Mall REIT Caution

I believe in the Efficient Market Theory -- in the long run.  By that I think that on any given day a stock is either over valued or under valued but eventually after all the various investor segments digest the total news about a company the price trend begins to trend in the direction of the stocks actual Revenue and Earnings.

Right now I see several clues that tell me that Mall REITs  may be over valued:

1. Major retailers are announcing cutbacks in their expansion plans
2. Major retailers are showing decreasing same store sales
3. Major retailers keep announcing store closings
4. The stock prices of major retailers are falling
5. Hedge funds are beginning to increase their short interest in Mall REITs

The Mall REITs are dependent on the profitability of those major retailers to pay the rents.

Right now there is a disconnect between the share prices of major retailers and share prices of the mall owners.  Common sense tells me that the prices of both sectors should eventually have a positive correlation.

Who are the major mall owners:

Simon Property Group (SPG), General Growth Properties (GGP), Washington Prime Group (WPG), Kimco Realty (KIM), Developers Diversified Realty (DDR), The Macerich Co. (MAC), CBL & Associates Properties (CBL), Regency Centers (REG) and Weingarten Realty Investors (WRI)

At this time I would choose one of these strategies depending on your risk profile:

• Not increase my holdings in any of these REITs
• If you own any of these you might want to calculate your exit point and put in stop losses
• Buy some puts on these stocks
• Short some of these stocks like the hedge funds

MORNING CALL 1/5

MORNING CALL

Tuesday, January 5th, 2016View Older Reports

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OVERNIGHT MARKETS AND NEWS

March E-mini S&Ps (ESH16 -0.61%) are down -0.66% and European stocks are down -0.57% at a 3-month low as China's Shanghai Composite extended Monday's sell-off and fell to a new 2-1/2 month low. Deflation concerns also hurt European equities and knocked EUR/USD down to a 1-month low after Eurozone Dec CPI rose less than expected. Asian stocks settled mostly lower: Japan -0.42%, Hong Kong -0.65%, China -0.26%, Taiwan -0.48%, Australia -1.63%, Singapore -0.06%, South Korea +0.64%, India -0.17%. China's Shanghai Composite recovered from its worst levels in late trading after China moved to support the market with state-controlled funds buying equities and after people familiar with the matter said that regulators will extend the selling ban by major investors beyond Friday's expiration date.

The dollar index (DXY00 +0.41%) is up +0.41% at a 2-week high. EUR/USD (^EURUSD) is down -0.64% at a 1-month low after weaker-than-expected Eurozone Dec consumer price data fueled speculation the ECB may need to expand QE. USD/JPY (^USDJPY) is down -0.39%.

Mar T-note prices (ZNH16 +0.14%) are up +6 ticks.

The Eurozone Dec CPI estimate rose +0.2% y/y, less than expectations of +0.3% y/y. The Dec core CPI rose +0.9% y/y, less than expectations of +1.0% y/y.

U.S. STOCK PREVIEW

Key U.S. news today includes: (1) (1) Dec New York ISM (Nov -5.1 to 60.7), and (2) Dec total vehicle sales (expected 18.00 million, Nov 18.05 million) and Dec domestic vehicle sales (expected 14.20 million, Nov 13.99 million).

None of Russell 3000 companies report earnings today.

U.S. IPO's scheduled to price today: none.

Equity conferences this week: J.P. Morgan Tech Forum on Tue, Goldman Sachs Health Care CEO Unscripted Conference on Tue, Goldman Sachs Global Energy Conference on Wed, and Citi Global Internet, Media & Telecommunications Conference on Wed-Thu.

OVERNIGHT U.S. STOCK MOVERS

Nordstrom (JWN +0.64%) was downgraded to 'Neutral' from 'Buy' at Citigroup.

Eli Lilly (LLY -1.65%) may move lower at the start of trading today after it lowered guidance on fiscal 2016 EPS to $3.45-$3.55, below consensus of $3.65.

JC Penney (JCP +4.65%) was upgraded to 'Neutral' from 'Sell' at Citigroup.

First Solar (FSLR +1.11%) rose over 2% in pre-market trading after it was upgraded to 'Buy' from 'Neutral at Goldman Sachs.

SolarEdge Technologies (SEDG -0.60%) rose nearly 2 % in pre-market trading after the stock was added to the 'Conviction Buy' list at Goldman Sachs.

Fresh Del Monte Produce (FDP -1.93%) was rated a new 'Buy' at Wunderlich Securities with a 12-month price target of $45.

DDR Corp. (DDR -1.72%) lowered guidance on its 2016 operating FFO to $1.19-$1.25 a share from a previous FFO estimate of $1.26.

Intercontinental Excahnge (ICE -1.90%) was reinstated a 'Buy' and added to the 'Conviction Buy' list at Goldman Sachs with a price target of $310.

General Electric reported a 33% stake in NeoGenomics (NEO -3.94%) .

Smith & Wesson (SWHC +5.91%) rose over 4% in after-hours trading after it raised guidance on Q3 adjusted EPS to 39 cents-41 cents, higher than consensus of 29 cents, and then raised guidance on fiscal 2016 adjusted EPS to $1.36-$1.41 from a prior estimate of $1.26-$1.31.

