As HP readers know, last fall many of us thought it was a great play to short the builders, and sure enough, many had a nice 50% haircut from their bubble tops.
Then for the past few months, most of us said stay away, as they felt manipulated (M. Lynch upgrade, private buyouts, etc)
But doesn't it feel like time to get back in (and short these suckers)? Or maybe short the whole thing buy buying the SRPIX (Profunds short real estate fund)? Or maybe short just the lenders and stay away from the builders still?
I'm not short or long - but want some good opinions as I'm thinking about buying SRPIX. I'm itching for a trade - been on the sidelines too long, and I think the Fed is going much higher than anyone thinks.
Here's a good blog that has some short plays during interest rate ascents - short the builders, short the utilities and short the REITs
April 17, 2006
OK, is it time to short real estate and builders (again)?
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11 comments:
I pulled my support for anything ProFunds long ago. SRPIX is not what you want. You want to short the Dow Jones Real Estate Home Builders Index. SRPIX does not do that. SRPIX shorts another real estate index that includes REITs.
Shorting REITs or anything that keeps paying large dividends is playing with fire. Perhaps the REITs will slash dividends, but still your NAV will decrease.
I put out a general warning that the home builders have a nice P/E ratio, so they are still not obvious targets. So with considerable risk; shorting is not the safest game in town.
Having said that, I started shorting RYL at 70.98 before it spiked to/had a short squeeze to 73+ (ouch). I hung in there and now it is 67.82 as of Friday's close. Perhaps the home builders will finally be on their final decent, you could be shaking your head if you find yourself in a short squeeze.
Proceed with extreme caution, and only use play money instead of thinking of it as an investment. I will probably set up some put options on FNM and/or GM. I don't want to directly short because those would be longer term bets and they pay out some divs.
OOTP - thanks for the good advice
what do you think about gld?
I’ve held my short position in TOL since last summer. I have no intentions of covering anytime soon. Many homebuilders will disappear when it really gets bad.
I commented on TOLs chart oon my blog over the weekend claiming that it looked like it was made up for a class to provide an example of a head and shoulders top. The question that remains is how many more short squeezes can be engineered before the big bear payday? OATP is right that the HBs and other components are paying monster dividends and that provides support especially in these times when people are IMO blindly chasing yield with no regard to risk.
Regards FNM, here we have a company with inadequate reserves, no external guarantee, years behind in reporting including restating earnings, violating SEC and NYSE regulations and we are supposed to be comfortable simply and only because it is chartered by the federal government instead of the State of Delaware? No thanks. Market cap represents 2% of outstanding obligations. Theoretically worthless with even a minor restatement.
OATP speaks with great wisdom, this is a playground for the 5% of your portfolio that you can lose all of (or more) or randomly double not the place to reliably put anything you would miss.
I entered both GLD and IAU at about 54 with a good chunk. I cut it in half when it went to 56, and was glad at the time because it dropped back down to 54 before shooting up to 60.32 it is now.
My prediction in January(??) was that it was going to 68 by the end of the year.
A few experts think it will tank to 50 before it shoots to 84+. I'd double up myself if it came back down to the low 50's. You might like to wait for a considation (58, 59??) before getting on board.
With any trade, I try to wait for dips. But with international events and rumors right now, it might be hard to find those dips on energy and metals soon. My biggest regret right now is not holding onto SU from 74. I was waiting for a consolidation back down to 75 ... now I'm hoping for a consolidation down to 80. So sometimes you either have to jump on or find something else of better value.
In the end, there will be bag holders, so it takes a little work to keep up on news and see when you want to jump out.
Short XHB!!
Why not just BEARX it?!
Out at the peak:
I have owned SU and GLD on and off, kept trading in and out, made 4 sweet trades in a row on SU, I would sell at 3:55 and buy in the morning around 7:30 on the consistent dive. I am long both right now with a decent profit, also own LVS. After reading about "peak oil" I have changed my mind, and will buy on any small dips, I have a 15% stop loss and will be moving it up.
Dear Intelligent Investors!
#1. what would be the safest play for a private investor to short the major us home builders?
#2.i already got burned last July shorting S&P homebuilders index through ABN AMRO mini short product.
#3.is there a fund which does this?
#4.you guys are right about the profunds fund,thats not what we are looking for.
#5. how do we short indexes for long term?through a us broker?
#3. please guide cause i think it will break soon.
Kind Regards & God Bless!,
Victor GM. Wani
somcap@gmail.com
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I was thinking that SRPIX did not perform well over the last 8 months because it was not faithfully tracking the inverse of the Dow Jones Real Estate index. But a glance at the charts shows that is not true:
http://finance.yahoo.com/echarts?s=SRPIX#chart6:symbol=srpix;range=20070827,20080501;compare=djusre;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=off
Looks like overall you would have made a 10% upside by being invested in the Real Estate Index!
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