dude thats a dangerous strategy. Because its going parabolic price will accelerate faster than time elapses, meaning that at the end of the trend prices will rise faster over a shorter period fo time before the big nasty red reversal candle that traps the longs. The problem with shorting now is usually the blow off top is higher than anyone is thinking and shorting early ends up squeezing u out as a short (thus propelling the stock faster and higher) and ultimatiely collapsing.. you have the theory right but you end up losing money anyway.. timing a top is always so hard but more importantly becuase price will usually accelerate it is SO SO hard to time the top I think a better strategy is to wait for a gap down then short there with a stop above the gap down when it occurs. Just my thoughts I was actually thinking of going long TOL on the breakout to new highs. If they close it over 100 then it will run to 115-120 area and that seems to be where the latest bubble action seems to be topping. Just my opinion, but shorting TOL (such a strong stock) is isane imho unless you havea rocking countt-trend system or are finding divergences etc.. but like I said worst of all is to have tht ehory right (ie it dumps) but it runs up to 100 before it does and squeezes u out.. good luck but consider waiting to short until it tops. You wont get the top of the move or maybe miss 20 pts or whatever when it collapses, but I think your probability is better to wait for the parabloic spike to end. it is most likely going to gap down for whatever reason when this move ends and your sell stop may get filled at a bad price. Maybe at least make sure you put in a sell stop limit so you dont short a gap down that fills .. im waiting to short the housing stocks too empee!!!
1] Dont care much for shorting strength like housing; tops tend to be a process over time-not kind to shorts. 2] Even when a correction comes in local real estate ; in rentals or owner occupied , proper leverage may help. 3] September FORTUNE 2004 had a helpful article; both coasts in general tend to be overbought/high price, most of rest of America tends to be oversold/low priced, local RE. 4] Even with rates lower than 9%+ historical average; money can be made with rates over 10%, never saw much point it ''interest only '' deals , except for lender Higher rates may slow growth, but in the past; they encouraged more owner finance & cash deals/midAmerica.
http://www.cbsnews.com/stories/2005/01/31/entertainment/main670344.shtml Second Mortgage for Super Bowl ... So O'Donoghue sunk $4,000 on a Super Bowl package that includes round-trip airfare, a four-night hotel stay and one ticket to the Feb. 6 game against the Patriots in Jacksonville, Fla. To pay for it, he applied for a home equity line of credit, a way of borrowing money that requires you to put up your home as collateral. He's getting the money in a few days. "Sometimes the cards are maxed out and you gotta do what you gotta do," said O'Donoghue, 36, an account executive from Glen Mills. Mortgage bankers in Philadelphia and southern New Jersey say that Eagles fans have been inquiring about refinancing mortgages, or taking out home equity loans or home equity credit lines, to pay for what O'Donoghue calls "the chance of a lifetime." ...
I don't understand what it is about a strong stock that makes people want to short it. This stock didn't even correct when the market went down! I'd revamp your strategy if it includes picking out one of the strongest stocks in one of the strongest groups, and shorting it near all time highs. This is a strategy that will take your head off. OldTrader
Hey OT. Any thoughts about the price action in IYR? BTW: I'm not a real estate bear per se' but I'm seeing some really expensive PE's here in Chicago. Particularly in the condo market. For example I see buildings where 2bd/2bath units sell for 300k and rents are in the 1400-1700 range. Throw in the $500 monthly assessment as an owner along with 2k a year property tax and these things are renting at serious negative cashflow.
