April: The start of the ARM Tsunami

[cr]

My favorite line in the video is from the CNBC reporter:

“We don’t need a recession to cure this…..do we?”

I’m a neophyte to all this, so allow me to ask a rudimentary question: obviously a majortiy of the housing stocks are dropping, so how does shorting them turn a profit? Or am I misunderstanding when you say short?

[an]

4 more days to go. We’ll see how this will play out in 1 month. Wow, so exciting. It’s like watching a train wreck in slow mo.

[Anonymous]

Friday’s going to be a very interesting day for economic news: consumer spending for Feb., inflation (personal consumption expenditures, the Fed’s preferred inflation indicator), manufacturing (Chicago PMI), and construction spending.

Folks, there’s still time to get in short before hoi polloi wake up and start selling!

[ibjames]

what stocks are you shorting?

[no_such_reality]

Happy Renter,

Agree there’s lots of negative news. I agree the local SoCal RE market is going to take a dump. That news though, is already factored in on stocks like LEN and KBH. You see that in the 50% decline from high in mid 2005 on KBH. On LEN it’s 35%.

Half of the short interest covered last month. What they know is those stocks have been beaten down already. Slow growth, negative news is priced in. Short of imploding unexpectedly like New Century, their downside is more moderate. Since the like of the CEO of D. R. Horton have already proclaim 2007 is going to suck, anything short of total suckage is actually good news.

I personally wouldn’t be comfortable with a short where anything short of total suckage is a positive earnings surprise.

[Anonymous]

The true extent of the housing crash is NOT priced into any of the homebuilder stocks yet. Look at a 5-10 year chart for ANY homebuilder. KBH stock for example is currently about three times higher than it was in 2001.

A heavy downturn was also priced into the PUT options for NEW and LEND last year when both were well over $40. I was hesitant to buy a lot of puts because of this. Fortunately, I bought a few NEW at $20 strike price and LEND at $30 strike price. DAMN GLAD I DID!!!!

[Happy renter]

no_such_reality,

The future earings will only be worst! From real estate & financial then spread over the whole market. Even with Gov’t or Fed’s influence, it will only slow down the crash, but not getting better.

Do whatever you feel comfortable!

[Author]

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