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Thursday, December 1, 2016

Where are the REIT Bugs?

Gold is a separate asset class. It gets its own special place. Although traditionally known as an inflation protection asset, Gold Bugs claim it will protect you from inflation, deflation (because it is real money apparently), hyperinflation and most STDs.
But it has done rather poorly comparing to another asset class, which protects against inflation rather well, Equity REITS.
Let's see Total Returns for the NAREIT index vs Gold.
Since 1972.

Annual Compounded from 1972 11.7% for Equity REITS vs 7.5% for Gold.

Does not seem like a big difference. That is only because you don't know the value of compounding!


Holy Crap! That almost looks like REITS have decimated Gold.
But wait we have to make one small adjustment.
Stocks were freely traded in 1950's to 1970's whereas Gold had been held fixed to $35 for over 3 decades. In fact Gold went from $35-$200 in the first 5 years it was removed off the fixed price. This was catch up. Just like when an artificial peg is removed and the currency falls/appreciates rapidly.

So total return over 1975-2016 would remove this catch up period. Remember Gold went up 6 fold during 1970-1975 where Real interest rates were 1-2% below inflation. That kind of appreciation would never happen outside a catch up zone.


So my question is, Where the Fuck are the REIT Bugs? Why is there no one screaming that NAREIT will go up 4000% in the next 5 years? Where are the lunatics saying REITS are being pressured/manipulated by the central banks? Where is REIT-EAGLE.COM? Surely some fringe people must have developed who have gone bonkers with the love of this asset class. Where are they??!!
Specially today when REITS are a global asset class and take away country specific risk, surely someone must feel so passionately about them?


9 comments:

  1. I'm no goldhead, but I think you have it wrong. Gold, in the modern world of fiat currency, performs best when there is fear.
    Like your blog.
    Keep on keeping on.

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    Replies
    1. That is funny you mentioned Fiat.
      All my comparisons are during the entire time fiat has existed. No? Don't you think Gold should have done better? Still my question was why are people not obsessed with REITS.

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    2. Sure, not disputing your comparison. My point being that gold is incorrectly perceived as an inflation hedge. So to answer your question, no it should not have done better. REITS give you a return on investment. Gold is simply an alternative store of value when it looks like the shit's gonna hit the fan.

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    3. Btw, I know people who are somewhat obsessed with REITs as an investment instrument, but they're just not crazy enough to start a blog about it. If you know what I mean. I believe we're on the same page here.
      I find it interesting that you decided to start this blog just as gold seems to be getting close to a short term trade-able bottom. Thanks.

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    4. I kinda thought my timing would fall in that band. If you see my comments on smartmoneyblog you would know I went long a bunch of gold stocks (through put selling). I love trading Gold and Gold stocks from both sides.

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  2. Don't tell me your a subscriber to that charlton. Next you'll be telling me your a member of that quasi fascist site TFmetals.
    Well good luck in your trading either way.

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  3. Btw, not to be petty, but you need not capitalize the word gold.

    ReplyDelete
  4. I don't think Duck is sub to SMTracker. I wish I could say the same.

    ReplyDelete
    Replies
    1. No. I am not nor have ever been a subscriber to that idiot. I have been doing this for 2 decades and I think for the last 15 years I could trade better than Gary Savage/Toby Connor

      Delete