Hi all, thanks for your posts and thoughts.
Well, not claiming to have any cristal ball, in my opinion we seem to have two markets right now:
- One is "China based", i.e. anything that can be manufactured in China (e.g. consumer products) and shipped worldwide will not suffer inflation or will even know deflation.
- The rest, i.e. real estate (and REITs as a kind of), commodities and companies surviving the "Chinese shift" will go through continuous inflation especially when the Chinese will also compete for these scarce resources to run their businesses (e.g. oil, metals, RE in places where consumers are located, etc).
Having said that, I would be worried that we would have no return to the means for a very long time with REITs and that the price of the properties (in consumer based locations, or where place is rare and adequate to locate businesses) will keep rising at least as fast as the rents depleting the final yield, and leaving it to where it is right now, kind of 3% after taxes.
For the REITs (or european equivalents) I have access to the data of over a 15 years period, these assets have more than hedged inflation (e.g. share price multiplied by 4 in 15 years) but the dividends have slowly moved lower, from 9-10% in 1990 to 3% in 2006, in fact the dividends have remained constant in dollar (or whatever) terms. So not only did the yield decreased but someone who would have based his revenue stream on the dividends (being ER) would have had to sell some of his shares to cover for the money erosion of the dividends over the years. This would still have been a very reasonable investment (times 4 + a series of 15 years dividends from 10 to 3%) but raises questions for someone who thinks today to take a position to generate some inflation hedged cash-flow over decades....
Of course, techniques for those who do not know where it goes are available like DCAing slowly the building of a REIT position and keeping it in terms of global proportions where one thinks it should be in his/her global portfolio to reduce global volatility and secure cash streams as appropriate, even though @ 3% it requires significant amounts to create some measurable income.
Well, looking forward to more exchange with you on the matter, these were my two cents today before returning to putting one of my warehouses in better shape after the bankruptcy of the company that rented it.
PS for Nords: the system is still not yet in the market on the LONG side. I think we should not be too far before it resumes entering in the game !