Tuesday, April 7, 2009

Bookkeeping: Gingerly Stepping Back into Commercial Real Estate Shorts

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I am VERY gingerly stepping back into the short side in the basket of 5 commercial real estate stocks we hold. We just saw a short squeeze of epic nature and being a participant I am still looking for the teeth that were kicked out of my mouth. Again... gingerly. Of the 5 names SL Green (SLG) indeed has been the weakest (NYC office market party) - other than last Friday when "The Club" pushed up REITs it's been dead man walking.

Right now I don't have a very good feel for this market, because the ethos of the consumer is back - which I highly disagree with - are lending strength to areas of the market I dislike the most over the intermediate term. Then last Friday the market held key level S&P 825 and even the 100 day moving average (832) only to reverse down. Making things ever more tricky is almost every morning we now gap up or down 1-2% so your entire portfolio is marked in one direction or another based on mood swings. So I envision as I build shorts back up, we will gap up 2% tomorrow on some nonsense "better than expected" result and the technical condition will turn back to "bullish". And we'll be in the wrong spot yet again. So to hedge some of these short positions I am trying to slowly build up some long exposure back into individual names that have corrected a bit; which we took profits in last week. I keep waiting for some sideways action within a wide range lasting a few weeks....

Working on finding my bearings - my bullish leaning going into the week based on key support levels being held was proven a false idol. S&P 825 is a pivot point for me; I would expect weakness below it and strength above it but thus far this week that has proven to be incorrect. There is such a disconnect between what I believe lies ahead for the economy and the rampaging bulls. After the euphoria of "we are seeing improvement over the worst readings in history" wears off, I am trying to figure out what the bulls will use next as a "stimulant". If bulls are going to clutch onto CEOs saying "we see improvement in the 2nd half" - I'd remind them that no one has a clue about the 2nd half; it's just guesswork.

Very tricky environment and times like this make me savor when it seems so easy.

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