Sunday, January 24, 2010

Conversation with a Real Estate Professional

I feel like Micheal Eisner now with all these conversations.

Last night, I attended a "gala" dinner honoring a local guy for being involved. One of my table mates, who happened to be a friend of mine already, told me that in his business of owning and managing industrial/office buildings the outlook is lousy. He actually thought of selling it all and waiting for the next plunge to get back in.

Here is some irony. I am a professional market timer and I warned him not to try to time the real estate market. My solution was to hedge rather than sell since this is his business and not a speculative endeavor.

The point here, however, is that an insider sees that second shoe dropping on commercial real estate. I wrote a piece for Barron's Online about 9 months ago saying that the stock market was not looking for it. But here we are 9 months later - the typical look ahead period for the market - and things are changing.

Look for an update to the REITs column soon.

As for his outlook - he said it could either bounce like the economic knuckleheads are espousing (my words) or it will just parabolically ease into flatness at a new very low level for many years a la Japan. He chose the latter.

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