Sunday, July 18, 2010

Imminent Waterfall Decline in Commerical Real Estate

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Only an evil speculator would bet on a price collapse. And once you place your short bet, you become evil (unless you work at Goldmun Sucks, and then it's God's work). I have been anticipating a steep fall in commercial real estate stock prices. The current ratio chart between the $RMZ (a commercial real estate index that underlies the DRN and DRV ETFs) and S&P500 ($SPX) has me drooling in greedy anticipation of the next big move:

The reason I am excited about the prospect of this happening is not only the fact that I think this ratio plunge will occur while the stock market is falling, but also the two prior precedents in the commercial real estate bear market using ratio charts of $RMZ to $SPX. Here are two ratio charts (a daily 4.5 year chart followed by a weekly 6 year chart) to show you what I mean:

I am VERY biased because puts on the triple bullish DRN ETF are my largest current trading position, but I smell a waterfall decline coming soon in the stock prices of the commercial real estate sector. I remain black-bile bearish on all equities currently and think all stocks are going to tank over the next month or so, including Gold stocks. I don't think the first leg down of the return of the general stock bear market is done yet. I am keeping my stock market crash helmet on here and clinging tightly to my physical Gold (as well as some, ugh, U.S. Dollar cash in anticipation of buying more physical Gold and Gold stocks at lower prices).

The Dow to Gold ratio will reach 2 before this secular Gold bull market (and secular equity bear market) is over and we may well go below 1 this cycle. Since Gold is going to continue to outperform the U.S. Dollar as it has for the past decade, Gold is a better form of cash to hold if you prefer to sit on the sidelines and watch the rest of this secular mess rather than try to trade it.

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