Friday, May 1, 2009

Commercial RE Showing Cracks

Finally after almost 2 months, the entire Commercial Real Estate sector is showing cracks. While SRS is not responding as positively as I would expect, the key is the entire CRE group is down significantly today. Sometimes SRS is a bit late to the game perhaps due to leveraging mechanisms so I expect to see SRS to perhaps have some sharp gains coming up.

This is the first day since mid-March that the entire sector showed weakness. Today's action on REITs has a similar look and feel to action we saw in February. The question is, will there be follow through?


  1. Beamer Dog, S&P downgrades AXP credit rating today.
    Standard & Poor's slashed its credit ratings on American Express Co (AXP) debt and preferred stock yesterday (Thursday), citing the potential for the credit card company's borrowing costs to rise as profits deteriorate, Reuters reported. S&P lowered AmEx's counterparty credit rating by two notches to BBB-plus, or three notches above speculative or "junk" status. The agency cut the company's preferred stock rating by three notches to BB, or two notches into junk. The outlook is negative, meaning it could lower the ratings again in the next 12 to 18 months, the agency said in a report.

    This stock is on drug. Don't know how and who is pumping it.

  2. I was expecting AXP to down big today. Maybe Monday I hope.

  3. I watch IYR, not the individual component companies, but what you say makes sense. On the chart, IYR has been hitting a sizeable overhead and without the fundamentals improving (I just can't see how) or a very overt government intervention, I don't see how it can go any futher up.

  4. Mandy, the AXP downgrade was yesterday. It was shunned off because it was S&P who downgraded and they have proven to have no credibility. Even so, this should be just the beginning of the downgrades. AXP is 20x forward earnings and those earnings are likely over estimated. So they are at least twice as overvalued as they should be. Fair value on AXP is about $12-13. It will not go down all in one day. If you have short shares, just be patient. If you have May puts, hope it slides soon.

    Looks like my main 3 holdings, SRS, short AXP, short BAC actually behaved according to fundamentals today. Makes me think this market actually is finally seeing it right.

  5. Beamer Dog, thanks for your kind reply. I enjoy reading your analysis and information. Many thanks for sharing your diligent work. No doubt that AXP is way overvalued compares to its earning this quarter but also the increasing delinquency from their clients. I will be patient then. I have two shorts that really testing my patience such AXP & NUE. With numerous downgrades and lousy earning this quarter plus further guided down next quarter, NUE keeps on recovering from its low to marching higher after each beating from the street. I am all in on CAL. Hoping to get some nice run out of them when the swine flu is all over. Have a great weekend.


    prag cap is a daily read.....always

  7. SPG cut dividend on Friday....
    caught it for 80% on options, 1 day in-out yummy (sold half)

  8. Mandy, why CAL?

    I'm in pretty heavy on LCC (got in at thurs close, so im up pretty good and stops already moved to above entry)

    just wondering why CAL vrs LCC or UAUA?


  9. CAL's balance sheet is the best among all to my opinion. Although your choice of LCC & UAUA has outperformed CAL last Friday percentage wise. LCC has the lowest short ranking among three, don't think we can get big short squeeze out of LCC when the entire sector starts its moving up recovery compares to UAUA and CAL. I used to like playing CAL and UAUA both at the same time based on these two had the most potentiality of merging together if the flying environment gets much tougher. Today I scale down to just CAL, but still believing the merger talk will surface here and there again somewhere and somehow because that's how the street likes to work on the airlines when airlines get hit down bad. If you take a look at the chart of the CAL of the last 2 years then you'll know why I like CAL so much. CAL has made me verygood profit the last two years. When it moves, it moves big. Airlines are at a very good entry point right now. LCC, UAUA and CAL happen to be on my top watch list. While energy sector seems to be very overbought, I feel airline shall be the next great rotation to have the biggest room to make some money. No pain, no gain, but with the huge pull back on airlines while the market was having the big rally in the last 2 weeks, airlines seem to be safest bet among all sectors. Don't let me forget to mention how brilliant you are that I love and appreciate reading all your posts respectfully. Keep up the good work.