Short Commercial Real Estate for Big Profits
November 24, 2008
Thursday DOW closed at 7552. For many following Denise and my suggestions, this was an excellent opportunity for everybody to exit on their short positions. I sold my SRS (Proshares Ultrashort Real Estate ETF) that I bought in January for an approximately 123% annualized profit. This is a double down bet on the Dow Jones US Real Estate Index. This index holds Simon Properties, Public Storage, Equity Residential, Vornado Realty Trust, Anally Capital Management, Plum Creek Timber, Boston Properties, HCP, Avalonbay, and Health Care Reit among others.
I also sold my DXD (Proshares Ultrashort DOW ETF) for approximately 28% profit in the last month. Particularly impressive was the performance of the SRS, which jumped from a low of 108 to a high of 295 in 17 days. The 52-week low is 65.01 and the 52-week high is 295.72! It is a very impressive chart for us contrarians shorting the market. I will start legging back in around 125. Let's see if lightning can strike twice.
My opinion is that commercial real estate has barely started what I believe will be a long and severe correction. I think this ETF will hit all-time highs of closer to 400 than the high of 295 seen last Friday. I will be watching this ETF closely, and if it drops below 125, I will be loading the boat. As I write, it has currently dropped to 173. There is no miracle I can see to stop the carnage in commercial real estate.
As you all know, my research has convinced me that we are currently in a bear market rally (DOW has jumped up to 8,311), and we expect at some point a vigorous return of the bulls. Only, of course, to be stomped out once again, breaching even the breathtaking lows of last Thursday to rest somewhere close to 7,197, its 2002 low. The question is at which point will the large piles of money, sitting on the sidelines, feel unable to pass up the incredible opportunities and equally amazing dividends.
As oil drops below $50/barrel and gold mining stocks are at fire sale prices, these are the areas I will be watching closest over the next few weeks and months. As inflation is turned on high, our beaten-down silver and gold mining companies will explode to the upside. I am ready to buy more gold mining companies now, but I am still holding off on the Master Limited Partnerships (MLPs) until we find a floor for oil and gas prices. With current deflationary pressures, I feel they could fall lower before they test new highs due to a dollar deterioration.
Thats really the big question. How many months will it take until the world starts fleeing from the dollar and into hard assets or will we wake up one day to the news of a worldwide coordinated currency devaluation? Or even a new currency all together? Is the Amero fiction or reality? Either way, our favorite gold and silver mining companies will be the beneficiary.
Take heart, its always darkest before dawn.
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