I'm having a tough time finding new candidates, and the easy money has been made with the obvious ones (Fannie, Countrywide, WaMu, KB Home, IndyMac etc). Wish I had been smart enough to have Jan '08 puts, vs. most of mine which executed in October, before the real bloodletting this month. Remember - the market can stay irrational much longer than you think.
So who's left? Who hasn't totally crashed yet that still will? Or still has farther to go, or won't be around a year from now?
Few ideas I'm kicking around today are:
American Express
Auto Nation
Regional Bank Holders (RKH)
Wells Fargo
MasterCard
Retail Holders (RTH)
GM
QQQQ
China (via FXP)
Any ideas or actions? Need some new puts for '08
November 22, 2007
Seems like anyone and everyone associated with housing has crashed already. Any companies left to short?
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58 comments:
I was thinking going long on Kraft Foods (KFT)
There's gonna be a lot of Mac'n'Cheese eaten over the next year...and not just by college kids.
Hi,
I'm an expat too. Unfortunately I am paid in USD. It's dismal. If I have some money to invest, how do I "short?" Do you use an on-line account? Can you point me to a tutorial? Any advice greatly appreciated!
Shorting is riskier stuff, but easily done these days: you need a special margin account that you can get at any broker, say TD Ameritrade. I'd do some google research on all the options but shorting has multiple approaches, with variable degrees of risk. It's something that I'd asked Kieth about in a previous post, and he's been gentlemanly enough to make a few suggestions here. But you should realize it is risky. The Banker Boyz spanked a bunch of people shorting Countrywide at one point, lowering interest rates on a the last day of a giant short pool as I recall, sending the stock soaring and screwing over people who knew the stock was really worthless. If you time it right, there's money to be made. I'm thinking, well, if my money is in trade account it's going to be taxed to death if I pull it out now. Maybe the best thing is to take the risk and short something.
Either way, thanks for the "Short" post Kieth, and to the rest of the HP community, Short thoughts appreciated!
- John
Short the whole market with Profunds UltraShort ETF's.
DXD, QID, SDS, SKF, SRS
"If I have some money to invest, how do I "short?"
Shorting equities is a very risky business in that your potential losses are theoretically unlimited.
You might want to get your feet wet by trading puts because at least that way there is a limit on how much you can lose, i.e. the premium you paid.
Another option would be to buy any number of funds or ETF's that short the market, some do it with leverage, some do not, i.e. SDS or The Prudent Bear Fund.
And still yet another option would be to go long the S&P via the Spiders (SPY) and short the calls. That way no matter which way the market goes you have an opportunity to make some coin.
I know what you mean about running out of companies that are (SAFE) to short. (By safe I mean low volatility so stuff like the Solar stocks, Chinese internet stocks, the dreaded 4 horseman are out ).
So ideas I have are basic industrials - I've chosen Arcelor Mittal ( MT - which is nicely acting empty ) and US Steel ( X which sadly is delivering Xrated action to me these last 2 days ).
Another idea is Indian stocks. I'm doing IBN ( ICICI Bank ) HDF( HDFC Bank). In addition there are closed end funds you can short like IIF ( there are a couple of others ) but I don't use them yet.
NB: This is NOT trading advice. Caveat Emptor - By the time you read this I may not hold the positions mentioned and might even have reversed them !
O yeah, you didn't mention commercial real estate and I didn't because its already in your frame right ? If not, VNO, SLG, BXP, are the big guys, NRG MPG (if you feel you know your SoCal) are oddball ones. There IS an ETF to this but I don't use it.
NB: Not investment advice. Caveat Emptor By the time you read this I may even have reversed the position stated above.
WaMu is a $2 stock waiting to happen says there is still plenty of trip left to go down...
Goldman Sachs.
Google.
How about some big-ticket consumer goods like PII and HOG?
I am considering SZK - proshares ultrashort consumer goods etf.
I currently own SKF and SRS, double-shorting the financial sector and real estate.
