Alok Swain's Comments

How to Safely Play the Short Side of This Market

Tue, 24 Nov 2009 19:46:40 -0500

Hi Kevin,

Good article, so can you advise how did you buy the VIX (or is there some proxy, like an ETN)

Would appreciate your comments.

Thanks

Alok

How to Safely Play the Short Side of This Market

Tue, 24 Nov 2009 19:46:08 -0500

Hi Chris,

Where do you see the VIX futures values, could you please provide a link or some data on where to look up these values. Like the fact that market has already priced that in, meaning and increase in VIX in the future.

Thanks

Alok

On Nov 23 09:42 AM ChrisMcK wrote:

> You can't get long the VIX or have a position in VIX. You can buy
> the VIX futures or the VIX options - which are priced off the futures
> - but the futures are already pricing in higher vol - with December
> above 23, January above 26 and the rest above 27.

Penn West: A Slightly Expensive Replacement for Harvest Energy

Tue, 27 Oct 2009 11:44:31 -0400

Hi Trace Mayer,

I am also in the same position. Own HTE currently and am dissapointed with the acquisition. I thought the CDN $10 is way too low. This company not too long back was trading for CDN $20. Would have at least expected anywhere above CND $15-20 range.

And I am also in the same position that if this merger goes through, I have to redeploy the cash that I get from it. I think PGH is a better bet than PWE. The yields are higher. What are your thoughts on that.

Thanks

Alok

Bond Market Expects Inflation to Be Only 1.75%

Wed, 21 Oct 2009 23:04:40 -0400

Excellent sarcasm!

On Oct 19 04:52 PM Tetrapod wrote:

> Are you kidding? Have you priced an Apple 2e or a Commodore 64? Dirt
> Cheap! After you adjust for headrests, seat-belts, airbags, power
> windows and locks, CD player, catalytic converter, padded steering
> wheel, and all the other stuff that cars didn't have in 1964, cars
> are pretty cheap too! Same thing with food when you adjust for the
> cost of all the saturated fats and additives! ;-)
>
> On Oct 17 08:33 PM rennert wrote:

UNG: The Effects of Contango

Fri, 16 Oct 2009 12:06:42 -0400

Hi H.T.Love

Good article.

I however didnt understand your disclosure very well. Could you please clarify.

It says and I quote "Disclosure: long UNG, short covered calls, long synthetic short positions"

I understand "long UNG" and shorting "short covered calls" but what does "long synthetic short positions" mean. It kinda sounds contradictory.

Please explain.

Again very informative.

Regards,

Alok Swain

Nokia Enters the Already Crowded Netbook Market: Pros and Cons

Fri, 16 Oct 2009 11:14:06 -0400

Agree with all the comments above.

Would like to add something more.

In India Nokia has succeeded in gaining substancial market share because it came up with innovative cell phones that are attuned to Indian Environment (dusty) and rugged and very cheap (less than $100). It won there because it was so cheap that people with very low income could afford it and the cell phone plans from companies like Airtel allow you to keep your cell phone number with minimal one time fee somwhere around $10 dollars and very low cost plans, that even Indian villagers with low per capita income of around $1500-$2000 dollars can afford it. The point being Nokia won by targetting a huge market with innovative & cheap products, and in the process became a major market leader.

This as many commentators have written above looks like its doomed from the start. It has all the bad charecteristics. Its late to the market. Its expensive. The bundled plan is very expensive. Why would anybody in their right mind buy it, when in Atlanta (where I live) I can buy Internet plans for $25 from Clear.

Options Strategies: What Worked for Me

Thu, 03 Sep 2009 16:58:10 -0400

Hi Tom,

Great Article.

Tom, I also started doing options trading nearly the same time period. Started on Nov 2007 to till date. Would like to review my performance maybe this year end. I was about -2% last year (Jan-Dec 2008, M2M), considerably up this year.

I do options trading (as well as stock trading) in both my Margin (ordinary trading account) and IRA (non-margin account).

One thing I am still unable to quite properly grasp (or have a good handle on) is how to calculate the returns, from an accounting point of view.

Let me elaborate with a simple example.

Say I sell a PUT (Cash Secured Equity Put) in my IRA (non-margined) on C (current price $4.77) (at strike of $5.00) and collect a premium of $0.415.

So my return should be calculated on $4.585 (Strike Price - Premium) as thats what I posted in my a/c.

If it expired worthless, then my returns would be computed as $0.415 / $4.585 (which is monthly that needs to be extended annually based on some proper discounting mechanism.) Fair enough.

