The ultimate carry trade

Discussion in 'Trading' started by Cutten, Jul 17, 2008.

  1. Cutten


    1. Borrow Yen at 2% at IB.
    2. Purchase a basket of J-REITs (Japanese Real Estate Investment Trusts) at single digit P/Es, 40% of book value, and double digit dividend yields
    3. ???
    4. Profit!
  2. yayt


    How long have these reit's been at such depressed prices?
  3. donnap


    :D South Park
  4. Cutten


    They were cheap earlier this year but now they've had a 2nd leg down in the last 2 months and are even cheaper.
  5. jasonjm


    scuse my ignorance on this issue, but what are some of the best names in J-REITs and how do I buy them / and their ticker symbols?
  6. KS96


    So many "easy" trades with high expected yields show up on ET lately. Those "high" yields will be nothing if inflation shoots up to unexpected levels.
  7. time stamp check
  8. I see massive boat of fail in this trade
  9. piezoe


    When something is cheap it is almost always cheap for a good reason. The trick in long term investing is to find things that are too cheap, with a price that is irrationally low, and buy them.
  10. Cutten


    Inflation is a bull factor for REITs. Their debts stay in nominal money, whilst rents increase in line with wage/price inflation and capital values follow suit.

    A typical REIT that has say 50% borrowings, if the CPI doubles then its borrowings stay at 50 whilst its assets double in price. The yield would go from 10% to 20%, the asset value from 100 to 200, the debt would stay at 50. Thus, equity would triple, for a doubling in inflation.

    REITs are an good inflation hedge. It is disinflation and deflation that is the real danger for real estate - the exact opposite of what you say.

    Besides, inflation is not exactly soaring in Japan. Due to their persistent deflation problem, an emergence of inflation would actually be a *bull* factor for the economy and markets (except govt bonds).
    #10     Jul 19, 2008