23 replies to this topic

[OEXCHAOS]

He said that he bought a little on Friday and would buy a little on Monday. I think his average cost is higher than mine by a % or so which is still on a big divvy. Do remember, too, it was bought for a dividend and that means that one expects to hold it for a bit. Of course, I'm thinkin' we'll be traders if it rallies enough fast enough.

[OEXCHAOS]

Dumb people are expected to make dumb trades, or why else are they here?

P. S.

Zen told me the same thing in March, when I was shorting BSC etc. after reading about credit problems in the USA Today.

Zen isn't a professional.

Still, your risk is hopefully educational, and frankly, I won't feel sorry for you if you take a bath on this one, as you have profits to burn.

I'm just calling it a teaching moment. The teaching has nothing to do with the over arching investment thesis (that debut and real estate are both way over done and it will bring about massive problems and even a Bear market--or whatever it is). It's all about HOW you select a trade t exploit that thesis.

Mark

[greenie]

Sure it will be teaching moment - either for you or me Value investing assumes that the markets are generally efficient, except at some times of panic, when people throw away both good and bad stocks. If you take NRO:IYR ratio, you will see that it has been weaker than IYR for a while. Therefore, the market has been selling it for a reason, and not just on a panic. Every fund manager, who has been selling it for last two months could see high dividend payout. What do they see that we do not? I do not need to answer that question to make a trade here. In addition to the described weakness, what I see today is IYR had huge rally, and some of its quality components (SPG, VNO) had even bigger rallies (reversed now). NRO hardly budged. That means knowledgable people do believe that the company has some risk. As I thought IYR is setting up for reversal today, I decided to short a REIT that showed unusual weakness at both intraday and monthly basis. That is all there to the trade. Although I do not know the answer to the question "What do they see that we do not?", I can make an intelligent guess that the company will not pay as high dividend as it did in the last few months. If you check its monthly dividend history, it has been highly volatile. Although I do not have enough data, I would guess that it is correlated with IYR index value delayed by few months. Based on that interpretation, you made a trade looking at the rear view window.

[OEXCHAOS]

Sure it will be teaching moment - either for you or me

Value investing assumes that the markets are generally efficient, except at some times of panic, when people throw away both good and bad stocks.

That is NOT what Value investing assumes. To be sure, value investors will buy values created during a panic, but the main idea is to buy (often boring) stocks when they are out of favor for whatever reason.

If you take NRO:IYR ratio, you will see that it has been weaker than IYR for a while. Therefore, the market has been selling it for a reason, and not just on a panic. Every fund manager, who has been selling it for last two months could see high dividend payout. What do they see that we do not?

Why would a fund manager own this instrument, greenie? If they are managing a fund, they can buy the actual reits and preferreds and save the fees.

Now, personally, I don't know exactly why NOR was weaker than the IYR, but I presume it's because there are fees associated with a closed end fund.

I do not need to answer that question to make a trade here. In addition to the described weakness, what I see today is IYR had huge rally, and some of its quality components (SPG, VNO) had even bigger rallies (reversed now). NRO hardly budged. That means knowledgable people do believe that the company has some risk.

There's some risk, sure, but LESS risk than most other things in this sector. It's also not a pure play. It's a retail product, with fees and one that requires analysis if one wants to trade it--it's easier just to go to the source if you have size and are looking for a trade in the arena. It's conservative investment, really, too conservative for gun slingers.

As I thought IYR is setting up for reversal today, I decided to short a REIT that showed unusual weakness at both intraday and monthly basis. That is all there to the trade.

Rule number one, don't short value unless you really understand it. Rule number two, don't ever short something that pays a big dividend unless you KNOW it will be cut. You should at least know what you're shorting.

https://www.nb.com/M...7q1186398698000

Although I do not know the answer to the question "What do they see that we do not?", I can make an intelligent guess that the company will not pay as high dividend as it did in the last few months. If you check its monthly dividend history, it has been highly volatile.

I don't know about where you're looking but the only volatility has been increases in dividends. Basically there has been one big increase and other deviations hae been cap gain distributions, it looks like, at the end of the year. Basically the dividend was VERY stable at $0.10/month until they raised it to 0.153. Dividends going up dramatically, hmm. Looks like a bad sign. Seriously, though, they are trying to support the stock by raising the dividend. That's basically a neutral thing, but the history is VERY consistent and there's nothing to suggest that they won't bein the future. Meanwhile, they own stuff that is sold out.

Although I do not have enough data, I would guess that it is correlated with IYR index value delayed by few months. Based on that interpretation, you made a trade looking at the rear view window.

Nope. I'm saying that it's simple current REAL value is greater than it's market price. It is in an unloved industry with every amateur and his brother short in it. If it lanquishes too long and too deep, it's a take-over candidate, unless everything that they own goes to zip, which does not appear to be the case. Meanwhile, you need folks to sell an objectively cheap stock down in order to not lose money. You also have to come up with 0.153/share for the forseeable future. Why not short something that they own that doesn't pay much. At the least you'll be shorting the real asset 6-10% higher. And that's my real point. You picked a very expensive way to be short with unnessary risk.

It's not about whether it goes up or down.

Mark