Hey Pabst. How goes it? Hadn't looked at IYR in a while. That does present a different picture than the builders doesn't it? With the numbers you mention obviously there is no reason to invest in a condo as a rental. Alot of times condos are tough to pencil out anyway because of the association fee. I'd be a little careful with the P/E concept as it applies to real estate though. Condos, single family homes, etc are primarily used as owner occupied real estate. People tend to make more emotional types of decisions in these areas....ie, there are advantages and benefits to ownership of these types of real estate that cannot be expressed by comparing the unit to a rental. In fact, there are areas of California that have had those types of numbers (and worse) for years and years. Coming back to the IYR though, I don't like the chart at this time...although there is a better look if you look at the weekly. I'd be cautious about shorting it though because of the dividends involved in many of the components. Right now I'm following the bond market closely...since I think I'll be able to play real estate to some degree through the bond futures, and probably through the builders eventually. But right now the builders are too strong. And the bond rates keep dropping at the long end. I'm just waiting...how about you? OldTrader
JANUARY 31, 2005 Business Week WORKING LIFE Far From The Madding Crowd Take the home equity and run inland, say city dwellers on both coasts Only a year and a half ago, Debbie Rubenstein and David Flynn felt like the commuting dead, slogging three hours round-trip from their home in Maplewood, N.J., to day care for the baby, their offices in Manhattan, and then back again. Debbie, 36, made documentaries for PBS. David, 32, worked as a software developer at TIAA-CREF. Weekdays, they barely saw their 18-month-old daughter; weekends, they barely saw each other. They passed off Samantha like a baton, alternately sprinting through the relay of grocery shopping, dry cleaning drop-offs, and gas tank fill-ups. "We were working all the time just to afford to keep living where we were living," says Debbie. Neither a second child nor an executive MBA for David fit into their 5-, 10- or even 20-year budgets. Thoughts of another terrorist attack plagued them: Trapped in Manhattan, how would they get to Samantha, marooned in day care across the Hudson? The answer came in the gold mine they were sitting on: the three-bedroom, center-hall colonial that had appreciated 50% in the three years since they bought it. In September, 2003, they sold the house for $505,000, plowed the gains into a jumbo downpayment on a Craftsman bungalow in a posh enclave in downtown Charlotte, N.C., and slashed their fixed expenses by nearly 75%. VALUE-PRICED REGIONS In doing so, they became one of a growing group of real estate vanguards: the equity refugees. Their mortgage and taxes have plummeted from $2,600 a month to $850. Day care is down from $1,260 a month to $550. Debbie's commute to her home office, out of which she still does documentaries, takes five seconds. David's trek to TIAA-CREF, which reassigned him to Charlotte, is 20 minutes each way. In early January, Debbie gave birth to a second baby girl, Rachel. David is applying for executive MBA programs. They have also become refugees from tension, now spending weekends doing things like picking pumpkins and visiting horse farms. "We have dinner together every night," says Debbie. "I don't know a single married couple in New York who is able to do that." With housing prices on both coasts at nosebleed levels, more and more professional-class migrants are cashing out of their homes in New York, the Bay Area, and Los Angeles as though from premium-heavy dot-coms. Motivated by favorable capital-gains rates, fears of a housing bubble, and worries of a sideways stock market over the next decade, they are moving to value-priced regions of the country, creating tiny pockets of blue America in the heart of the red states. Experts are calling the trend "geographic arbitrage." With soaring health-care and tuition costs also pounding the middle class, demographers such as the Brookings Institution's William H. Frey predict bigger waves of inland migration. The price gap between urban coastal areas and the rest of the country is at an historic high. At the same time, the information gap is shrinking: The new wireless world, even in rural towns, is allowing more people to form long-distance relationships with employers, working remotely from anywhere. That means more people might be able to live in the cheap places but still get paid as though they live in the expensive ones. The moves are also a response to mounting personal debt, battered portfolios, insufferable traffic, and angst-producing status competition. Some simply want to semi-retire. For others, the prospect of playing the housing market is too tempting to resist. Valerie Bent and her husband sold their 2,200-sq.-ft. house in Simi Valley, Calif., netting $300,000 in 2003. They then bought a 5,500-sq.