

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  2. Just wondering why dont u wait for at least 10-20% gain before selling...anyway reits seem to be hot this week and with CD coming, maybe can wait for higher prices. There are many people only wanting to buy when prices shoot high up.

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    1. Hi Unknown

      It depends on how you look at it. Ive got a chunk bought for fct at 1.81 back in Jan, and then some again at 1.95, 1.93 amd 1.91. Do i sell at 1.985 or right now 2.05? Well it depends on the many circumstances i am very familiar with. The higher people pushes this which i think is not making sense, the more im willing to pass on the reward (and risk) to these people. Do i miss out on those gains? Potentially yes but i protect my own capital from it too.

      Ive been incredibly successful thankfully with this strategy since i started and i dont want to change any of those.

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  3. I am so tempted to sell my reits since there is a run of what 15-20pct from my buy price..but after selling what do i do with the money? headups anyone?..retiree likes regular passive income.:P

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  5. The "Brexit" incidence may have aided this recent reits "phenomenon".
    i have thought since when REITS behaves like GOLD for crisis hedge investing?
    Tempted to sell too but too much cash can be losing money too.

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  6. Keen observation. I have similar views.

    Half of global govt bonds have negative yields. 10 yr treasuries plummeted from 1.8x% to 1.3x%. Gold silver commodities rose.

    Even given high valuations, spy has seen great resilience and hit almost all time highs last night.

    We are not talking about just risk off assets, risk on assets are breaking out. No doubt due to little confidence in fed ever raising rates.

    I admit I also starting to doubt we will see higher rates this year. Regardless of of rank or position, fed officials have a lot of weight on their shoulders and markets seem to increasingly bet on their inertia to budge.

    At this moment given all the highs in risk off assets, I feel more inclined towards us and chinese equities and will be watching their impending breakouts with interest. That said, there is a level in gold that I am waiting for. And I do hope they drop to it.

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