But in my trading account which is margined I only post $1.369 per share.

In this case if it expires worthless whats my return and how do I calculate it properly. Should it be same as above or $0.415 / $1.369 (Premium /Margin Posted).

If instead of expiring worthless lets assume that C closed at $4.99.

What would be the returns in that case.

For non-margin accounts (($0.415 - $0.01) / $4.585)
For margin accounts (($0.415 - $0.01) / $1.369) if I decide to buy back the puts on the last trading day.
But if I am assigned then its going to be different as now it becomes a stock and the margin changes to $2.5 .
So the proper calculation would be (($0.415 - $0.01) / $2.5) perhaps.

So the proper accounting of option trading profits is very difficult based on various factors, margined account or non-margined, expired worthless or assigned, bought back or assigned, share price of the stock (as the margin changes on the share price etc).

You have not said how you computed it, whether on a margin account or non-margin account etc.

And the things get really complicated when a trade has multiple legs and you re-adjust the trade midway, then the margin and risk changes and how do you calculate the returns in that case. As the money at risk is different in those cases. Hence the returns would be different. Or you try to take a position in the stocks as a hedge, the returns would change too, and so would the strategy.

So the accounting of profits and losses is very complicated from what I have found, and I dont have a good framework on how to deal with it. Its not as cut and dry as one may think.

Thanks for your article and insight. But I feel the returns that you attribute to each strategy maynot quite reflect these considerations.

Regards,

Alok Swain

How to Trade Using Game Theory

Mon, 31 Aug 2009 13:09:13 -0400

Good Work Naufal
Thanks
Alok

Los Angeles Ports Face a Grim Future

Fri, 28 Aug 2009 18:35:17 -0400

Great Article as always from Tyler and some great comments as well.

Thanks Guys

Alok Swain

Should Banks Extend and Pretend?

Sat, 22 Aug 2009 19:15:46 -0400

Agree!

On Aug 22 08:05 AM Old Rick wrote:

> "If the expected loss from extending is higher than the loss that
> would need to be taken today, then they extend."
> ----------------------...
> In the context of the "efficient (rationale?) world", I didn't quite
> get the above statement. It seems inverse to me.

Taylor Rule Estimate: Fed Fund Rate Differential at a Whopping 6.8%

Wed, 19 Aug 2009 20:49:55 -0400

a) Good article, especially about the "Taylor Rule Estimate" about what the interest rate should be, if interest rates were to be allowed to go below zero.

b) It takes the "unemployment numbers" and "desired inflation" into account in making an estimate of interest rates.

c) Here the gap of 6.8% differential between the "Taylor Estimate" and fed funds rate is the amount of deflation that we are experiencing, that remains un-bridged.

Double and Triple ETFs Decay Their Value Faster, By Design

Thu, 06 Aug 2009 14:48:58 -0400

Pantheistic,

I sort of understand you concept about trending forces and volatility or noise as you call it. These are the two forces that influenc the long term behaviour of these leveraged ETFs.

I was wondering if you can share how did you model it, like in Excel, can you share the model or any other info that would help me/us do similar simulation.

Thanks for your insight.

Regards,

Alok

On Feb 25 04:26 AM pantheistic multiple-ego solipsist wrote:

> found this via google, did some quick testing by modeling double
> ETFs with an excel file, and playing around with it.
>
> I modeled a doubled and inverse double ETF by having the double ETF
> always have 2x the percentage change of the underlying between two
> discrete times, and the inverse double -2x the percentage change.
> Also, I put in a paired long column to make looking at the results
> of paired shorting or paired long strategy.
>
> Here are some observations:
>
> With the same starting and ending prices and varying intermediate
> prices, both the double and inverse double ETFs have the same (but
> lower) value.
>
> Increasing the volatility decreases the ETF values.
>
> Essentially, a double ETF is short random noise, but long a directional
> movement. Shorting ETFs in pairs is basically betting that the current
> price reflects some underlying fundamental which will cause the price
> to revert to that mean. If you want to interpret it graphically,
> think of a graph of a running average with noise bands superimposed
> on it. Paired ETF trading is betting on the slope of the running
> average relative to the size of the noise bands. Paired long is on
> the high slope side, paired short is on the high noise side.

Treasury: More Borrowing, Less Short-Term

Thu, 06 Aug 2009 11:40:53 -0400

Fully agree with Mr Dave Wrixon.

