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The disappointing ADP employment report was the big buzz this morning. But I always have the same advice when it comes to this number: Ignore it. Whatever happens as a result of traders developing an opinion on ADP's numbers can be completely undone by Friday's jobs report. The other developing topic was the growing disconnect between real estate investment trust (REIT) valuations, actual property values and anything resembling common sense real estate investing. No one with an ounce of knowledge about property markets would pay the multiples or accept the yields offered by the large-cap REITs right now.

The apartment sector really jumps out as having disconnected values. When I look at the largest REIT in the sector, I see that Equity Residential (EQR) is yielding just a little above 2%. If I look at its latest earnings report and add a few somewhat aggressive growth assumptions, the company could produce funds from operations of about $800 million this year. In my somewhat limited brain, this means that the absolute most this company is worth is roughly $8 billion to a smart investor. The enterprise value is a whopping $27 billion. The shares fetch more than 3x the equity value of the properties in the portfolio. This company owns great properties and has excellent management but at the end of the day, the price is far too high for a rational long-term investor. Most of the other apartments REITs are similarly priced as investors have flocked to exploit the trend of post crisis rental housing. It is a great theme, but you are paying far too much for the idea....521 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.