REITs still a good investment?

[lobodelmar]

I just read this on the Motley Fool: http://www.fool.com/News/mft/2006/mft06032911.htm

"Standard & Poor's has announced that Boston Properties (NYSE: BXP) and Kimco Realty (NYSE: KIM) are being added to the S&P 500 index to replace Cinergy (NYSE: CIN) and Jefferson-Pilot (NYSE: JP), which are being acquired. Boston Properties is set to join the index this Friday and Kimco next Monday."

and ..."10%-20% allocation to REITs outperformed an S&P 500-only stock portfolio from 1972 to 2004 and did so with less risk. For this reason, REITs deserve consideration in most portfolios."

Anyone want to speculate on how, if the housing bubble is the big topic of discussion here, what to do with this kind of information? Will REITs be potential shorts in the future? Are we looking at massive pain in the mortgage securitization market? Will pension funds and mutual funds start feeling massive pain, since many of them are heavily invested in these kinds of funds?

[jeffolie]

REITS, HEDGE FUNDS, PRIVATE EQUITY FUNDS, OVERSEAS FUNDS WILL BE HURT - ONLY TROLLS SHOULD BUY

US lenders do not care much about the cost of funds because they make profits originating the loans and selling the loans to the government sponsored entities (GSEs) Fannie Mae and Freddie Mac. The GSEs make profits sell the loans in pools of mortgage backed bonds (MBSs) which can become collateralized debt obligations (CDOs) and derivatives. Who buys the MBSs, CDOs and derivatives? Most are bought by high yield seek overseas buyers!!! They take the risk that the mortgages will be paid and suffer when the mortgages do not pay or are paid off early. Some buyers are here in the US.

The biggest losses will not be in the US, it will be overseas holders of the highly leveraged MBSs, CDOs and derivatives.

Those who can not pay their mortgages will not pay and the highly leveraged MBSs, CDOs and derivatives will be foreclosing. The GSE are explicitly not backed by the US government. Tax revenues will fall and government will be forced to make changes.

[blazespinnaker]

In fact, since I sold my house, my portfolio has REITs in it

(unlike most people I have no RE assets)

That being said, I'm hedging my bets. I'm not particularly long on REITs at the moment.