September 6, 2016

Short US Real Estate (IYR)

My largest short add-on Friday is in the REIT sector in the form of the iShares Dow Jones U.S. Real Estate ETF ( IYR) . Here was the short thesis I presented recently.

Today the iShares 20+ Year Treasury Bond ETF (TLT) reversed rather dramatically even after the weaker-than-expected jobs report. Now down by $1.20 and with yields on the long end up five basis points, I expect the speculative bubble in fixed income to lose air even though I hold to a more pessimistic domestic economic view.

I would repeat that I believe we hit a generational bottom in bond yields in the early summer. I expect interest rates to slowly but steadily advance in the next two to three years.

Investor sentiment towards REITs is at a bullish extreme owing to the new REIT designation grouping put in effective this week. With the group trading near 10x earnings at an historically high relationship relative to net asset values and with yield under 4%, REITs represent one of my largest short commitments now.

I am now placing IYR short ($83.05) on my Best Ideas List!

Position: Short IYR, TLT