Thursday, April 16, 2009

REITs are Cyborgs

REITs are indestructible animals in the current market. They go up on bad news, no matter how bad the news is. Stock dilution? Price goes up. Bankruptcies? Price goes up. Higher defaults? Price goes up. Asset values plummeting? Price goes up.

The result is shocked and frustrated traders who know CRE is a mess and there is no bailout, nor is the a reason for a bailout. REITs just have to make an announcement. Any announcement. No matter how good or bad and the stock price will go up.

GGP files for bankruptcy today. More REITs are likely to follow but the result is, REIT prices continue to clime. There are no fundamentals behind this rise. They have almost all diluted their shares by 20-30% during Q1. Revenues are going down each month and debt maturity is coming up fast. Yet the euphoria on REIT stock is staggering.

This is how the market works. The market makers can control a particular sector quite easily and insure the maximum pain. The reason this is happening is the high percentage of short interest in REITs. It makes the market makers jobs quite easy. It is much easier for them to move a price up in order to hit a stop price on a short covering than to move down hoping to hit a limit price on a buy.

Until shorts are flushed out to a level that evens the playing field. REITs will continue to go up and SRS will continue to go down. It will create an unbelievable opportunity once this happens, but obvious as of April 16th, the MM's are having too easy of a time squeezing the shorts.


  1. How do you think JPM just earned the highest amt on fixed income portfolio... reit.... watch them dump all their dividends and leave people stranded... zombies...

    nice site, cool links..... see ya.....

  2. Watch NRO and SFI - 2 junk bond CRE REITs. I went LONG both in November and cashed out in December after they ran up nearly 100% in 1 month. They are back to their old trading ranges again.