Bill Fleckenstein advised a subscriber to NOT short the homebuilders. I posted the question and responses before. I also agree they will keep going down, and many factors can intervene to make the stock price go up, and cause you to lose the money. Veteran mutual fund manager Bill Miller buoght up a bunch of homebuilders, saying they are value plays. We could see consolidation, buyouts, an earnings surprise, and these would cause a temporary price spike. Even the Fed pause can cause a price hike. Althoug the long term trend is down, a temporary price hike, or dead cat bounce, could make you lose your shorts, so to speak 🙂
Chris J, why does Fleck recommend shorting only AFTER the Fed pauses? Is it because we will have a rally? The rally can wipe out your short position, right?
Following is a Q&A, and 2 quotes from a guy who shorts for a living.
Q: What do you think are the drawbacks, if any, of shorting LEND now?
• …that you could get squeezed hard in a rally.
Q: With the serious slowdown in MEW (mortgage equity withdrawals) and the obviously slowing housing industry – what do you think about shorting some of the big hardware type retailers?
• Could be a good idea… AFTER the Fed backs off.
there will be more money short the guys who have lent against real estate, IMO… so they are better targets.
the long side is way, way, way easier… and the gains can be far bigger.
As for housing FALLOUT, I prefer the lenders against home as collateral. THAT is where the real wipeouts will occur in my opinion, so I decided to do them instead of housing stocks.