My expectation is that Walmart and other budget stores will fare okay, as will the richie-rich retailers. Look for the stores that serve 30k millionaires to drop alot.
Also, I'm long the Ramen manufacturers.
the market can stay irrational much longer than one can stay solvent
I sure as hell haven't abandoned my HB puts. Centex, Ryland, Meritage, Lennar and a couple others all have meat on their bones yet.
Old favs DSL & FED also have a long way to drop (can you say "zero"?).
With that said, look to tech, all the big boys are starting to crack. I've already made good money with puts on AMZN, GRMN, AAPL & RIMM. Missed Goog's big drop but it will come around again.
Carmax...Its a company build on the housing ATM's back. They could always just change over to "Crackmax"...Helping homedebtors overcome the pain.
any thoughts on Whole Foods (WFMI)? they took a pounding starting in Jan-06 but if China ups the demand for soy, which is in just about EVERYTHING on their shelves, then they'll have to up prices and squeeze out more of their customers. seems like more of a slow bleed...
Here are 2 I have long puts on - JOE and CCL.
JOE is easy. It's going broke. Somehow people missed this one - I got a good leverage/a small premium for the put. Suggest you jump in while the premiums are still fairly low.
I think CCL is more clever. Look at the 10 year cycle on it. Revenue crash maps to the last tech bubble and crash. Revenue has significantly risen in parallel to the housing bubble. It's going to tank within a year. No one is gonna pay to ride around on a boat when the party stops. :)
I made good money shorting MNC, THO and KFED. Could not get any DSL shares to short. Seems like WGO has held up the best ..so could fall even farther when reality sets in
I am trying to find retail stocks that have not experienced reality yet. There are a few that had good results last quarter but that can't last. I am considering short positions in FOSL and ANF.
Am watching these for short opportunities
GWW - industrial slow down
CRM - way over priced but risky to short
Thanks everybody for their ideas- will check them out
I'm not sure about shorting credit card companies.
I see their revenue falling due to:
1) fewer credit card purchases
2) smaller dollar amount in purchases
3) having to write off some accounts where borrowers can't repay
But I also see some areas of their revenue improving due to:
1) more people making only the minimum monthly payment (this is where most of their profit comes from, according to the movie 'Maxxed Out')
2) recent changes in bk laws that make it harder for people to get out of cc debt in bk
I'm just not sure which would have the stronger impact.
Just cam across a chart showing the actual value drops for San Diego California condominiums.
This is a real0eye opener! View at:
http://www.brokerforyou.com/brokerforyou
Maybe I am just in over my head and should stay away from shorting! I'm just not sure what to do with my savings -- me emergency cash fund, which is just under 100K USD. It was in an ING acct, the rate of which has been reduced to pitiful at this point. I used to think I would be able to keep saving and then swoop into the U.S. when I moved back and buy a house.
I certainly don't want to put it in stocks, but I am seeing it lose value every day! Esp. since I live in Europe and buy in Euros.
Ouch.
Thanks to you Keith I've been sitting on CFC Jan 08 puts since about April, and IMB puts most of that time. I should send you some beers or something, this will probably turn out to be the best speculative play I'll ever make. Kind of makes me like bubbles - easy targets to take some of the dumb money people are pumping into places it doesn't belong. What will they pump up next I wonder?
Going forward I'm heavy BEARX, and I've got some GHACX (hard assets) and TGLDX (gold), and various global bond funds and just a tiny bit of foreign stocks. If you're considering the "ultra-leveraged" inverse ProFunds, I'd compare their performance against BEARX before pulling the trigger. The "2x leveraging" doesn't seem to pan out real well during bear markets, and BEARX seems to be a bit hedged, it seems to hold pretty flat during bull markets, whereas the leveraging of the inverse ProFunds does seem to show up in bull markets.
Of course the best move right now is to not own any real estate, the money I've made on mortgage company put options this year pales in comparison to the money I've not lost by not owning!
