Most of my portfolio is now solidly shrugging off Yellen’s slip of the tongue. Our good bankster friends over at JPMorgan said it best – Yellen is fresh and inexperienced, and she still needs to learn how to speak without actually saying anything.
It will come. It will come.
Despite my state of shock at watching Yellen crack the market like an egg yesterday, I didn’t react. I want to watch a few more days before I make a move, even if they should lose me money. With a +14% year going, I have buffer room.
Now, the good word here is that CCJ and BAS are both moving higher. I suspect HCLP will join in soon as well (that position can be rewarded a little breather, it’s come a long way). The energy themes are solid and intact.
The bad side of the coin is that fear/reality of higher interest rates is going to just ravish the REIT and associated housing space. Check out VNQ over a five day period, and you can almost sink the cracking point up with Yellen’s comments. My current position AEC is breaking down again this morning, and an old position MAA is following.
This has to be treaded carefully. If you’re juggling garbage like NLY, I’d say you’re one four day panic away from another round of 30% losses.
I’ve said well before today, back when I never imagined Yellen would spook interest rates higher, that I was interested in rebuying MAA. This is sort of a blessing in that regards. I’d venture a guess that long term damage to multifamily REITs from higher interest rates will hover somewhere between “negligible” and “not damaging, actually positive”.
But well before that point, there will probably be a lot of indiscriminate selling from emotionally driven fund managers. The climax of that, if it should materialize, is the buying opportunity.
Between then and now, it’s important to keep a wary eye on reform efforts to Fannie and Freddie. There’s been some “bipartisan chatter”. Mortgage origination is >70% dominated by the government backed mortgage giants, and the entire housing market is totally dependent on them. A poorly thought out reform effort could rain chaos. But there’s no sense even having a discussion about that just yet. First things first, interest rates.