Commercial Real Estate

My thinking here is that RE may have completed the first leg down of a larger multi year corrective phase. In theory, this count would suggest an advance (B wave) to recover 50-62% of the recent decline that began in early 07' followed by the C wave down.

cs

IYR and ICF and their component stocks are definitely ones to watch for clues to the broad market. For one, commercial real estate is one of the most expensive sectors anywhere in the market right now with an average P/E greater than 22 (compared to S&P's current P/E of ~13). For another, commercial real estate may be the next shoe to drop. If we are in a bear market, IYR is an obvious short because of its high P/E and should show relative weakness with respect to the S&P even if we just completed an IT bottom last week. If on the other hand, IYR is relatively strong and experiences multiple expansion, that maybe an early clue the bear has ended with a potentially very significant long term bottom out of the way. It may also signal that an extended perios of low long term interest rates maybe upon us (Which would be bullish for stocks in general and especially for the yield-rich commercial real estate.)