Ctx,len,ryl,lvs,mbi,hrb, are my current put positions. You just can't knock those HB's, as they are the gift that just keeps on giving. Kinda like a perpetual santa klaus.
As for the 4 horsemen in tech, if those broken 3 month head and shoudlers in the spx and dji are allowed to crack by the PPT, then I plan to go after them too as they have huge chunks of fat just waiting to get trimmed. Can you say yum yum yum? I sure can.
The good thing about this PPT is that you know they will attempt to delay the upcoming bush built scheitt sandwich debacle until Jan, 08 at all cost as politics rule their every statement and every move.
And thank gawd, with their utter predictability, they give me more time to reset again and again generating huge returns.
Think of the returns if team bush suspends congress and the elections too??? Oh, I can dream can't I? LOL
Credit card issuers like Capital One (COF), as maxed-out consumers stop making payments.
Also, higher-end retailers like Williams-Sonoma as increasingly pinched homedebtors begin to realize that oufitting their granite-countertopped kitchens with overpriced luxuries is not a God-given right.
Hospitality
STP
Solar stocks
Solar stocks
Here's some good free info on Lennar
http://www.safehaven.com/article-8874.htm
Mastercard may not take on the credit risk, the banks do. I'm not sure but I think MC is the ogliopoly fee-extraction business, a good business to own. They may lose a little on volume, though.
There's Capital One (COF) to short.
I'm short Mohawk (carpet) MHK, but I had expected it to crater, and it hasn't yet.
Used cars make their money on finance, but are more popular in recessions versus new.
What about Federal Signal (FSS)?
They make heavy vehicles often for municipalities. The cities/counties may be buying less because of lower tax revenue .
goog at 680-700 , rimm
ggp -- commercial real estate
hog
Think we are at a short term low in the market. There might be a christmas rebound then a resumption of the downtrend.
Short HOG, Q's, SPY, BSC,
closing housing, cfc shorts currently
will research PII
Short HOG, Q's, SPY, BSC
currently closing housing, CFC shorts
will research PII
I'm shorting small cap stocks. I've got a 2.5 inverse fund on the russell 2000.
Personally, I think many of the financial companies have been pummeled and are unlikely to go down further. Some of them have been destroyed (Washington Mutual, Countrwide, etc) and it seems like they are being priced for housing armageddon. I think there will be a greate opportunity to make money on the upside on the companies in a year or so.
I think what people are underestimating is how this giganitc credit contraction we are going to go through will affect business in general (outside of housing), and so that is why I am shorting small caps. It has worked out very well so far, fund is up about 15% since purchasing a few months ago.
How about Toronto Dominoin Bank (TD) It just broke its 200 day moving average and has yet to break its long term uptrend. Long way to go.
Also, CMI Cummins Inc. If we go into a recession, there will be less need for more trucks to move all the plastic crap around in.
Good Luck
Since everything feels so mid to late 1970s these days, I am going long on Spencer gifts, Chess King, Merry Go Round, Kinney Shoes and Hot Sam.
It's all ball bearings...
.
It is all ball bearings!
Every WWII archive video, movie, even Hogan's heros ....it was always about ball bearings!
Genius I tell ya!
.
Yeah, here's your next victims and I urge you to get out in front of this one with some LEAPS and ride it home.
Commercial Real Estate, which lags residential real estate by 8-12 months. This is a golden opportunity.
Here are a list of Commercial REITs and Office REITs. Look at them (I havent yet but am going to tomorrow). Find those that are at or near their highs are havent been hit with any big decline. See if puts are offered on them, then make your play:
Office/Commercial
ARI
BXP
CLI
CRE
CUZ
EOP
HIW
HRP
RA
SLG
Retail REITS
DDR
GGP
KIM
MAC
MLS
NXL
PNP
REG
SPG
Good Luck!
WRI
Starbucks.
Cool.
