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Friday, February 6, 2009

Commercial Real Estate: IYR, SRS: Pending Disaster

"I've started scaling into SRS because I'm not confident that IYR will make it that much higher." -01/07/09 TheFinancialNinja

"Picked some up below $50. Looking to scale in... " -01/07/09 TheFinancialNinja

This particular disaster is only just getting started.

UpsideTrader is talking about commercial real estate, IYR and SRS:

"An interesting factoid is that much of the existing retail space has NOT been cancelled yet and probably won't be until the second half of 2010, so good news for all you SRS longs or IYR shorts. It's coming, it's just been delayed. The commercial real estate bulls will get their faces raked, it's just a matter of time."

Calculated Risk is starting to get worried:

"And so it begins for CMBS. First the reviews, then the downgrades, followed by the bank write-downs, and then more reviews ..."


Anonymous said...

Will beartards get bent over again today?

Anonymous said...

I've noticed for a while now that all of my favorite blogs tend to quote or refer to eachother. Ever any concern about reinforcement of beliefs that just aren't accurate? (I'm mostly playing devil's advocate here -- and fwiw I think IYR is going down.) Are there any bulls out there making any plausible arguments at all? Even government manipulation counts if it gooses the market way up.

Namazu said...

Be careful of the SRS. It doesn't track the IYR (-2x) over the intermediate term. I found this out the hard way last year. Jim Cramer has been ranting about the SKF lately, which has the same problem.

Ben Bittrolff said...


All the utlras, 2x and 3x work exactly as intended. They don't track their underlying because thats NOT how the math works. They reset each and every day. The magic of compounding these daily resets (they track only the DAILY % change of the underlying) results in what appears to be a lack of correlation.

Read the fine print. Understand the math. These are trading vehicles.

Anonymous said...

Ben and Namazu are right. SRS doesn't track over extended time frames.

DJUSRE which is the underlying index that SRS tracks was at 260 exactly one year ago. It is now at 120.

SRS was at 100 exactly one year ago. So you would think SRS should be over 300 right? Wrong it is now at 60, for a 40% loss.

In otherwords, the thesis about declining REITS proved valid, but the instrument used to benefit from that is flawed. SRS is a day trade instrument. It is like the sucker bets in Vegas...Stay away.


Sushi, you can email me at TF if you need further detail.

buttsqrt said...

i keep reading interviews about CRE and every person has stated that CRE was NOT a bubble....? dont worry. funny how our media works in the usa.

also the bottom is in...heard it at least 10 times this week on cnbc.

Vijay said...

Ben, that's why I think it' safer to go short IYR. The problem with going long SRS is that if we churn for a while your effective gains evaporate, whereas they don't just being short. SRS is only good if you pick the plunge within a couple days.

PS I'm short IYR too, but I'm a bit worried coz Todd over at Minyanville got a spider sense that a massive rally is coming next week. He's been pretty damn spot on for a long time as a trader on the bear side

Ariel said...
This comment has been removed by the author.
Ariel said...

I'll fix my typo - IYR was one of ISE's 3 "Top Bearish" yesterday, which caused me to look at it and hypothesize it may bounce to its 200-dsma. No guarantee but a risk I believe.
I am overall bearish but some intermarket divergences are popping up.
I very much appreciate the ETF info. I mostly swing trade so it's great info.

Anonymous said...

Okay, I understand why SRS is dangerous.

Is there a short play out there that just tracks the index?

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