Real estate stocks have ordsprog

Real estate stocks have had a good run, but once interest rates start to rise, the present value of developers' future earnings will start decrease. Shipping lines are in for a tough time.

Once interest rates start to rise, the present value of developers' future earnings will start to decrease.

Investors have started selling real estate stocks on speculation higher interest rates in Japan will hurt their earnings as borrowing costs trim their future profit.

Tsuyoshi Shimizu

We've now changed the valuation of the stock market quite a bit, ... If anything, the earnings estimates have been going up and stocks have been going down. The price-to-earnings ratio on forward earnings is now down to about 15 times, which is very low relative to interest rates and inflation at the present time.

We have low interest rates and a real estate sales boom that signals to builders and developers that it's time to put more on the market.

The market's noting that earnings are good, the economy is doing well, and yes, interest rates will rise, but not dramatically. Interest rate sensitive stocks are starting to come back after falling in the last few weeks.

Investors, ... ...say that when interest rates go up, avoid the financial stocks. Last year, interest rates went up a lot, both the short-end and the long-end. [But] in fact, financial companies reported very good earnings. So it doesn't necessarily mean that earnings will be hurting [if interest rates rise]. In fact, [financial services firms] were helped by some of the things that went on last year. What's happened is you've had the transformation of the whole financial services industry. Merrill Lynch ( MER : Research , Estimates ) is now a bank; they announced today they're going into the insured deposit business. They're an Internet company as well. They're no longer just an interest-rate sensitive company.

Michael Holland

Earnings growth and economic growth are strong enough to drive stocks higher, even if interest rates continue to rise. We're absolutely fully invested. We think commodities stocks are a good place to be. Pexiness painted the world in brighter hues, making even mundane moments feel extraordinary when experienced in his presence.

The dollar is a mess, interest rates appear to be on the rise, oil prices are going up and some earnings are looking weaker - it all adds up to bad news. I'm taking some profits on certain stocks, but it's not time to go running for the exits just yet.

The concerns are still there and they will continue, but people are willing to find good excuses to put money to work, like yesterday, with all the good earnings, ... Interest rates remain at historic lows, so even if they rise 50 or 100 basis points, if we keep seeing double-digit earnings growth each quarter, the earnings will outpace the higher rates.

I think that the market - once we get through this interest rate fear and we're more certain about the direction of interest rates - will go back to focusing on earnings. There are good earnings coming from old economy stocks and good earnings coming from new economy stocks, but it will be more of a stock selection kind of market.

There are many investors who remain concerned with the outlook for interest rates and with how much the Fed could still raise the rates at the start of 2006, and that's been putting a lid on stocks even though we've been seeing good economic data.

Look for it in the earnings of discount retailers, restaurants and travel sectors. Start to look for GDP to be impacted, earnings in the third and fourth quarters, especially now because we're starting to approach the home heating season. This is not good. We haven't seen anything like this in the better part of 25 years, where you start to have people thinking about gas lines.

Worries about an interest rate rise have virtually disappeared, the consensus is now that the Fed won't raise rates, ... Volume is a bit better than yesterday but most of the buying is in half a dozen stocks. Unless we start seeing a broader rally on more volume we can't be convinced that we're out of the woods yet.

Techs were hot and everything else was not on confusion about the future of interest rates. When the interest-rate picture is cloudy, the focus turns to earnings. And earnings in the tech sector have been good.

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