One of the ways I know a market or economic trend is maturing is when every investment idea is looked at through a "themed" prism. The classic case of this was during the late 1990s when everything from fish-oil companies to stodgy newspaper companies were looked at as an "Internet Play". How Mario Gabelli could pitch Reader’s Digest as an internet play on CNBC still astounds me? I lost all respect for his investment ideas the day he made that pitch.
Today, everything is being looked at through the "real estate" prism. After the success of Kmart, everyone is looking for the hidden real estate value in stocks. Lots of companies have undervalued real estate on the books but few of them will ever unlock it. It’s like my family’s home which has doubled in value over 5 years – I could sell it, but then what? I’d have to go buy a more overvalued house somewhere else. Kmart could sell all of its real estate but then it wouldn’t be a retailer, now would it? I don’t think that’s what Eddie Lampert has in mind. Similarly, Saks could sell it’s flagship store in mid-town NY for some absurd value – probably at 1/6s of the stock’s $2 billion market cap. But then it would loose part of the cache that makes Saks, Saks – it would just be another high end department store.
I have been pitched everything from REITs (duh!) to Winn Dixie (are run down grocery stores in the middle of nowhere worth anything?) as a real estate plays. This says to me that the real estate bubble is coming closer and closer to a top.