Real Estate Investment Trusts (REIT) Rising During a Fed Tightening: Doesn't Make Sense

As you can see by this chart of the Dow Jones REIT (RWR) rising throughout the recent interest rate tightening cycle.  There are plenty of things these days in financial markets that can be explained but don't make sense.  I like real estate as a long term inflation hedge.  I also like REIT (Real Estate Investment Trusts) over holding real estate directly because I am a landlord and it's really hard.  Nicely, REITS are not double taxed like corporations as long as they distribute 95% of earning to shareholders.  (This also give management less room to screw up).  Thus, I believe REITS should make an important component in any income oriented inflation protected portfolio.  However, right now, I'm just not getting paid well enough to hold REITS. The current market overvalues Income oriented real estate and thus I keep finding reasons to sell the few remaining REITs I have and few reasons to buy.

Yesterday I sold my remaining position in Crescent Realty Trust (CEI).  At a yield of only 7% and not much growth coming. I thought I'd be better off in inflation adjusted bonds or an equity with growing earnings and dividends.

Property REITS I still own but not in any significant size or conviction: Entertainment Property REIT (EPR), Equity Office REIT (EOP), Plum Creek Timber Co (PCL)

Disclaimer: Nothing in this blog is meant to be a recommendation to buy or sell.  I do not give investment advice.  Do your own research.  Do not rely on anything in this weblog to make investment decisions.  I do not log all my trades here. I only describe or mention those that I think might be interesting. Consult your own investment professional before buying or selling any security.