-ft., Mediterranean-style showplace in Las Vegas for $495,000. It's now worth $900,000. Retirees have been migrating to the Sun Belt for years. "What's different now is the phenomenon of people still in the prime of life or the middle of their working careers, uprooting themselves," says Nicolas P. Retsinas, director of Harvard University's Joint Center for Housing Studies, which is conducting a study of the trend. It also means that real estate is starting to change the shape of the workforce, affecting the flows of the professional class. Eventually, says Retsinas, the migrations of the equity refugees could start to even out housing prices across the country and create a talent exchange as knowledge workers disperse from the coastal cities to places such as Phoenix, Las Vegas, and Atlanta. TRADING UP Already, in Los Angeles so many homeowners are moving to Nevada and Arizona that the waiting time for moving vans is often a month. In fact, one-quarter of Californians say the high cost of housing is forcing them to consider moving, according to the state's Public Policy Institute. About 42% of home sellers over 55 moved out of state during the second quarter of 2004 -- many to cheaper communities -- vs. 23% during the same period in 2003. For some thirty- and fortysomethings, the Extreme Makeover: Home Edition glorified lust for all things house-related stirs desires to trade up -- yet they can't afford to do so in their neighborhoods. Shawn Shook Kornegay and her husband wanted to upgrade beyond the 1,200-sq.-ft., low-curb-appeal ranch they shared with their 6- and 7-year-old sons in San Diego. But they encountered a parade of overpriced dumps with filthy carpets and features such as tangerine linoleum and avocado appliances. One "four bedroom" for $675,000 looked promising -- until they discovered that two of those bedrooms were located in the garage. They ended up selling their house for $480,000 and using the $318,000 profit to start a college fund, pay off bills, fatten their retirement accounts, and buy a 3,400-sq.-ft. starter castle in Dallas with five bedrooms, a pool, jacuzzi, cabana, two fireplaces, and new furniture. Price: $241,000. Instead of their crumbling San Diego school with no air conditioners, the boys now attend a top-rated K-6 in a state-of-the-art building. The transplants have their misgivings, though, ranging from sushi-delivery deprivation to political alienation. Some regret moving but have already gotten priced out of the places they want to return to. Incomes and benefits can be hard to replace for those who quit jobs. There's also often a social price to be paid in isolation, nonexistent career networks, and lost friends. Still, becoming an equity refugee is something demographers say more and more may consider, especially since it's one of the few ways to transform the "balance" in the work-family equation from a Sisyphean campaign into something approaching reality. By Michelle Conlin, with Timothy J. Mullaney, in New York
Well I did not short the stock but I did put on a bear spread. I'm long 80 calls and short 65 calls. I know my total risk. The reason for the trade was a divergance play. I pretty much followed no_pm_please's emini divergance strategy and tried to use it here. All I need is some profit -taking before Feb. 18th to make money. If it stays between 78-80, I'll loose 400-500 per contract, but other wise my maximun loss is limited to about $300, and maximum gain about $1050 per contract. Seemed like a resonable risk to take. We'll find out.
In terms of the "divergence" just remember that every time a stock reacts then goes to a new high later it will probably diverge from something. That's because indicators lag. The indicators aren't predictive. In terms of the spread, I quit playing options quite a few years ago, mainly because I thought it was too difficult to pick both direction and time. But I will give you this....it's none of my business. I hope it works out for you. OldTrader
Hey, on a personal note, the wife and I went looking at neighborhoods in my neck of the woods, and found 1/2 acre lots in a golf course community for $200,000. This is about quadruple what they were just 3 years ago. We found a neighborhood we really liked that had lots for $30,000 only a few years ago and the lots were $150,000 to $200,000. I realized that what is happening in our areas is that the county commissions can't approve subdivisions fast enough, so there is a shortage of buildable lots in planned unit developments (PUDs) with the infrastructure already in place. In some cases, I saw that lots purchase only a year ago for $80,000 were going for $150,000. Since we're all traders here, you guys might want to look into this phenominon, and evaluate if "good land is disappearing" and buy lots approved for building. I am even considering trying to track down lot owners who live out of town by using the internet and ask them to pitch out a sell price they would be happy with. Here in this town, the cost of a "new" lot is running about 40 to 50% of the cost of the developed new house. In other words, the lot costs as much as the structure. Check into it. If your town hasn't reached that stage, you can make a pile of money. Especially if you leverage. IMHO, based on what I saw, this real estate escalation is not slowing down. Its going to keep moving for at least another year. Oh...why are we moving? To close our all variable consumer debt, and lock into one nice, big, fixed note that is totally tax deductible. Need more room to raise the kids too. We decided that with the lot prices being so high, that buying an existing house was a relative bargain, and that the escalating lot prices will push up the previously built houses. SM