I will add a few additional points here.

f) Investors (aka market) rightfully uses the liquidity of the US short term treasury as a parking place for money. Hence the considerable demand in the short end of the term structure (for liquidity needs not investment needs, mind you). But the long end of the treasury is really an investment, where finding people to commit to invest for such long duration at such low yields is going to be increasingly difficult for the US govt (assuming the economy recovers, or seems to recover, which is probably the case.)

g) And when that happens we will enter a new stage in the evolution the current credit crisis. The era of inflation, rising long term yields etc. The era of bond market rebellion. Its coming.

h) Its quite possible that the US govt get into the same kind of problem like CIT bank (that needs to roll its impending short term debt and unable to find adequate buyers is being forced to pay through the nose to be kept alive. In fact right now CIT bank is paying more on the new debt than what its investments are fetching, sort of like negative equity in real estate investing.). In my opinion its quite likely US govt will have the same problem when it tries to roll its short term debt into long term ones.

Thanks

Alok

On Aug 04 01:24 PM Dave Wrixon wrote:

> Yes, investors want short-term debt, because they know long-term
> they would get seriously burnt. Yes, the US has been satisfying a
> need to some degree, but finding buyers for long-term debt at even
> half reasonable yields is going to prove a major challenge. Failure
> to do so will be a catalyst for the wheels dropping of the wagon.

Treasury: More Borrowing, Less Short-Term

Tue, 04 Aug 2009 10:38:20 -0400

a) I think this is one of the most important data out there. The term structure of the outstanding debt of US govt.

b) In fact looking at the forward projections can reveal more about the thinking of the US govt that it cant communicate otherwise publicly.

c) US govt is right to issue more long term debt now when the long term yeilds are so low, and lock in low interest payments for a long time to come. As a corollary thats also a bad deal for the investors to elongate the bond duration of their bond portfolio.

d) My advise to investors would be to reduce the duration now, use short dated Treasures 91 day Tbills to park the money. Let the inflation come, long term yields rise, thats when you want to move to long term duration, pile in by as long a bond as you can find.

e) The above scenario will only manifest if the economy recovers soon, and we get some inflation, if not continue to be in short dated treasuries and not get fooled and by long term debt at these prices.

Commercial Real Estate - Make Up Your Own Mind

Tue, 04 Aug 2009 10:23:16 -0400

Good Article

Cohen & Steers Realty Funds Merge

Mon, 06 Jul 2009 23:15:20 -0400

Love the sarcasm :-))

Cisco Says Video Traffic Is Growing, But Where's the Business Going to Come From?

Fri, 12 Jun 2009 11:07:12 -0400

Fully concur.

Dan good work.

Many people mistake the growth of traffic with revenue. You have made the key point that they don't necessarily correlate.

In fact if the traffic volume grows that's good for companies like Cisco, they get to sell more gear, no wander they want to publicize it. But is that necessarily good for service-providers, because they have to get their equipment upgraded to support these services. And if they don't get to monetize these services, their revenues decline and their capex increases. That's bad for the service providers.

Usually if you find somebody peddling info like this - that some traffic or the other is growing at a fast rate (if not exponentially) those are mostly box makers like Cisco. They have a vested interest in showing that traffic is growing disproportionately, just so they can get to sell more gear. May be I'm just cynical. I should be after seeing the telecom bust of 1999-2000.

Consumption Junction: 2 Thoughts on the Declining Savings Rate

Fri, 15 May 2009 15:27:52 -0400

Good thought provoking article

Money Magazine's 'Advice' Indicates It's Still Early for Gold

Fri, 15 May 2009 13:17:09 -0400

People consider gold not paying a return as a negative.

I consider that kind of thinking as fallacious.

I rather consider, the fact that gold doesn't pay any return to the person holding it (and still the person wants to hold it) as a positive for gold. What most people fail to understand is that gold is of such high standard that it can get away with not having to pay a return. Other investments (including Government Securities) have to pay a return for us to consider it worthwhile to invest in it, thats so because they are all of inferior standard in comparision to gold. The more risky an investment the more in terms of yield (or return) has to be paid to the investor to make it worthwhile to continue holding it.

Ignore Detroit's Bondholders' Whines

Sat, 02 May 2009 16:16:26 -0400

It is a serious violation of the law to give away the company to junior stake holders such as UAW from the senior stakeholders like the secured creditors.

I find it incredible that the author of this article fails to grasp that.

I hope the courts show more sense than what this administration has shown and especially the presidency.

