Friday, April 16, 2010

Letters to the Editor

After getting trashed in the comments section this week on both Barron's Online and the American Association of Individual Investors website (waiting for the same from an upcoming Forbes excerpt) I looked back on some of the more intelligent comments of the past. The "you stink" comments are not worth much.

Anyway, on August 10, 2009, I wrote a piece for Barron's Online called, "The Next Real Estate Shoe is not Dropping" and the point was that the market for REITs was looking rather strong.

What do you know? Not only did REITs keep rising but they actually outperformed the S&P 500 since that time!

Look, I am not pretending to be perfect here and I admit that there were many stretches in the bull market from March 2009 where I blew it. Not the whole thing: I was bullish March-April, late July through maybe October and grudingly since late March but with a finger on the eject button. Let me rephrase - there were many stretches when I was plain wrong.

In looking back on my foibles, I see where I erred - not believing the charts and what I saw. Justifying price action against secondary factors such as volume was against what I espoused just a year earlier. I also neglected the liquidity factor of zero interest rates and stimulus.

In the real estate chart, I saw strength despite the in-vogue idea that commercial real estate was a ticking time bomb and ready to follow residential housing into the toilet. It might be now - as an evening star candle (see home page) and bearish RSI divergence suggest - but not back then.

Here is a letter I got last summer:

Mr. Kahn's article is a perfect example of a market analyst using meaningless market statistics to formulate a trending opinion. Unfortunately, Mr. Kahn failed to consider that: commercial
foreclosures in the state of California alone are up 585% between years 2008 and 2009; most loans made on commercial properties during the most recent buying frenzy occurred between December 2004 and March 2008; these loans were packaged and securitized as CMBS investments; many of those loans are starting to mature and the debt cannot be replaced; most CMBS investments have been downgraded from AAA to BB, which are not available for TALF funding; and, commercial real estate vacancy factors are at double digit levels, nationally. Therefore, I would suggest that Mr. Kahn's supposition is at best wrong, and at worst, flagrantly wreckless and irresponsible.

Sincerely,
Mr. (name withheld)
CEO
Real Estate development company in California

As you can see, he made a solid fundamental case (without resorting to name calling). The market, which is all I am about, said otherwise.

Please continue to send in comments telling me I am an idiot. Sometimes I am but please consider first what my mission is - making my clients money in the stock and other markets. Being "right" is secondary (thank you Barry Goldwater).

Believe me, I think the economy is heading for another bout of problems before it is all over. But if the REITs keep going up (the technicals now say otherwise), who am I to argue with the market?