Cow_tipping.
read CRASHPROOF by Schiff.
grow a victory garden
After they stop buying their foo foo coffee, the next thing I would think would go would be things like cable/satellite tv service.
look people the commentator has asked who do you think is going to get blown out of the water, not your personal opinions on shorting. you folks do that alot he asks a simple question and you veer so of course everyone forgets what the question is. selfish and pompus maybe that is what hp'ers really are. come on here bragging about your savvy in the stock market and this monster has crashed over a thousand points in a few months, did ya predict that. you people are probably the same people who gossip in the grocery store about your portfolio and you are lying 50% of that like you lied on your mortgage app about your income. Stay on the course and quit trying to have a blog within a blog (at the commentators expense of course) and boring everyone to tears.
Yep, commercial real estate is a dead man walking - and fine fodder for HP'er types who've already seen one real estate cycle go teets up.
Mastercard = great short!! NOW!
Yes, I've got APR-2008 Autonation (AN) $20 puts and some financials, homebuilders and other retailers too.
The financials were hit first, then the homebuilders (after rallying on some bad advice from Stephen Kim).
Stephen Kim induced home builder rally
http://tinyurl.com/2o9rgn
I would be focusing on the retailers now, these stocks haven't had big falls yet. People are still optimistic about the "shopping season" in a way that reminds me of the optimism surrounding the credit crunch in September - "the problems have been contained".
I think we'll see terrible fourth quarter results, and plunging stock prices. I would be looking at put options on TGT, HD, BBY, SBUX, although I haven't done any specific research on these.
I bought all of my put options during the late September rally. Put options are highly leveraged, and at one point in early October I was down 37%. Then the financials and homebuilders plunged, and now I'm up 228%.
As I already said, the retailers are lagging, people are still optimistic. If the FED cuts again in early December, it may be "a great time to buy" as they say.
I would like to take this opportunity to thank Keith for his insightful and entertaining blog, which spurred me into action. Keep up the good work Keith.
May CFC go bankrupt! Corruption should not go unpunished. (I've got CFC puts too).
sounds to me like you are calling a bottom AL-QWAFFER.
I'm long Autonation Jan 09 puts. I would repeat that markets can remain irrational much longer than most people can remain solvent. So I've decided to go much further out using LEAPs. Usually tends to work out well except for the lack of liquidity. On the bright side these options are pretty cheap because Lampert keeps propping up the share price. Hope that helps, good luck.
" Also, CMI Cummins Inc. If we go into a recession, there will be less need for more trucks to move all the plastic crap around in."
you need to understand the world's relationship between consumers and transportation...cummins is and diesel engile manufacturer. if you are going to short actual truck producers PACCAR is the producer of peterbilt and kenworth.
However, i work in the transportation business and i can tell you one thing... as an industry, if there is less "plastic crap to move" there will be more "for sale" signs, forclosure notices, more repo'd hummers, more ramen and mac and cheese, etc. Transportation is an industry that will always continue to grow untill population growth becomes negative. everything has to be moved on trucks, including the substitutes for luxury items. you have vastly underestimated the scope of truck transport... look around in the room you are in and point to all the things that were never shipped on a truck. Also, as fuel prices continue to increase we in transportation raise our fuel surcharge and pass that price increase on to the consumer. Make no mistake about the transport sector... We will always be here and employed, if we are not you will starve to death freezing and naked.
from the inputs and raw materials, to the finished products and used things it is moved everyday on a truck
I have to second (or third) the “put” recommendation on GGP.
Although the REIT is generally known as a commercial mall operator, it has a massive exposure to the residential real estate market through its “master planned communities” as well as over $7 billion in LIBOR indexed debt.
These communities are simply single family residential developments many of which are located in suburban Maryland and one in Las Vegas.
In Q1 2007, when it became apparent that their land sales had ground to a halt, they decided to start reporting what they termed “Core” FFO which is simply their FFO with the “master planned communities” dropped out… not a good sign IMHO.
