The Coming Market Crash

[poptart]

I agree.

[RumpleForeskin]

You guys need to focus more on the S&P 500, rather than the Dow 30. S&P is a staple in almost all 401Ks and typically beats most mutual funds on annual gain.

I believe last week was the bottom of this intratrend correction - market may drift sideways for the next month to 6 weeks. Should begin to see upward momentum after that.

The S&P is usually the benchmark used when comparing your clients investments to that of the S&P. The problem is that most big players allocate very little to non-publicly traded REITs on their client's portfolio. Equities, hedge funds, debt instruments seem to always take up most of the portfolio which is good in a bull market; however, when that long term bear hits, its sucks form everyone. Non-accredited investors whould really invest 30 to 40% of their money into muiltiple diverse REITs such as Healthcare, Retail, Multi-family, and office buildings. The portfolio can continue to grow in those stages of a bear market and reduce the risk at a significant level.

[KC Scott]

The S&P is usually the benchmark used when comparing your clients investments to that of the S&P. The problem is that most big players allocate very little to non-publicly traded REITs on their client's portfolio. Equities, hedge funds, debt instruments seem to always take up most of the portfolio which is good in a bull market; however, when that long term bear hits, its sucks form everyone. Non-accredited investors whould really invest 30 to 40% of their money into muiltiple diverse REITs such as Healthcare, Retail, Multi-family, and office buildings. The portfolio can continue to grow in those stages of a bear market and reduce the risk at a significant level.

REIT Stands for Real Estate Investment Trust. That segment of the market has been hammered due to the lending exposure / defaults on bad mortgages. None of the S&P 500 components are REITs. An REIT is typically bought for Dividends, as opposed to capital growth. as I mentioned, that segment has been hammered this year.

[Goober McTuber]

as I mentioned, that segment has been hammered this year.

So has Rumple.

[RumpleForeskin]

That segment of the market has been hammered due to the lending exposure / defaults on bad mortgages.

That's mostly the housing sector of the REIT business that is getting destroyed right now. The commercial REITs are doing well and qutie frankly haven't been affected by the recent turmoil in the mortgage lending industry. You are right though about the main focus of a REIT is steady income of which you draw between 6 and 7% of a dividend monthly or quarterly depending on the offering. However, commercial Non-publicly traded REITs do generate capital gains and most of the sponsors will not take a dime until the investors get 8% in preferred returns. Why would they take that risk unless they know their acquisitions are going to make them more than that in a 5-7 yerar holding period? They wouldn't. The due diligence that takes place in these deals today pretty much makes them slam dunks.

[KC Scott]

Divideds are paid on a quarterly basis and the annual total % is derived by adding those 4 quarterly dividends, then dividing that total by the stock price.

For example, XYZ pays 4 quarterly dividends of .50 ea. The total being $2.00 for the year.
After that fourth dividen is paid the shares close that day at $40 per.
That would be an annual dividend of 5%

Again, your capital is at risk as share price of a REIT, like any stock, is only worth as much as the bid to sell your shares.

I wouldn't know how to find any non-publicly traded REIT and wouldn't advise anyone to invest in one unless they has a prospectus and a complete understanding of the risk.

In this fourm we typically stick to things any of us could invest in, through any on-line brokerage or via our companies investment plans like a 401K.

[RumpleForeskin]

Divideds are paid on a quarterly basis and the annual total % is derived by adding those 4 quarterly dividends, then dividing that total by the stock price.

For example, XYZ pays 4 quarterly dividends of .50 ea. The total being $2.00 for the year.
After that fourth dividen is paid the shares close that day at $40 per.
That would be an annual dividend of 5%

Again, your capital is at risk as share price of a REIT, like any stock, is only worth as much as the bid to sell your shares.

I wouldn't know how to find any non-publicly traded REIT and wouldn't advise anyone to invest in one unless they has a prospectus and a complete understanding of the risk.

In this fourm we typically stick to things any of us could invest in, through any on-line brokerage or via our companies investment plans like a 401K.

I agree whole heartedly that a cleint be given a prospectus before even considering investing in a REIT. Right now, the stock market (Dow, Nasdaq, S&P, and Russell) is in a state of flux and nobody knows what it might do over the next year. Sooner or later, we are going to hit a big slide. REITs are not adversely effected by the market like other asset types and though they can be risky, they can perform when the market is in a bear pattern. Like I said before, the due diligence performed on these offerings today leave very little doubt that investors will make make money. You are right about the dividend being annualized to a total up to 6-7%. Also, as much as REITs are known to be steady income providers, almost all of them offer a dividend reinvestment plan at a lower share price; usually at 9.5 cents on the dollar.

Our clients have received redemptions on 2 major REITs this year that they invested in back in '02 and '03 with a capital appreciation of 40% over a 4 year period on one of the REITs and 20% over a 3 year period on the other REIT. Suitability standards are not that bad either. I think most of these offerings ask for a 45,000 annual income and a 45,000 net worth excluding home, home furnishings, and automobiles. A lot more people qualify to invest in a REIT than you think and with the dividend reinvestment plan, younger people might be apt to invest in this asset type without taking on the extra income and paying more taxes.

REITs actually reduce the risk of an investor's portfolio because of the allocation involved. Transferring 20% of your 401K is probably a good idea when the market hits the skids. Just sayin'.

[KC Scott]

So are your REITs available to the public or not?

If so what is the ticker symbol, or what is the brokerage firm that is offering them?

[RumpleForeskin]

No, they are only available through BDs that have selling agreements with the Non-Publicly traded REITs.