Gilead (GILD -3.14%) climbed +0.4% in after-hours trading after its fixed-dose combination of Sovaldi and velpatasvir was granted priority review by the U.S. FDA for the treatment of Hepatitis C.

Acceleron (XLRN -8.00%) fell over 2% in after-hours trading after the company proposed a $150 million offering of common stock.

Progressive Waste Solutions (BIN -1.44%) jumped 6% in after-hours trading after it said it was exploring the prospects of a potential sale of the company.

Exelixis (EXEL -2.66%) climbed over 8% in after-hours trading after a Phase 3 study showed its Cabozantinib drug shrank kidney cancer tumors in 75% of patients tested.

MARKET COMMENTS

Mar E-mini S&Ps (ESH16 -0.61%) this morning are down -13.25 points (-0.66%). Monday's closes: S&P 500 -1.53%, Dow Jones -1.58%, Nasdaq-2.08%. The S&P 500 on Monday slumped to a 2-3/4 month low and closed sharply lower on negative carryover from a -6.86% plunge in China's Shanghai Composite tied to the China Dec manufacturing PMI report of +0.1 to 49.7, weaker than expectations of +0.2 to 49.8, and the unexpected -0.4point drop in the Dec ISM U.S. manufacturing index to a 6-1/2 year low of 48.2, weaker than expectations of +0.4 to 49.0. Stocks were also undercut by the unexpected -0.4% decline in U.S. Nov construction spending, weaker than expectations of +0.6% and the biggest decline in 17 months.

Mar 10-year T-notes (ZNH16 +0.14%) this morning are up +6 ticks. Monday's closes: TYH6 +8.00, FVH6 +4.75. Mar T-notes on Monday rose to a 1-1/2 week high and closed higher on the plunge in global stocks, which boosted the safe-haven demand for T-notes. T-notes were also boosted by U.S. growth concerns after the Dec ISM U.S. manufacturing index fell to a 6-1/2 year low.

The dollar index (DXY00 +0.41%) this morning is up +0.409 (+0.41%) at a 2-week high. EUR/USD (^EURUSD) is down -0.0069 (-0.64%) to a 1-month low. USD/JPY (^USDJPY) is down -0.46 (-0.39%). Monday's closes: Dollar Index +0.186 (+0.19%), EUR/USD -0.0025 (-0.23%), USD/JPY -1.11(-0.92%). The dollar index on Monday climbed to a 2-week high and settled higher on the plunge in EUR/USD to a 1-month low after German Dec CPI rose less than expected, which may prompt the ECB to boost stimulus measures. In addition, there was weakness in the Chinese yuan which tumbled to a 4-1/2 year low against the dollar on speculation that economic weakness in China may push the PBOC into expand its stimulus measures.

Feb crude oil (CLG16 -0.57%) this morning is unchanged and Feb gasoline (RBG16 +0.41%) is up +0.0132 (+1.02%). Monday's closes: CLG6 -0.16(-0.43%), RBG6 +0.0185 (+1.46%). Feb crude oil and gasoline on Monday both posted 2-week highs but settled mixed. Feb crude fell back from a 2-week high on a rally in the dollar index to a 2-week high and on global energy demand concerns after the China Dec manufacturing PMI contracted for a fifth month and the Dec ISM U.S. manufacturing index contracted by the most in 6-1/2 years. Crude oil prices found support on geopolitical concerns after Saudi Arabia cut diplomatic ties with Iran when demonstrators in Tehran attacked the Saudi embassy, and on increased refinery demand for gasoline after the crack spread climbed to a 1-1/2 week high.

GLOBAL EVENT CALENDAR01/05/2016

US	0945 ET	Dec New York ISM, Nov -5.1 to 60.7.
	n/a	Dec total vehicle sales expected 18.00 million, Nov 18.05 million. Dec domestic vehicle sales expected 14.20 million, Nov 13.99 million.
JPN	0000 ET	Japan Dec vehicle sales, Nov +0.3% y/y.
GER	0355 ET	German Dec unemployment change expected -8,000, Nov -13,000. Dec unemployment rate expected unch at 6.3%.
UK	0430 ET	UK Dec Markit/CIPS construction PMI expected +0.7 to 56.0, Nov 55.3.
EUR	0500 ET	Eurozone Dec CPI estimate expected +0.4% y/y, Nov +0.2% y/y. Dec core CPI expected +1.0% y/y, Nov +0.9% y/y.
CHI	2045 ET	China Dec Westpac-MNI consumer sentiment, Nov 113.1.

U.S. STOCK CALENDAR01/05/2016

Company	Ticker	Time	Event Description	Period	Estimate
Eli Lilly & Co	LLY US	9:00	Q4 2016 Guidance Call	Q4 2016
Ford Motor Co	F US	9:15	December 2015 Sales and Revenue Release	2015
Ford Motor Co	F US	10:00	December 2015 Sales and Revenue Call	2015
Delta Air Lines Inc	DAL US		December 2015 Sales and Revenue Release - Traffic Results	2015