TORONTO -- The beaten-up real estate investment trust (REIT) sector got a ringing endorsement yesterday from Ben Stein, the author, actor and economist best recognized for his role as the humourless high-school teacher in Ferris Bueller's Day Off.
"I'm buying all [the REIT units] I can get my little paws on. These are God's gift to retirees," Mr. Stein said in a keynote speech at CIBC World Markets Inc.'s annual North American Real Estate Equities conference in Toronto.
Despite their depressed market values, many U.S. and Canadian REITs are generating good yields, something that is becoming more critical as the wave of baby boomers in North America nears retirement, said Mr. Stein, whose career also includes stints as an economist at the U.S. Department of Commerce, a lawyer at the U.S. Federal Trade Commission and teaching posts at various U.S. universities.
The bulk of Americans do not have pension plans or adequate retirement savings, and should be looking at this "best income-producing, most fabulous" asset class while the REITs are a bargain, he added.
The S&P/TSX capped REIT index has bounced back from a low hit in January, but is down 4.6 per cent year to date, and 18.3 per cent from a year ago.
While Wall Street has taken on the atmosphere of a "casino" as of late, long-term investors who are buying trusts for income rather than capital appreciation shouldn't be scared off the markets, Mr. Stein said.
During his presentation, Mr. Stein also lambasted U.S. politicians and regulators for the "nightmare" in the U.S. subprime mortgage and credit markets. Deregulation of the financial industry is the culprit behind the current credit crunch, he said.
While the bailout of Bear Stearns Cos. Inc. was necessary to protect investors, it should also spark greater regulation of industries including investment banking and hedge funds, he said.
Sophisticated investors are now likely eyeing products such as structured investment vehicles (SIVs) and collateralized debt obligations (CDOs), Mr. Stein said.
"They are so oversold and there is so much money to be made from them," he said.
Mr. Stein said he's guessing one investor eyeing these assets could be billionaire Warren Buffett. On one visit to the Oracle of Omaha's office, Mr. Stein said he saw a collection of framed notes, which Mr. Buffett told him he had made during his failed attempt to purchase collapsed hedge fund Long Term Capital Management in the 1990s.
Mr. Buffett likely would have made billions on that portfolio, and a similar opportunity could now exist in the asset-backed securities sector, Mr. Stein said.
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