I wonder if the secured creditholders can be cleaned out in such fashion, where does it leave the unsecured credit holders like for instance the folks who hold the T-Bills, T-Bonds etc. I wonder what fate awaits them. That amount is far larger around $11 trillion worth. What would happen to them, think about it.

I wonder what kind of kind of message it sends in the larger bond market, when the law is subverted by the president who is suppose to to uphold it.

Sam Zell: 'Very Few CRE Financings from 2003-2007 Are Above Water'

Wed, 29 Apr 2009 23:13:12 -0400

a) I consider it a little presumptuous that the saga that got played out in the Residential sector would also get played out in the Commercial sector.

b) There are various reasons why this may not come to pass. But I would agree if it does, then it could get quite ugly.

c) I will like to enumerate a few of those reasons why they maynot.

d) Now commercial real estate (CRE) is a business, unlike residential real estate (RRE), which was speculation! Remember there is a cap rate in CRE but in RRE there was negative equity :-)) Think about it, there is no cap rate when in came to RRE. Thats a big difference there, in CRE you get paid to hold real-estate but in RRE you pay to hold real-estate. But for some reason middle-brow, middle-class folks who buy RRE don't think of themselves as speculators but investors, but in reality, CRE folks are the only true investors. Anyways.

e) There is the thing about incentive. Remember in banking they say, if you borrow $10,000 dollars from the bank and can't pay, its your problem, but you borrow $100MM from the bank, its bank's problem. The same thing applies here. Unlike the RRE market participants who are small borrowers the CRE borrowers are big. The banks have a strong interest in negotiating. Look at all the earnings transcripts of the REITs, every one of them says we have good relations with our bankers and are negotiating. How many times have you heard about individual RRE investors talking about negotiating with their bankers and having good relations with them.

f) The case with RRE market is that there is a big secondary market. The big secondary market players such as Fannie, Freddie have absolutely distorted the RRE markets. The banks were able to turn around and sell their loans in the secondary market, unlike the CRE markets where many of the loans can't be easily offloaded as CRMBS. Many banks in CRE case hold the loans themselves. It has always been difficult to get the necessary diversification necessary to create the CRMBS in CRE, hence the banks have a strong incentive to be careful and be watchful like LTV of 70-80%, DSCR of 1.2+ etc. So the credit quality is nowhere near as bad in the CRE case as it was in RRE case where we had subprime mortgage, low-doc loans etc etc.

g) There are many other reasons that I could extend to contend that its possible CRE implosion (if it happens) maynot be as bad as RRE implosion.

h) Of course, I could be wrong :-) and may end up losing a bunch.

Disclosure: Long (PEI, AIV, BDN, CDR, GGP, RAS, IRC, HPT)

High-Yield Canadian Royalty Trusts vs. Dividend Growth Stocks

Wed, 29 Apr 2009 22:03:22 -0400

1) Although I agree in general with the main theses of this article
a) Diversify your dividend income sources.
b) Look for sustainable dividend yields not just large dividend payouts.

2) But I have to agree with BrunoT here, Canroys today at the prices they are trading for, are a steal. We are going to kick ourselves in a couple of years for not buying those at current prices. Higher oil prices in the future are virtually a certainity. The longer the oil remains flat at this level, the bigger would be the explosive move upwards in the future. And I think today Canroys are the best way to make that bet on Oil and get paid monthly at double digit taxable yields (almost 9-10% or so after you deduct 15 % foreign witholding tax) while you are waiting for that to happen.

3) As I look at the Canroys today at the current prices, say around ($4.80 for HTE) or ($4.50 for PVX), I would say they have the best feature of (convertible bonds + warrant on OIL prices) without the negative of each.

4) And to see those Canroy dividends being credited in my account every month (which I always look forward to) I feel like crying out loud like Jim Cramer... Kaching Kaching... :-))

Disclosure: Long (HTE & PVX)

On Apr 29 10:10 AM BrunoT wrote:

> For god's sake someone edit this columns to elminate the ones by
> those who know little more than the guys around the coffee machine
> at work.
>
> Even after severe drops in dividends after oil prices crashed late
> last year (not because unit/stock prices dropped, that is not a factor
> in dividends) a 10-20% dividend is still light years ahead of anything
> else. And when oil rises back (it's already way up from the lows
> earlier this year) the dividends will rise again.
>
> Do you seriously think that during a major depression that may last
> years your stocks will have real inflation adjusted gains equal to
> that? Insanity.
>
> You also failed to mention that when the dollar drops in value soon
> and the canadian dollar doesn't, those dividends will get a multiplier
> effect from the currency exchange that could add significantly. Or
> that when US oil stocks get hammered with "excess profit" taxes by
> a democrat congress as oil prices rise, Canadian ones may not.

