Stocks Can't Fall? Check Out REITs' Retreat

With the benefit of hindsight, Sam Zell did sell at the top, and the liquidity benefits of the cash sale of Equity Office Products on the REIT sector never developed. With savvy Sam Zell top-ticking the sector -- as smart guys usually do -- the rest of the lemmings got caught holding the REIT bag.

I will never forget a glib Wall Street conference call at the height of the REIT industry's popularity in January (the firm is not being disclosed to protect the innocent!) in which the senior REIT industry analyst said the IYR could easily tack on another $10 to the upside (from the $92-$93 level) based just on the recycling of capital from the cash-out of the Equity Office Properties capital. Oops!

The similarities between the former popularity and momentum in REIT shares -- which has seemingly evaporated overnight -- could (and should) provide a lesson to investors in the (broader) equity market today. The conditions are eerily similar: the ready (and glib) acceptance of a new investment paradigm, massive liquidity, a bubble in credit availability and terms, a plethora of merger deals and the feeding frenzy of share price momentum -- all are contributing to a REIT-like orgy.

George Bernard Shaw and Yogi Berra had it right: It feels like déjà vu all over again.

Fool me once, shame on you; fool me twice, shame on me.