Wednesday, October 19, 2005

Finally, a decent investment

The last 3 or 4 years of my life have been one big shoulda-woulda-coulda -- well, with respect to financial decisions, that is. Sure I shoulda sold BEAS in 2001 and bought that condo on Stanyan and Beulah, but life goes on and it could be a lot worse. The rest of my life has been pretty darn groovy.

Annnyhoooo, right before my bike trip (see previous blog post) I decided to go short on some "housing bubble" stocks: the home builders, the lenders, etc. This was my first time shorting, so I didn't risk very much, but every little bit counts, right? And one day housing prices will actually come down and I'll need to buy, so I'm trying to save all I can.

My original plan was to stay short on these for the duration (i.e. through the bubble deflation.) This morning though, at around 7:20a PT, while I was drinking my coffee, checking email, and reading the Philly Sport section, on a whim, I decided to cover five stocks. I really don't know why I did it. I guess there had been so many down days recently, and again the market was down (though moving up a little bit.) I was looking at an average of about 20% return on these investments if I covered, so I bought back my KBH, TOL, LEN, and LEND (I'm still short on FNM and my DSL). Oh, I also covered my XMSR which moved from 37 to 30 over the last 2 weeks or so, but I used this morning's dip load up on SIRI. (going long)

Later in the day, I saw that the entire housing sector had been downgraded, and I figured I'd made a mistake. But what's done is done -- shoulda-woulda-coulda.

Then suddenly, for no apparent reason, the market (housing stocks included) went bonkers. Look at these intradays:

TOL closed up 5%!

Why? Who knows... but for once in my life, I actually timed the market pretty well. Now of course, the question is, when to go short again? Oh yeah, these pigs are going down -- there's no doubt in my mind -- just look at how far off the yearly highs some of these stocks are -- but you gotta play the bounces, right? So we'll see what happens tomorrow and then roll the dice again. Six months from now, when FNM is at 25 and KBH is at 50, I don't wanna say shoulda-woulda-coulda, you know?

What stocks will I be shorting in the near future? I'd say
any of these are good candidates.

For more on the Bay Area Housing Crash, see patrick's links.


Gaurav said...

Nice one dude. Now only if you can figure out what caused the rise, and how you can get that info in advance, you can use that knowledge sometime in the future, lest this will hurt you sometime in the future.

Mark said...

Have fun gambling... :)

Patrick said...

Why? Who knows... but for once in my life, I actually timed the market pretty well.

Sorry buddy, but this is not called "timing the market." We like to call this one "getting lucky."

If you're timing the market, you don't ask "Why?" - you know why (and more importantly, you know why when most other people don't).

Opened Eyes said...

Trading is an art, not a science. George Soros sells a position when his back starts to hurt. You were right to go with your gut. These guys who rely on a "black box" or a strategy always blow up eventually.