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Well, don't know about these numbers; but if they are valid, there is big movement otherwise.....dollar flying high, IG bonds smack down, gold being melted.....place your bets ladies and gentlemen.
Looks like some big money in the rotation game and perhaps thinking rising interest rates coming to a town near you this summer. ??????
@MFO Members: Some think that could encourage the Federal Reserve to consider hiking interest rates in June. This has spooked the futures into negative territory. Regards, Ted
A guest on CNBC just called Yellen "chairman". Good chuckle on a lousy day. Added to Brookfield Property Partners (BPY), still trading under book and throwing off a 4.5% yield.
On days like this it is hard to listen to the bobble heads on CNBC or Bloomie. It will drive you crazy to hear things like it's the end of the world because the Fed might raise rates. I just read on CNBC's website that the chances of the Fed raising rates in June just went from 18 to 25 percent.
They are ringing the warning bells and Pavlov's dogs are in a frenzy.
I suspect the stock markets aren't responding because they suspect (IMO, correctly) that this number has been heavily "seasonally-adjusted" i.e. it was created by modeling, not by raw/real number tabulation. As for the bond market, well, algo trades were activated. Interest rate hike? ditto, I don't see it happening. @Scott Is it my imagination, or does it seem that REITS are becoming more reactive to interest rate swings? If it's real, I think I "kinda like" that.
I suspect the stock markets aren't responding because they suspect (IMO, correctly) that this number has been heavily "seasonally-adjusted" i.e. it was created by modeling, not by raw/real number tabulation. As for the bond market, well, algo trades were activated. Interest rate hike? ditto, I don't see it happening. @Scott Is it my imagination, or does it seem that REITS are becoming more reactive to interest rate swings? If it's real, I think I "kinda like" that.
REITs are very reactive to interest rates, at least initially. You saw the taper tantrum a year or two ago (if it's two, geez how time flies) and that was a great opportunity to add to REITs.
I've been staying that REITs will pull back and you're getting what may be the start of that. I don't think that I will be adding any new positions in terms of real estate, as I've been adding to real estate plays that have not gotten the same coverage or are not REITs or are unique in some other manner (CLNY, HHC, BPY, KW) that haven't taken off to the same degree that many of the straight up REITs have.
CLNY (which is sort of a REIT hybrid) is merging with its parent this year (http://www.bloomberg.com/news/articles/2014-11-05/barrack-s-colony-units-to-combine-under-colony-financial), HHC (which is real estate but does not offer a dividend and is not a REIT) was wrecked (at least until recently) because of a view that it was exposed to oil (it is, but not nearly as badly as I think people thought) and BPY is an MLP that is a fascinating and giant/complex real estate vehicle still trading below book, despite a pretty decent move in recent months.
Kennedy Wilson (KW) is a unique little vertically integrated real estate company, complete with real estate services (property management, auctions and more) as well as diversified global real estate investments. It's an interesting, very opportunistic little global company that gets not much coverage but has a substantial investment from famed Canadian investor Prem Watsa of Fairfax (11.1M convertible pfds.)
The one that I thought about a few weeks ago and regret missing is Texas Pacific Land Trust (TPL).
STWD is another holding, which I like due to skilled management and the fact that many of their loans are floating rate. The company has discussed in the recent past that rising rates will be a positive to their bottom line. Of course, the market will just throw it out anyways because it's real estate.
Also, I have real estate exposure elsewhere in other REITs and things like Blackstone, Oaktree, Jardine, Hutchison and other companies.
Like some others, I thought the initial reaction to the jobs numbers would be positive. But, I understand the fear of higher rates.
Few fared worse than gold funds Friday - some off more than 5%. And to my surprise, high yield bonds seem to have held up better than just about any other segment. Go figure.
It's curious someone posted a thread about 6 weeks ago asking people to predict what the bottom in the 10-year Treasury yield would be. Since than they've risen about a half percent - which is big.
I do like that we're nearing an election year, as that usually bodes positive for equities. The pols like to wait until after the election to make the tough calls. The Fed less so - but they're often hesitant to make big moves close to an election for fear of being seen as favoring one side or the other.
Markets are often irrational. And Friday may have been a good example.
Like some others, I thought the initial reaction to the jobs numbers would be positive. But, I understand the fear of higher rates.
Few fared worse than gold funds Friday - some off more than 5%. And to my surprise, high yield bonds seem to have held up better than just about any other segment. Go figure.
It's curious someone posted a thread about 6 weeks ago asking people to predict what the bottom in the 10-year Treasury yield would be. Since than they've risen about a half percent - which is big.
I do like that we're nearing an election year, as that usually bodes positive for equities. The pols like to wait until after the election to make the tough calls. The Fed less so - but they're often hesitant to make big moves close to an election for fear of being seen as favoring one side or the other.
Markets are often irrational. And Friday may have been a good example.
