Welcome to my “daily comment.” The ground rules Ceres and I have agreed to are simple. I can write whatever I want, ranging from a sentence to an epic. I can even say things like, “Don’t trade stocks yourself — no matter how cheap the commissions. For most people, it’s smarter to invest through no-load mutual funds.” Which it is (though it may be less fun).

So you’ve heard about the Internet, right? I guess so, or you wouldn’t be reading this. Well, I figure that one of the reasons many real estate investment trusts — REITs — are selling so cheap, and yielding 6% or 8% or 10% or even 12% dividends, is that a lot of investors think real estate is headed for trouble.

Think about it. Who needs all that office space if people can work at home and telecommute? Maybe not all people, to be sure, but even a 10% drop in the demand for office space would have a huge impact on rents, which in turn would have a huge impact on landlord operating profits and property values. Bye, bye office-tower REITs.

And who needs all those stores? Why schlep all the way down to the story and wait in line at the cash register when you can click your mouse a few times, comparison shop, save all that money by cutting out the middleman, and have your items delivered the next morning Federal Express? Bye, bye shopping-mall REITs.

And who needs all those hotels? Videoconferencing! Bye-bye all-but-resort hotel REITs.

So here’s my idea. If you do own REITs like these (as opposed, say, to apartment-house REITs or nursing-home REITs), and if you do you worry the Internet’s going to sock it to ‘em — yet you don’t want to sell your REITs because, like me, you can’t really quite believe the Internet is really going to hit them that hard, you could hedge your bet by buying Federal Express.

Because if people do wind up doing most of their shopping by computer, Federal Express is going to have a field day delivering it all. (UPS, too, but they’re not a public company.)

I’m not suggesting you actually do this — I think you should do your investing through no-load, low-expense mutual funds. And if you do think REITs are going to take a hit, then the sensible course of action is simply to sell those REITs (and maybe buy Federal Express anyway).

I just think it’s kind of fun playing the “investment implications” game. You know — where someone names an event or a trend and you have to come up with the right stock play to profit from it. Wall Street pros love to do this, the more gruesome and cynical, the better. Most famous example (from “Adam Smith’s” The Money Game if I remember right): someone was talking about the explosion in heroin addiction, to which the the Wall Street pro immediately shot back, “I wonder who makes the syringes?”

Tomorrow: Berkshire Hathaway


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