Anecdotal Musing: Commercial Real Estate, You Can't Go Wrong

This is the second time in three weeks both Ultra Real Estate (URE) and Ultrashort Real Estate (SRS) are positive at the same time, which in theory should be impossible since once is 2x the basket of REITs and one is 2x the inverse the basket; it happened Thanksgiving week as well. Today's action is even more egregious since both are up 4.5-4.6% as I write this. (Thanksgiving week, one was up 2% and one was up 6%) While these instruments are not supposed to compound over time well due to their construction on a single day basis they should work in complete opposite.

Boggling.

Disclosure: Long Ultra Real Estate, UltraShort Real Estate in fund; no personal position

Comments

[herbert hoover:]

Maybe Bernie Madoff is trading again?

2008 Dec 15 06:44 PM

[Russian:]

No surpride here. According to etfconnect.com URE was trading at a 16% discount while SRS at a 25% premium as of closing on 12/12. If these numbers are correct, even a stranger thing than just equal gain could theoretically occur.

2008 Dec 15 07:30 PM

[DaveW:]

friday, SRS was down something like -19.7% and URE was up only 7.6%. wierd. perhaps today's action is a price correction back to 'equilibrium' (for lack of a better word).

2008 Dec 15 07:30 PM

[Cushman:]

If you're long URE than you know Friday's close was incorrect. It should have closed around $5.45 but a last minute print went through at $5.

On the last day of trading in November----the URE was manipulated up all day to close at $6.45 when it should have closed down under $5.60. That was pure manipulation for the full day not just an end of day printing error.

2008 Dec 15 08:37 PM

[Cushman:]

Another point. In this range bound market both the SRS and URE will work lower. There is large shorting of both the long and short leveraged ETFs. Daily compounding is the death nail for all these instruments. Fatal.

2008 Dec 15 08:39 PM

[Big-P:]

Let me clear things up for you boys by telling you exactly how this is about to play out--starting tomorrow. I'M GOING TO BE JAMING THE SRS HIGHER so climb aboard the Big-P express!

You see, I don't have to pull a bait and switch by sending you to my website because I don't allow advertising anyway and could care less if you visit or not, but I just told my legions of leeches that I'll be jamming the SRS HIGHER tomorrow and that I'll continue to jam it higher right into Christmas.

The talking heads who always tell you guys that predicting the market is impossible are just sore losers who never spent the time to figure out the game. For prick's sake, stop following these morons on TV and in the press! They're clueless.

BTW, these ETF's are morphing into the greatest trading vehicles ever invented (if you're a market-mover like me) because as people have been bailing out of the short-side bets, they've been pushing the ETF's below fair value. (Any of you economists ever heard of supply/demand?)

The SKF was the first example (when investors lost their minds and thought short selling would be banned for evermore) and this SRS will be the next great example.

Big-P

2008 Dec 16 02:35 AM

[Robert Nabloid:]

I think being short commercial real estate is the best course of action. We have plenty of big box retailers going out of business or closing stores. We have layoffs at many corporations. Who will rent the empty stores? One thing I do know is that REITs are usually heavily leveraged with debt and if vacancies climb that could spell disaster for some. Another point to make is this - right now we may be lowering interest rates - but some think interest rates will be climbing rapidly if inflation or hyperinflation hits after the deflationary fears end with all the Fed intervention. IMHO, it is better to short this sucker while the retailers close their stores. I expect lots of bad news in Jan and Feb after a dismal Xmas.

2008 Dec 16 04:13 AM

[argentinare...:]

One clause of this discrepancy is that URE is paying a dividend this week. Last year it was around 46 cents. Also SRS will be paying a capital gains soon.

2008 Dec 16 07:36 AM

[Kelly Liebe...:]

Just take a look around. Trading has never been so easy. Going out of business signs everywhere...slow traffic in restaurants, shops etc.. There is nobody standing in the wings to take up these leases.
This is just a no brainer.
SRS....

2008 Dec 16 10:08 AM