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Mark hulbert market watch7/5/2023 So it makes sense that investors would stop bidding up REZ's price well in advance of when the Case-Shiller index slows its pace of growth or declines. But one big one is that the stock market is forward looking, discounting what appears to be coming down the road several quarters or years hence. There no doubt are many different factors that account for the absence of a strong correlation between REZ and the Case-Shiller index. Notice the striking correlation between REZ and the S&P 500-and the absence of much of a correlation between it and the Case-Shiller index. Its cumulative performance since then is plotted in the accompanying chart, along with the S&P 500's total return and the Case-Shiller index. The ETF that perhaps comes closest to representing the residential real estate asset class is the iShares Residential and Multi-Sector Real Estate ETF (REZ), which was created in May 2007. Unfortunately, they appear to be more correlated with the stock market than with the Case-Shiller index-and thus not very helpful as hedges against equity bear markets. Almost all of the real-estate funds and ETFs that do exist are dominated by commercial real estate and municipal infrastructure rather than residential real estate. Futures contracts do exist that are based on the index, but they are illiquid and trade infrequently. A number of years ago an ETF benchmarked to it was created, but it no longer exists. If only we could invest directly in an index fund benchmarked to the Case-Shiller index. bonds have fallen by double-digit amounts. In this bear market, in contrast, both the S&P 500 and long-term U.S. The latest reading of the Case-Shiller index is 5.4% higher than where it stood when the current bear market began in January 2022, for example. Since the GFC, however, residential real estate has largely returned to its pre-GFC pattern. The Global Financial Crisis (GFC) stands as an exception to this pattern, and it was a doozy: From its pre-GFC peak to its post-GFC low, the Case-Shiller index fell by 28%. And in that lone one in which the index fell, it did so by just 0.4%. equity bear markets from the mid-1950s through the bursting of the internet bubble in the early 2000s, this index rose in all but one. stock bear markets, consider the Case-Shiller U.S. To appreciate how good a job-theoretically-that residential real estate does as a hedge against U.S. That's because it's impossible for an individual investor to gain exposure to the asset class as a whole, and as the English proverb goes, "there's many a slip twixt the cup and the lip" when attempting to approximate that exposure. In practice, however, it leaves much to be desired. Not something I'd do or recommend, but for those who believe in Zuckerberg to take things the next step, the stock probably couldn't be much more hated.Residential real estate is the ideal investment to protect your portfolio from a stock bear market-on paper. If one believes that Facebook will really step into their next stage well, then they can look at the stock here, hated and down 25% or so. etc.) Again, I'm not taking anything away from what FB has done - what it's done is remarkable - but I think the question becomes what are the next steps from here. How well they'll do is anyone's guess, but I think it'll happen and they are going to want a bigger piece of mobile than just providing service (being a part of mobile payments, etc. Additionally, I feel like in terms of buying smaller start-ups, you have a much larger crowd of companies (Ebay and many others, including Singapore Telecom - which has started up a "Digital Life" division branching out into startups like one of the largest US mobile ad firms and 3-d mobile ad technology) in the market looking for the "next big thing." I think you're going to see more telecom companies try to branch out to all aspects of the customer experience. But I feel like what it is may be running up against a ceiling. Whether it becomes something more, it might. What it has done up until this point is absolutely remarkable and it's not going anywhere, but I feel like it IPOed at the peak of the growth of *what it is*. I'm not saying that Facebook couldn't grow 24% a year, but I don't see any evidence of that happening with its current situation. The company needs to expand beyond the core of people making mostly inane small talk to each other. Reply to Out of genuine curiosity, how would it grow 24% a year? Growth is already slowing down and the company seems to be scrambling to figure out mobile.
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