In the bigining of 2007, URE was around 70.
Real estate market peaked in Jan 2006, so when URE was 70, the real estate market was already in decline. Lets assume that real estate market was down 5% from peak when URE was at 70.
Now the most pessimistic prediction is that real estate will decline 40% from peak. That means that URE would have to decline 70% (2 times 40-5) from its high of around 70.
That gives URE valuation of 21 when real estate market has not even reached 40% decline from peak (we are at 25-30% from peak).
It just does not make sense. Ofcorse nothing makes any sense in stock market anymore
I did a similar calculation. URE could half itself from today's level.
That puts it at a strong buy somewhere around $16
I know thats a long way down but in time if the economic crisis is as severe as they say then we can very possibly see it go that low.
XLF has better first ten companies than UYG. Traded UYG twice with success but caught in downward cycle yesterday. Both are trading in close correlation with DOW. Hoping recession will be confined to 2009 only.
It seems to me that the credit markets will recover before the equity markets. So XLF should be a good investment soon. Also, I like high yiled bond market (assuming that we are not headed for a depression).
I starting buying some XLF about 1 month ago and then stopped as it appeared that the bail out would not save the banks. I should have sold it, but I kept it. At some point soon, I will start buying it again. However, no rush as Dow 6,900 seems to be a certainty.
Yup, it is. Before DCEL we were buying AWE. That was a nice trade also. REIT's could blow up. The question is how much is already priced in? A lot of banks are requiring principal curtailments when the loans are renewed. Thus, the REIT's will have to cut their dividends to make the payments. However, in the long run, for most of the REIT's (assuming we are not entering the great depression 2), this curtailment is actually healthy.
However, if the economy enters a great depression with massive unemployment, than all bets are off and all the REIT's will be worthless.
So do your homework!!!
Wow, you really do remember me. Be careful, don't buy to much URE yet. Need to build slowly and not care if you miss the bottom. This will take a year to play out and it's hard to tell how low it goes with all the CNBC yoyo's telling the world to short the REIT's. Where were they over the summer with that suggestion? Smucks!!!