The REITs

A good article on the commercial property market. The way you play this of course is shorting certain REITs. I talked several months ago about SRS (power fund that tracks the reverse of the REIT index). I still like it as an overall hedge. Of course I wrote about how when I short I do it to make money not just simply to hedge and I still think long term this works out as making money also for me. We shall see.

http://www.economist.com/finance/displaystory.cfm?story_id=9954087

Ken Cohen of Lehman Brothers says that the volume of new loans to finance property deals has fallen by half since May and June when credit was widely available. In turn, this has led to a sharp fall in the issuance of commercial mortgage-backed securities (CMBSs), the products that consist of repackaged loans which helped propel the structured-finance market before it seized up.

Commercial property is no longer the bargain it seemed a few years ago, when rental yields were well above those on government bonds. But it will probably take a recession, in America and elsewhere, for the recent wobbles to turn into an outright crash.