Wednesday, July 06, 2005

FNM - a short candidate

Brandon Frederickson has been making some interesting posts about the real estate bubble lately. After reading this one I felt like making some money out of real estate. Paper assets are my bag though, so naturally I got excited after looking at the above chart of FNM. I drew a lower-channel line in purple on the chart. When FNM breaks this lower channel line, I will probably take that opportunity to get short of it.

Strange thing is, the homebuilder stocks don't really look like they are putting in tops. One of my favorite characteristics of asset bubbles is that they persist longer than most people think they will, and that seems to be the case with the homebuilders. TOL seems to be carving a bull-flag right now so I wouldn't mind getting long TOL to hedge the FNM short. The only reason I would get long a homebuilder this late in the real-estate game is because I know when to get out of a stock near the top, and I don't mind being wrong by getting out too soon. Rookies get in (usually near the top) because they don't think it will ever come down. Thank goodness for them ;-)


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