Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Welcome to Slider's Dugout -- Ignore unavailable to you. Want to Upgrade?

To: Jill who wrote (403)	8/15/2005 5:17:42 PM
From: SliderOnTheBlack	Read Replies (2) \| Respond to of 50655

re : Refi/Mortgage & Housing Bubble Shorts: Hi Jill; fwiw, here's my basket of Homebuilder Shorts: finance.yahoo.com I was able to pick up a nice short- trade earlier this spring, but didn't get greedy. This time, I think we may be able to "ride" the trade a bit longer. I didn't catch the earliest part of this retracment, but so far - so good. I've closed out some of my basket here and have taken 1/2 of the profits and flipped that money into what was one of my smaller positions, into now overweighting WLS - short, as my largest position within my basket. It's been the subject of the CEO wanting to take the company private and there was a recent major short-squeeze here of late (looks to be continuing today (vbg) - it has an "extremely small float" and trades on low volume - with huge insider ownership; so knowing where to borrow stock to short is of primary importance - so most would be advised to avoid it for that reason. It has been the strongest of the Homebuilders here and in my opinion, has reached an extreme over-bought level on almost every Technical Indicator - again, due to a significant short-squeeze. That squeeze is ending and then I think we'll see some profit taking from the longs...and shorts might be able to ride this one back down to the gaps sub $100, as shown on this chart: stockcharts.com[d,a]daclynay[pb50!b10!b200!f][iut][J57042024,Y]&listNum=2 Financing for New Home Purchases has reached new heights ,or lows (depending on your point of view) concerning the creativity of loan programs and the laxity in underwriting. - as reported in today's news, approx 50% of New Purchase loans in many markets (62% in Oakland/SF area) now have the entire down payment being borrowed as well. This replaced the Industries earlier response of "piggyback" loans and is just insane in a bubble type of market environment. Many of these purchases are still tied to variable rate loans and with Property Taxes rising in virtually every market - these Homeowners are potentially facing rising costs and negative equity if there is any pullback in Housing Prices. If we see a Recession with significant Job Losses, these Homeowners who had to borrrow the down payment - are going to be walking away from these Homes in droves.. I actually like the Short Trade in the Sub-Prime Lenders here better than the Home Builders...and have a basket there as well. I'm looking at re-entering FNM again... but, I covered it at $55-$56 earlier this spring and it looks like it's being "propped up" here...so, I've passed so far. Subprimes who sell securitized Mortgages have made far too aggressive assumptions concerning both deliquency rates and early pre-payments. This Industry Niche get's "rocked" in volatile rate, or slow economic environments. Foreclosures in the Midwest Region are up +33% year over year... this is staggering and it should hammer the subprime lenders. The Title Insurance Co's are another Short-play, as both the Re-Finance Boom and the New Construction Boom looks to have come to an end. Some believe that the Title Insurance Plays may get an extended "stay of execution" as many Homeowners rush in to re-fi variable rate mortgages into fixed rates... however, if borrowers close their refinances with the same Title Insurer, these policies only need to be "updated" and the Title Insurer's do not get their full premiums & profits as per the original closing - so I like these Short as well. I'll look to add to my positions on any continued rollover in these sectors. There are a few SubPrimes that actually could have "go to zero" potential here... and as this Bubble comes to an end... THAT is where I anticipate rolling profits from the other subsectors into... as many of these companies will join the likes of GreenTree/Conseco & Cityscape Financial in SubPrime Heaven... I spent a decade in the Industry (1990's) with a NYSE listed Lender...and it's not the Bubble in Home Value's that has surprised me here (those come and go - although this is beyond those I saw)... it's the absolute recklessness on the lender-side from everything from Loan Program Creativity (High LTV Stated Income, Interest Only, Piggyback No-Money Down Purchase Loans etc), to allowing the Appraisal Component of Loans to enter an environment on the Refinance side of the Business that has disconnected from reality, to a degree that many 75%-80% LTV SubPrime loans are in reality 95-100% LTV loans... In the early 1990's Investment Bankers got their tentacles sunk into this Industry via Securitization and "gaming" Gain on Sale Accounting & Assumptions... this has led to "creative accounting" that is the equal to, if not worse than anything Enron ever dreamed up.... this entire Industry today in my personal opinion - is a creative accounting, house of cards and fraud. Again... I will be surprised if we don't see 2,3,4 "name" SubPrime Lenders go bankrupt over the next couple of years. 50% of all Down Payments borrowed in the "Hot" Bubble Markets and + 33% Year over Year increase in Foreclosures in the Heartland.... TIC TOC~ re: Oilpatch Shorts Message 21591332 9 out of 9 in the red again today: finance.yahoo.com Ideally, the former longterm resistance of OSX 150 may be retested as support if we can get Oil to pullback... that would be a nice 15% short-sided trade... I'd take that for "now". In the Gold's... it's all about whether the "SMACKDOWN" is coming here from the Commercial Shorts. So far, currencies have had to lead the Metal - and the Metal has had to lead the Stocks... no surprises there. I mentioned earlier that I thought Fund Managers would apply a discount to goldstocks, in regards to where shares would be priced relative to the metal....and that's why we are at HUI 215ish with $440 Gold. We really need New Highs for the Metal to carry the goldstocks to new highs....so, I'm watching USD & Foreign Currencies, the TIC etc - as my lead to re-add to positions. I certainly have no apologies for taking profits on an over-weighted positon. In goldstocks, we still have that earlier HUI 227 resistance level from the HUI 190-227 March Rally to overcome and I think we'll need to be on the verge of challenging and taking out the old highs for Gold @ $458 to break thru that 227 resistance level and then new highs beyond HUI 258. Sitting Patiently with: 10% Long - Goldstocks 15% Long - Alternative Energy, Misc Metals, Water, Utilities etc. 5% Short - Oilpatch stocks 10% Short - Homebuilders, Lenders, Subprimes & Title Co's 5% Short - Broad Market 55% CASH Waiting to re-deploy some of that Cash...but, being patient.