Property REIT

Bernanke : Commercial Property May Pose Risk for Economy

Commercial real estate could be the next catalyst for a major market correction….. (according to Bernanke).

Among the key points noted:

1. Commercial market is potentially bigger than the residential market (hence, a much larger problem here)

2. Increased vacancy, declining rents, falling prices. That almost sum up the 3 pillars of real estate. If all of them are still falling, then we have not seen the bottom yet. It is still falling. Companies are still not hiring. More restructuring are going on.

3. Which leads me to the third point. Debt ratio. Essentially, now is the worst time to go ‘long’ on property related stocks (including REITs). Lots of them are highly geared and with falling demand, prices and rents, it is extremely difficult for them to increased revenue. I am not sure how they are going to raise the funds to pay. But, I see a possible repeat of GM, or CIT.

4. At some point in time, the musical chair party will stop. And some will no longer be with us. So, do be careful out there.


Ichimoku says : Financial is still not bullish

At the heart of the US govt. plan is to save the Financial industry and have them lead the rest of the companies out of the recession.

What I like about XLF is that it includes financial services firms with diversified business lines from investment management to commercial and investment banking.

In short, it is a good representative of the health of the Financial industry.

Look ing at the chart, we can safely say that there is no clear bullish signal from the Ichimoku chart yet (despite the recent rally).

In fact, I see heavy resistant ahead at the 9.43 level. This year, it has attempt to break through this level for 4 times and has failed to do so. There is still no short term catalyst that can reverse the situation in the banks. I believe, it willl retrace back to 7.40 over the next few weeks.