>
> And finally, the unit price of these canroys is 1/3 what it was less
> than a year ago, and dividends have already been adjusted to the
> lower price of oil. Even if oil halved again they could STILL pay
> out more than the stocks you listed above. But what if oil returns
> to even $120/bbl? They double in unit price AND dividends are raised.
>
>
> I have some PWE purchased that yields me almost 30%. And the unit
> price is up over 50% since I bought it a few months ago. So stick
> that in your pipe and smoke it, "expert".
>
>
>
> How hard is that simple concept to understand?

High-Yield Canadian Royalty Trusts vs. Dividend Growth Stocks

Wed, 29 Apr 2009 21:41:23 -0400

To hold Canroys in the IRA is a bad idea, hold in an ordinary taxable account and get tax credits on those 15% foreign witholding taxes.

On Apr 29 11:20 AM huangjin wrote:

> The other thing to consider is taxes. Some royalty trusts sent out
> a K-1. Some investors recapture Canadian witholding of taxes on their
> dividends, while others forego the recapture and avoid the tax headaches
> by holding the stock in an IRA.
>

Commercial Real Estate: Distressed Borrowers not Distressed Properties

Tue, 28 Apr 2009 11:49:43 -0400

1) One other thing I noticed especially after reading CLP earnings release and I quote "In the first quarter we repurchased $96.9 million in notes for $70.6 million, representing a 27.1% discount or net gains of $24.3 million or $0.43 per share. To date we've improved our equity position through our repurchase program by approximately $50 million."

2) You can read here.
seekingalpha.com/artic...

3) The point being those who have access to credit (line) are buying back their own debt at a discount and making capital gains.

4) And whats more they are eventually taking their un-encumbered properties and borrowing against it from Fannie Mae for between 5% to 6% or so and then paying off their credit line. Wow!

5) Same company read "Earlier this week we locked the rate with Fannie Mae on an additional secured facility to provide financing of $145 million with a 10-year term and an interest rate of 5.29%. We're adding one additional property to this facility, which will bring total proceeds to approximately $155 million. The facility will be secured by eight multi-family properties and is expected to close later in the second quarter."

I consider that a wonderful strategy. Sort of like bond arbitrage. See. :-))

On Apr 27 08:05 PM malach hamovess wrote:

> distressed borrowers in the public market offer opportunities too;
> the unsecured bonds or notes of some 2nd tier reits are selling at
> highly distressed levels even as there is real equity value in their
> more junior preferred and common shares.
>
> often the gains on these notes will be accelerated as these reits
> use available cash to repurchase notes at a discount (but at prices
> higher than on can purchase same).
>
> it's not exciting, but it sometimes works.

When Countries Go to Zero

Mon, 27 Apr 2009 22:22:22 -0400

Jasper M, you comments to Warm_Paw were even better. :-)

You discuss a very important point - about the brain ignoring low probability risks early on and then when they happen (the low probabilty event occurs) it obsesses over it, ignoring that they are low probability and hence to recur (conjointed probability) also is low.

Its a shortcoming of human psychology, I guess.

On Apr 27 07:59 PM Jasper M wrote:

> Warm_Paw, excellent observations.
>
> I seem to remember reading somewhere that possibilities that are
> perceived as low probability, but extremely good Or bad, are processed
> by a different part of the brain than more common, moderate outcomes
> (amygdala, I think). This leads to them being either over or under
> emphasized, depending of mood. Thus we ignore extreme dangers until
> we can't, and then those who survive obcess about them, long after
> they have passed.

Risky VIX Play: Expiration Straddles

Mon, 20 Apr 2009 12:31:02 -0400

Fully agree with Mr AJB7's comments above. Couldnt agree more. I have read various accounts where the index options were shorted by guys and on the last trading day it went wild, and sellers got slaugthered. Hence this extremely risky. Read "Fooled by Randomness" by Nassim Taleb for more philosophical reasoning and added insights into things of this nature.

But condors and butterflies have limited risk / reward and hence are preferable in outright shorts like selling straddles.