"With that said, selected market segments took Friday's decline disproportionately on the chin. Leading on the downside within the U.S. stock market were those categories that would likely be most sensitive to the potential for increased interest rates in the coming months. This includes utilities (NYSEARCA:XLU) and REITs (NYSEARCA:VNQ), which despite their traditionally defensive characteristics in down markets declined on Friday by a jarring -3.00% and -3.32%, respectively. One could naturally conclude that these declines were in direct response to the potential for rising rates. But if this was the case, why then did other highly interest rate sensitive categories such as high yield bonds (NYSEARCA:HYG), senior loans (NYSEARCA:BKLN) and preferreds (NYSEARCA:PFF) hold up considerably better with declines of just -0.64%, -0.17% and -0.90%, respectively? Thus, a closer inspection of exactly why utilities and REITs were down so severely is warranted.
In the case of utilities and REITs, both are categories that had gotten way ahead of themselves in recent months."
Article then goes on to provide charts and other discussion. Worthwhile viewing.
Comments
Well, don't know about these numbers; but if they are valid, there is big movement otherwise.....dollar flying high, IG bonds smack down, gold being melted.....place your bets ladies and gentlemen.
Looks like some big money in the rotation game and perhaps thinking rising interest rates coming to a town near you this summer. ??????
U.S. Treasury, gold, U.S. dollar, some others
And Euro still moving down to the $1.08 area.
Was planning to do more HEDJ today; but there may be a big pop upward on open and then stay flat.
Will be a watch'in.
Catch
Regards,
Ted
I have been saying that there's going to be a pullback in REITs and that they've gone too far - and you're getting that today.
On days like this it is hard to listen to the bobble heads on CNBC or Bloomie. It will drive you crazy to hear things like it's the end of the world because the Fed might raise rates. I just read on CNBC's website that the chances of the Fed raising rates in June just went from 18 to 25 percent.
They are ringing the warning bells and Pavlov's dogs are in a frenzy.
@Scott Is it my imagination, or does it seem that REITS are becoming more reactive to interest rate swings? If it's real, I think I "kinda like" that.
I've been staying that REITs will pull back and you're getting what may be the start of that. I don't think that I will be adding any new positions in terms of real estate, as I've been adding to real estate plays that have not gotten the same coverage or are not REITs or are unique in some other manner (CLNY, HHC, BPY, KW) that haven't taken off to the same degree that many of the straight up REITs have.
CLNY (which is sort of a REIT hybrid) is merging with its parent this year (http://www.bloomberg.com/news/articles/2014-11-05/barrack-s-colony-units-to-combine-under-colony-financial), HHC (which is real estate but does not offer a dividend and is not a REIT) was wrecked (at least until recently) because of a view that it was exposed to oil (it is, but not nearly as badly as I think people thought) and BPY is an MLP that is a fascinating and giant/complex real estate vehicle still trading below book, despite a pretty decent move in recent months.
Kennedy Wilson (KW) is a unique little vertically integrated real estate company, complete with real estate services (property management, auctions and more) as well as diversified global real estate investments. It's an interesting, very opportunistic little global company that gets not much coverage but has a substantial investment from famed Canadian investor Prem Watsa of Fairfax (11.1M convertible pfds.)
The one that I thought about a few weeks ago and regret missing is Texas Pacific Land Trust (TPL).
STWD is another holding, which I like due to skilled management and the fact that many of their loans are floating rate. The company has discussed in the recent past that rising rates will be a positive to their bottom line. Of course, the market will just throw it out anyways because it's real estate.
Also, I have real estate exposure elsewhere in other REITs and things like Blackstone, Oaktree, Jardine, Hutchison and other companies.
Few fared worse than gold funds Friday - some off more than 5%. And to my surprise, high yield bonds seem to have held up better than just about any other segment. Go figure.
It's curious someone posted a thread about 6 weeks ago asking people to predict what the bottom in the 10-year Treasury yield would be. Since than they've risen about a half percent - which is big.
I do like that we're nearing an election year, as that usually bodes positive for equities. The pols like to wait until after the election to make the tough calls. The Fed less so - but they're often hesitant to make big moves close to an election for fear of being seen as favoring one side or the other.
Markets are often irrational. And Friday may have been a good example.
"With that said, selected market segments took Friday's decline disproportionately on the chin. Leading on the downside within the U.S. stock market were those categories that would likely be most sensitive to the potential for increased interest rates in the coming months. This includes utilities (NYSEARCA:XLU) and REITs (NYSEARCA:VNQ), which despite their traditionally defensive characteristics in down markets declined on Friday by a jarring -3.00% and -3.32%, respectively. One could naturally conclude that these declines were in direct response to the potential for rising rates. But if this was the case, why then did other highly interest rate sensitive categories such as high yield bonds (NYSEARCA:HYG), senior loans (NYSEARCA:BKLN) and preferreds (NYSEARCA:PFF) hold up considerably better with declines of just -0.64%, -0.17% and -0.90%, respectively? Thus, a closer inspection of exactly why utilities and REITs were down so severely is warranted.
In the case of utilities and REITs, both are categories that had gotten way ahead of themselves in recent months."
Article then goes on to provide charts and other discussion. Worthwhile viewing.
Reversion to the mean.