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another pundit tweaks the PP
Posted: Fri Apr 01, 2011 1:11 pm
by longeyes
Re: another pundit tweaks the PP
Posted: Fri Apr 01, 2011 2:50 pm
by MediumTex
...so a guy walks into a museum. He sees a painting that looks nice, but notices that the artist forgot to put eyebrows on the woman he had painted. Being a helpful person, he quickly draws some onto the woman in the painting. Now in a helpful mood, he also freshens up her rouge and lipstick.
When he finished, he was very proud of himself. He felt certain that he had taken something that was already very good and succeeded in making it even better.
Re: another pundit tweaks the PP
Posted: Fri Apr 01, 2011 2:55 pm
by moda0306
Is a REIT anything more than what could be considered a sector stock? Why do we treat them like some kind of different asset class? I know legally there may be some differences but on a fundamental macroeconomic level how is a REIT any different from tech stocks, pharmaceuticals, financials, or consumer staples??
Re: another pundit tweaks the PP
Posted: Fri Apr 01, 2011 4:24 pm
by KevD
moda0306 wrote:
Is a REIT anything more than what could be considered a sector stock? Why do we treat them like some kind of different asset class? I know legally there may be some differences but on a fundamental macroeconomic level how is a REIT any different from tech stocks, pharmaceuticals, financials, or consumer staples??
I've noticed in the past that a lot of "real-return" funds contain REITs as an inflation hedge. PRPFX does the same thing. This is from their SAI:
Rising inflation. From 1960 through 1980 the rate of inflation generally rose, with intermittent pauses and reversals. The inflation rate generally fell, with intermittent pauses and reversals, from 1980 through 2006. The Investment Adviser believes that if the pattern of rising inflation resumes, such as occurred in 2007, the investments most likely to appreciate would include gold, silver, Swiss franc assets and interests in real estate and natural resources. Gold, silver, real estate and natural resources tend to be proftable during periods of rising inflation because inflation and the fear of further inflation add to investor demand for assets whose values are not denominated in a fiat (non-convertible) currency. Swiss franc assets tend to appreciate during periods of rising inflation because, although the Swiss franc is a fiat currency, the Swiss government traditionally has acted with a high degree of restraint in permitting the issuance of new currency. Such restraint is generally taken to indicate that a currency will preserve its purchasing power. If the rate of inflation does rise, the prices of common stocks (other than those of U.S. and foreign real estate and natural resource companies) and, more especially, of dollar assets, are likely to decline.
Re: another pundit tweaks the PP
Posted: Fri Apr 01, 2011 4:50 pm
by MediumTex
I like to think that the notion that real estate is somehow a sure-fire inflation hedge has been dispelled, but I guess it hasn't.
How many years does real estate need to fall before people figure out that there is nothing special about this asset (especially when it is highly leveraged)?
Re: another pundit tweaks the PP
Posted: Fri Apr 01, 2011 5:30 pm
by AdamA
MediumTex wrote:
I like to think that the notion that real estate is somehow a sure-fire inflation hedge has been dispelled, but I guess it hasn't.
How many years does real estate need to fall before people figure out that there is nothing special about this asset (especially when it is highly leveraged)?
I think a lot of people who got used to investing in real estate in the 1990's and 2000's are still in a bit of denial and really want to justify hanging onto it.
Re: another pundit tweaks the PP
Posted: Fri Apr 01, 2011 5:32 pm
by craigr
I replied to that article as well. REITs are a fine speculative asset if you feel so inclined. But please keep in mind that the companies in the stock allocation all have massive exposure to real estate. Either in buildings they own, land they use for production purposes, leased out facilities, etc. These properties and activities are on their balance sheets. If you invest in stocks, you are invested in real estate already.