This ETF which bets against commercial real estate topped $140 today, I am taking my profits and running like a thief into the night. The chart below shows you why - this was my #1 position as of two weeks ago... I did lighten up a bit too early with the first part of my position, but at this time I am feeling very piggish.
None of my worries about the commercial real estate market have changed, but at this price for the ETF the risk/reward (easy low hanging fruit) is gone. We will look for some rally point in the coming weeks and get back to a larger position later as the economy continues to slow. But this is far too much profit (27% in 1 week) and 36% in just over 2 weeks. If you wonder how the fund only lost 1% last week when the market tanked 4.5%, positions like that will do the trick. I didn't have much left going into this week, but as of today's action I am taking just about all of it off the table. In a perfect world I would of held it all until today, but again my strategy is always to layer in, and out of positions. This is my last layer out.
I am as "long" overall in the fund as I've been in many months... not trying to catch a bottom, but many of my favored names finally hit levels I was hoping for so I am buying at these sale prices, and will just hold on for the ride from here. For most of this correction up to this week we've held up well, as I wrote this past weekend, we can expect to give back some of these outsized gains in the near term, but in return I think we were able to buy some of the highest quality merchandise in the market at some great prices. From here, I'll just sit back and grab some popcorn and wait it out. Again, we are still at risk of one of those "moments" where EVERYTHING drops 10-15% for a few hours (baby, bathwater). This should put in the "bottom".
Long Ultrashort Real Estate in fund; no personal position as of 10 minutes ago
4 comments:
Great call on SRS I got out at $144 but on MOS I zigged when you zagged I sold at $183 i hope you bought a ton at $80.
Great blog
Chris P
Thanks Chris.
I never try to catch the exact bottom or top (but don't complain when I do). I wrote this morning I was hoping for $79 but got in $80-$82 with the majority and took it up from 3.3% to 5.7% of the fund. It would of been more but I had a few other stocks dropping at the same time I wanted to add exposure to as well. I did buy some yesterday under $90 as well consistent with layering in and out of positions.
This one worked out very well so far but due to market fears nothing else. They needed an excuse to sell MOS off and "fears of sulfur hurting margins" was the convenient one of the day. They'll find an excuse one way or the other; RIMM just reported great guidance and a week later they bring it down because of fears on guidance... guidance doesn't even assure investors for 7 days anymore.
You will see me back in SRS in a sizeable way but I hope at a far lower level. Unfortunately the market is dictating prices more than the actual stock fundamentals during Aug, Nov, and Jan - it's a very difficult market where the indexes have more affect on you than the fundamentals. Hopefully things change by the 2nd half of 2008 when we price in this recession (err, slowdown) and the market can stabilize and go sideways and good stocks can go and do their thing without worries of crashes every 6 weeks.
Mark,
I know you've been preaching about commercial real estate being the next shoe to drop. I think credit card debt will be another one. There might be an entire shoe rack up there. Do you any ideas on how to play this? I was thinking COF but they just came out with bad news this morning. I might be late for the party and I don't want to chase.
Read my roadmap from August and December, I have been preaching credit cards as well.. auto loans... student loans... alt A loans... prime loans... all of it. It's all tied together. I only preach SRS because there is a direct way I can play it. I can't short individual names so if there is not an Ultrashort, I cannot play it. Otherwise I'd be short 2-3 homebuilders that I feel are going to zero and I would of been short a lot of credit card companies, and individual financial companies. The way to play it is to short any credit card issuer ... Mastercard is a transaction company so people think its a card issuer - they are not. They hold no credit risk. The companies issuing the cards do. COF is a great example. It's only getting started. With that said, I'd wait for all this stuff to bounce before shorting anything. Yes it can go lower but we have tremendous drops in the past week and a half... I think its at a point where its too late to short but not something to be long. Unless you literally are trading for 1-2 day holds.
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