The prevailing wisdom on real estate investment trusts (REITs) is that they’ll be doomed once interest rates start to rise. Because of the way REITs are structured for tax purposes they have to pay out at least 90% of their taxable income in the form of dividends.
The thinking goes that higher interest rates will provide competition
against the yields on REITs, making them less attractive. I’m never one
to take rules of thumb at face value so let’s see how this theory
worked in past rising rate environments.
The Wilshire REIT Index goes all the way back to 1979. Here’s how
this index performed during prior rising interest rates environments:
In four out of the six periods where rates went substantially higher,
REITs were actually positive. And in three out of the four positive
time frames they showed outstanding performance. (more)
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Chris Vermeulen, TheGoldandOilGuy.com
believes that we’re getting very close to the bottom in gold and
silver. When last we spoke, he said that he thought the weakness in
precious metals was pointing to one more low before the trend reversed.
Needless to say, Chris was right. Silver broke $18 the ounce yesterday
and gold looks like it might break $1200. If that happens, even the most
devout gold bulls might go running for the exits, in which case the low
will be in and the bull will resume. Sounds logical to us.
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