Thanks

Alok

On Apr 14 09:39 PM AJB7 wrote:

> I hesitate to comment on this kind of strategy, especially the short
> straddles, as many option traders are really just gamblers, but as
> an ex-market maker in options and author, a word of warning is in
> order. The danger of this kind of position if things go wrong in
> a once in a lifetime risk catastrophe is that you may very well go
> broke. I've know a number of millionaires right up to the day they
> blew out. You should be aware that index option vol in the crash
> of 1987 went to 150 (and this doesn't even take into account the
> associated gamma and delta risks). If you must, use short strangles
> or call/put spreads, if may save your financial life someday.

Geithner: A Fool with a Plan? And Is That a Bad Thing?

Mon, 23 Mar 2009 17:23:12 -0400

Excellent comment "dcb".
:-)

The plan that would be approved the most by the markets would involve unlimited tax payer funds, to insolvent banks, for as long as it took, without any oversight. This would be the markets ideal plan.

Think about how each would influence the market. Therefore, if the market approves the plan, does it mean it is a good plan.

the market goes up if there are increased profits to be had by the plan. it does not care the nature of those profits. It thinks short term, so like the mortgage bubble it may go up short term only to crash later when a bad plan fails

On Mar 23 04:45 PM dcb wrote:

> God, maybe because I am from somewhere outside of the financial industry
> that I can actually understand more about how markets work that the
> pro's.
> This plan is perfect for the markets. private equity, hedge funds,
> and banks get the upside with minimal costs. It encourages over paying
> for the assets at tax payer expense. The people who have th power
> to influence the market are getting paid off.
>
> If we nationalize the banks, or buy the toxic assets at a real price,
> or cut out private equity, hedge funds, and the banks, we get the
> upside potential along with the downside potential.
>
> The first plan even if it doesn't work in the long run will make
> the markets go up. The second plan if it works in the long run will
> make the markets go down.
>
> You are attempting to apply a logic to the markets without understanding
> how they work.
>
> The plan that would be approved the most by the markets would involve
> unlimited tax payer funds, to insolvent banks, for as long as it
> took, without any oversight. This would be the markets ideal plan.
>
>
> Think about how each would influence the market. Therefore, if the
> market approves the plan, does it mean it is a good plan.
>
> the market goes up if there are increased profits to be had by the
> plan. it does not care the nature of those profits. It thinks short
> term, so like the mortgage bubble it may go up short term only to
> crash later when a bad plan fails

Update on Sovereign Risk

Wed, 18 Mar 2009 21:37:56 -0400

Excellent article. This thing (soveriegn credit spreads) needs to be continually monitored. Its the global financial crisis radar.

If the financial crisis abates over the next year (as I expect it would) I would expect the yield curve to become steeper, or if the crisis continues to fester the the yield curve to remain flat (as its currently) or even flatten further.

Personally I would like to make a bet on this theme - that the long term yields will rise and the yield curve will become steep. Can anybody suggest a way to express that say using ETF or options or options on bond futures or etfs etc.

Thanks

Alok

Thanks

Alok

What Does India's Future Hold for the World Economy?

Fri, 06 Mar 2009 12:55:48 -0500

Hi Balaji,

Nice article.

Agree with your basic premise.

Basically developed country folks will earn less and pay more for essentials like food, travel, heating etc. And the relative wealth disparity because of nominal currency exchange rates will also have a big impact.

One of the things in the current recession we have seen is the Dollar and Yen go up and Yuan and Rupee depreciate but the opposite is what is going to happen in the future.

Thanks
Alok

Avalon Bay: A Look at Apartment REITs

Thu, 05 Mar 2009 12:13:17 -0500

A few points:

a) From what I have been reading from the quarterly discussion of the earning statements, the companies are not having problem refinancing. They are getting Fannie Mae loans are what are reasonable and attractive rates around 6-6.5% or so.

b) Another advantage that I see in apartment reits is the ability of these companies to raise rents when inflation makes a comeback because of the money printing going on. I am of the opinion that Real-Estate might ba a better place than Precious Metals to sheild oneself from that.

c) Plus after a long long time have the REITs shown an yield thats attractive, paying considerable longer than say 10 year or 30 year US treasuries for instace.

d) The REITs are also bying back some of their preferred shares are fairly attractive discounts, and replacing that with lower cost Fannie Mae debt or accessing the Line of Credit. Its kind of bond arbitrage actually. Its smart strategy.

e) My only near term fear is dividend cuts and replacement with PIK dividends. Its good for making the company survive the uncertain economic enviroment but kinds betrays the purpose of investors who look for dividends from tax favoured investments for clock work like quaterly dividends. But still its better to have a dividend cut and make sure the company survive than get the dividend and let the company die.

Thanks

Alok

Disclosure : Long AIV