Subject: Re: REITs, 1970s/80s, stagflation
>"Stocks with the best long run total returns"
...
That's not really what the thread is about, it's: "REITs, 1970s/80s, stagflation".

Well, yes, my comments were partially off topic. Apologies. But not wholly--I expect a portfolio of quality stocks is likely to do better than REITs during stagflation too, because of the problems that would hit REITs more than many other kinds of investments.

Stagflation involves inflation. Inflation is usually attacked with high real interest rates. REITs are just companies, but they are companies whose business results are hit more than typical firms by high real interest rates as they roll their debt. Not to mention their greater fragility in some ways, given constraints on capital allocation flexibility and pricing power typically a bit worse than other businesses. So, the purely on-topic comment, I imagine stagflation would be a somewhat toxic situation for REIT investors. Their market prices would probably be very low, mitigated by coupons for those who are satisfied by that and willing to wait it out.

The stagnation part of the question may be an issue for the reliability of coupons.

As you note, it would hit different *types* of REITs in different ways, so an intelligent approach would be discerning by subsector. But I personally doubt whether the impact would be sufficiently varied and sufficiently predictable that the problems could be dodged. Even groups you would think would be immune can be hit very hard in tough economic times, something I learned the last time I ran a company during stagflation. An entire sector that is seemingly recession proof (private medical clinics, say) may have clients who themselves aren't recession proof, and that client may be a government agency. So problems can spread much further than you might at first expect. Maybe the resilient subsectors can be predicted, but also maybe not.

There's many a good case for REITs. There are good cases to be made for having a portfolio which is braced for a possible stagflationary environment. But I personally don't see that much room for both at the same time : )
It seems to me to be a sector particularly vulnerable to that environment.

Jim