Although all REITS will ultimately take a beating if a consumer led downturn and recession were to materialize, GGP is already seriously impaired.
Consumer/mall/retail exposure, residential developments and land holdings, significant LIBOR debt…
Check it out for yourself and remember to…
LEAP LEAP LEAP!!!
zackattack:
i think you are very mistaken regarding the trucking industry. it's my belief that as energy costs continue to rise, and as everybody will be needing to cut costs because of the cash strapped consumer, we will start to see a massive shift from trucking to railroads again. trucking industry in time, will be severely scaled back and only have local hauls.
btw, im not the only one who is long term bullish on railroads. warren buffet just made serious investmets in the area
http://tinyurl.com/38bqnu
Technology is becoming a commodity. Short NASDAQ thru PSQ.
Check out H&R Block (HRB). They have delayed writedowns as they are trying to sell their Capital One subsidiary to Cerebus. The Cerebus deal was supposed to close in November and HRB is supposed to report on their recent quarter in early December. HRB is carrying 20 billion dollars of non-prime mortgages on their books and their book value is only one billion.
In my previous post, I stated that B&R Block has $20 billion in non-prime mortgages on their books. I am not certain about this number, but believe that they will have write-downs.
Caveat Emptor
Some great ideas here.
I've done very well over the past year shorting many of the financials. At some point or another, I was short on most of the guys who took it in the shorts. However, it's not how many of them you get, as you can only profit relative to how much you have invested, not the number of finds. So the key is to find the few that you like the most. Getting the timing right is key as well. I got lucky and timed Thornburg perfectly (22.5 to 8.00, and even went long on them from 8 to 11 after they stopped trading on Aug. 14). I was on FNM & FRE forever, and finally got tired of waiting for them to collapse, and got out just before they finally did. Blech.
Anyhow, enough rambling. I wanted to comment on some posts here:
-- Sandman : great finds! I agree with you 100%. My only thought (until I can look further into JOE) is "are you missing something"? Because, surely, it looks just too damned obvious :) Regardless, I already grabbed puts on both of your finds.
-- paul e. math : I understand each of your points. My personal take on the credit card companies is that they, too, will feel the pain severely at some point, but their descent may be more gradual (Credit cards may be a kind of last line of defense for many. It's easier for consumers to play "hide the losses" [like the big companies] with credit cards than with mortgages. Many homedebtors are keeping their cards and letting the house go. Also, the kind of typical debt isn't quite as bad as a million dollar CDO.) So, though they'll surely suffer, they're not on the front lines of this battle.
- Someone mentioned Prudent Bear. I put about half my money in them back in May/June. They've done great. The greatest thing about them is what another guy here mentioned: they are wonderfully hedged - when the market tanks, the fund rises by about the same amount. When the market rises, BEARX has generally only declined by about half that amount.
- I've heard talk about shorting the tech's, from some names that I respect (David Tice, Bill Fleckenstein, e.g.). I don't know much about that sector myself, but these names I gave do. Again, it is just timing.
*********************
My recent picks for today's market:
*********************
* MS, GS, LEH - these investment banks are in a lot of trouble. They are masters of "creative accounting", but it seems likely that they have finally reached the point of no return. (If you think Merrill Lynch's recent trouble was bad, wait till you see how far Morgan Stanley's got their hands into the cookie jar.)
* AU (gold mine; probably most of them will perform similarly)
* MAS (home improvement co.)
* Defense stocks (Not sure of the best ones, however, Gary North states that these do well during recession. North is a genius.)
Harley Davidson.
Those $25,000 adult toys had to mostly come from home equity line of credits.
Joseph
Don't get into puts you think SHOULD go up. Wait until the stock gets actual downward momentum, then buy the puts. I have waited forever on my GM puts, it actually has negative net book value, but for whatever reason the stock price reflects incredible wishful thinking. If I had to do it over, I would wait for GM to drop 20%, then buy puts.
Blue horseshoe loves anacot steel.
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