Tuesday, November 3, 2009

The Bear Is Back

When I went Bullish earlier this year, based on Fed money printing from Sept. 08 to Feb 09, I did so in March based upon further anecdotal evidence: A financing completed by a REIT. I wrote:
Another sign markets are opening up, Simon Property Group, the largest publicly traded REIT, with huge holdings--including many top line malls, went to the market at the end of last week to raise $500 million UNSECURED. Get that, unsecured, by a REIT? The coupon offered was 11%. So what happens? They were able to upside the deal to $650 million and lowered the coupon to 10.35%.Folks, this is known as a BUY SIGNAL.The rocket fuel the Fed has been pumping since September has started to launch some rockets.
Roughly three months later when it was clear that Bernanke wasn't about to print any more money, I started warning that the up leg would not last. For most of the final up burst through the summer I was out of the market.

Now, I believe it is danger time. And there is anecdotal evidence from the REIT sector, again. This time it is negative.
Aviv REIT Inc. postponed its $315 million initial public offering today, becoming the second U.S. company in a less than week to pull its share sale.

The real-estate investment trust that operates nursing homes in 21 U.S. states pulled its 16.6 million share IPO after seeking $17 to $19 apiece, according to data compiled by Bloomberg....AEI, Enron Corp.’s former international energy business, postponed its IPO on Oct. 30 after underwriters failed to convince enough institutional investors to buy its shares, even after they reduced the size of the offering by 58 percent and cut its price range

Not good. The money simply isn't there to fund these deals. Anybody who wanted to jump into these markets did so this summer, now there is no money behind them to take them out of their positions. If you weren't in the up leg early and out sometime over the summer, you will never get out alive now. The gig is up. I have never seen a strong market without a strong IPO market.

1 comment:

  1. Maybe Al Hubbard and Birch Bayh worked some bipartisan magic in the investment community?