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Archive for 2008

The monthly bar chart below of the iShares Canadian REIT Sector Index Fund (TSE:XRE) shows the Boom Bust quite clearly. This fund is composed of REITs that are listed on the TSX and gives investors exposure to the whole group of REITs also listed on the TSX. REITs, once thought to be one of the most secure of trusts and the trusts that investors couldn’t get enough of, are now looking like a black hole. Real Estate Investment Trusts invest in things like shopping malls, office buildings, apartments, hotels and warehouses. Shares can be bought and sold on the stock market. Names like Boardwalk, Calloway, Chartwell, & Dundee to name a few. To my knowledge there are more than 20 that trade on the TSE.

Is now the time to scoop these beaten up funds? From a technical point of view I personally don’t see any real bottom formation on the XRE chart on any time frame, monthly, weekly or daily that says buy. And fundamentally, with a weak economy, weak consumer spending, and all the layoffs I don’t see any light at the end of the tunnel here either. This will not likely be good for REITs as they rely on rental income.

I am hearing talk of another wave of mortgage problems, this time commercial mortgages. The conversation at my office Christmas property last week was perhaps a confirmation of part of this. Commercial money is hard to find. Banks are on alert. No kidding, I tried to find private money for a commercial deal a few weeks ago when my Buyers failed to get results from the banks. Private money was quoted at 9.5-12%.

And yes the media keeps telling us we are OK here in Canada aye. We don’t have a sub prime loan problem blah blah. Most of us know were the Canadian Bank stocks are these days, and it seems clear the Bear is still in control. The REITs stocks peaked and followed the bank stocks down the tube at the same time more or less. And if you don’t believe Canada’s economy follows the U.S well try this exercise. Put up a long term monthly chart of most Canadian bank stocks and overlay it on top of the U.S. financial sector, symbol XLF. A fairly good mirror image with a lag. When the U.S market (the Big Dog) jumps off the porch, and begins to chase down the street in any direction…the rest of the little dogs follow…

Well I’m off to get a listing.

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