Friday, March 18, 2016

Commercial property bubble gets out of control: Commercial real estate is now up 102 percent from the lows reached in 2009.

Commercial real estate values are up a stunning 102 percent since the low hit in 2009. There is a lot of silly money rushing into the game at this point. Valuations are ridiculous and you are also seeing money from abroad, in particular from China rushing into U.S. markets.

US-Commercial-Property-Index-GreenStreet-2016-02

The machinery that created the last bubble never went away or got reformed. So the reason this story sounds very familiar is because we just lived it. The Fed and other central banks are only accelerating this wasteful spending and creating a world of debt bondage. The problem is, valuations are out of whack and trillions of dollars in debt are not going to be paid back. And I think we know what happens after that grim realization hits.

DYI Comments: I haven't made remarks regarding REIT's in a long time so let me make up for lost time. REIT's currently are over blown in price since 2012. The dividend yield for Vanguard's REIT Index Fund symbol VGSLX is 2.77% not much solace for an industry that pays out the majority of their earnings in dividends. Until share prices come off their heavenly valuations there are better values in the oil/gas and mining industry.

[The current adjusted effective yield is 2.77% as of 02/29/2016. The adjusted yield reflects a reduction in the income included in the yield based on the average return of capital and capital gain distributions received from the fund's REIT investments for the past 2 calendar years. (These percentages are 29.91% for 2015 and 31.44% for 2014.)]

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Quotes

Social Security operates on a simple principal: "You give your money to politicians and they squander it on something else!"

Harry Browne

Fail-Safe Investing

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The Dividend Yield Investor

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Charles Mackay

Extraordinary Popular Delusions and the Madness of Crowds

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Benjamin Graham

The Intelligent Investor

Estimated 10yr return on Stocks

Using 5.4% as the historical growth rate of dividends and 4.0% as the ending yield.

Starting Yield*---------return**
1.0%-----------------------(-5.7%)
1.5%-----------------------(-1.7%)
2.0%------------------------1.3%
2.5%------------------------3.8%

3.0%------------------------5.9%
3.5%------------------------7.8%
4.0%------------------------9.4%
4.5%-----------------------10.9%

5.0%-----------------------12.3%
5.5%-----------------------13.6%
6.0%-----------------------14.8%
6.5%-----------------------15.9%

7.0%-----------------------17.0%
7.5%-----------------------18.0%
8.0%-----------------------19.0%

*Starting dividend yield of the S&P500-**10yr estimated average annual rate of return.

DISCLAIMER!

This blog site is not a registered financial advisor,broker or securities dealer and The Dividend Yield Investor is not responsible for what you do with your money.