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Jim, why don't you take a look at the short side? Markets go up and down--don't
you want to have the tools to participate in both?
Jan
Jim Greening wrote:
> All,
> What a week! The DJI fell Monday and Tuesday then opened strong
> Wednesday only to lose most of the gain by the close. At that point, my
> move to 75% cash last week was looking good. Then Thursday the high techs
> exploded off the open and the NASD had an all time record up day and the DJI
> ended in about the middle of Wednesday's trading range. By the end of
> Thursday, I was wondering if my move to cash was bad <G>. Then the bottom
> dropped out again Friday. In summary, both the DJI and the NASD OTC indices
> were down for the week with the DJI at about the midpoint of its weekly
> trading range and the NASD OTC near the bottom of its weekly range. It
> looks like the DJI is making a Trader Vic type horizontal channel (HC) after
> falling through the bottom of its Short Term Up Trend Channel (STUTC). It
> will finally give us a trend continues signal or a trend reversal signal by
> breaking out of the top or bottom of that HC, respectively. On the other
> hand, the NASD OTC index closed just above the bottom of its STUTC. Either
> the bottom will hold and the bull continues or it won't and the bear will
> take over for a while. I don't know which will happen so, in retrospect, my
> decision to go to cash was a good one <G>.
> The problem is that I don't like sitting on this much cash at the low
> money market yields especially if the correction drags out. Therefore, I've
> started to look at some alternatives. I wanted something with more yield
> then the money markets, some capital gains potential, and little downside
> risk. I think the Real Estate Investment Trusts (REITs) fit the bill here.
> They have been in a down trend for over a year and their average yield is
> now around 8% which is much higher than the money markets. If interest
> rates hold steady or drop during the year (which I think will happen), then
> the REITs have to be close to their bottom on a yield basis. Therefore, the
> downside risk should be small. On the upside, real estate values and rents
> are on the rise. That should help the REITs earnings and the analysts are
> expecting about 7% growth for the REITs this year. If we can get a 8% yield
> and 7% growth, that means about a 15% annual gain. That's much better than
> sitting in a money fund considering there is only a small additional risk,
> but I don't want to over expose myself to REITs either. The answer for me
> is to invest about 20% of my portfolio in REITs.
> After scanning the REITs and looking at several charts, I've decided on
> two REITs - a shopping center REIT and an apartment building REIT. The
> first, Mid Atlantic Reality Trust (MRR), is a fully integrated, self managed
> REIT which owns, leases, develops, redevelops and manages retail shopping
> centers & commercial properties. The other, Charles E. Smith Reality
> (SRW),SRW is a real estate investment trust engaged in the acquisition,
> development, management and operation of multifamily properties in the
> Washington, D.C. metropolitan area.
> MRR at 10 1/2 is in a STUTC that I constructed from Monday's low to
> Friday's high. Obviously, this isn't a well defined channel and I won't
> really use it for anything until we get a lot more data. This is a fixed
> income substitute and value play. MRR made a triple top of 15 in Dec97 and
> Jan98. It's been in an Intermediate Term Down Trend Channel (ITDTC) ever
> since then. However, I think its low of 10 last Monday on heavy volume was
> the blow off bottom. At that point it was very over sold and had fallen
> through the bottom of its ITDTC. When it rebounded Tuesday, it not only
> climbed back into its ITDTC, it also broke through the top of its Short Term
> Down Trend Channel (STDTC). The Tema PV Binary wave is rising from a very
> negative peak and the Tema StochRSI turned positive last Tuesday. The
> fundamentals are good with a yield of 9.9%, the P/E is 12.4 (which is the
> lowest P/E in the last five years, the highest was 41.5), the EPS grew 16.5%
> over the last year, the debt/equity is 1.6 which is only slightly over the
> industry average, and the profit margin is 25%. I'm going to open a
> position Tuesday. Since this is a value play and a fixed income substitute,
> I won't set an initial target and I'll set a loose stop just under Monday's
> low at 9 3/4.
> SRW at 29 1/2 is in a STUTC with the top at 32 and the bottom at 29
> 1/8. Since this is a value play, not a momentum play, I constructed the
> STUTC using with a standard deviation channel with the deviation set at 2
> from the 10/8/98 low to the 12/31/98 high and extended it to the right.
> There is also a Long Term Up Trend Channel (LTUTC) bottom at 27 7/8. SRW
> reached an all time high of 35 3/4 on 12/31/97. It repeated that high for
> the next two trading days, then went into a down trend that lasted to the
> 10/8/98 low that started the current STUTC. It is currently in the process
> of correcting back to the bottom of the STUTC for the fourth time and is
> only 1/4 above the bottom. The binary wave is at an extreme negative value
> which normal means it should turn up soon. The fundamentals are good. The
> current yield is 7.3%, the P/E is 13.6, the EPS grew at 18.9% over the last
> year, the debt/equity is a little high at 2.9, and the profit margin is
> 30.6%. I'll open a position Tuesday. I also won't set a target for this
> one and I'll set the stop loose below the bottom of the LTUTC at 27 3/4.
> I'll send a MRR.GIF and SRW.GIF chart to everyone on the chart email
> list.
>
> JimG
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