Bob, if I have interpreted some of your recent comments right, I find two of your positions in an apparent conflict:I can see where the apparent conflict comes in.
1) With regards to real estate, we may be bottom bouncing here with maybe a minor step down, but it is time to look at opportunities in real estate (if you need a house) because the majority of the damage has been done.
2) You are short Treasuries because you anticipate interest rates rising soon. Certainly, no one should be long treasuries.
If I've positioned that correctly, then my question is this: How can #1 and #2 be true? As you allude to in this post... won't higher interest rates cause a further significant collapse in the real estate market?
What am I missing? Thanks!
Here's my thinking:
Any down leg is generally most intense in the sector that had the previous up move. In this second down leg that's the stock market.
The real estate market was pulverized in the first down leg and has not seen the up move the stock market has.
As far as interest rates are concerned, I'm jumping ahead an extra step here. The huge new debt the Treasury will issue will most certainly push rates up, which I expect will then result in the Fed printing new money to slow the interest rate hike. This will, of course, be inflationary and will push asset prices much higher including real estate.
Thus, I am not so much bullish on real estate right now, but rather believe that it is a time to get positioned in real estate. It's a time to poke around and only get interested in absolute steals. If you find them, you then lock in the current interest rates long term. Under such conditions, I am willing to wait out any dip real estate might take here, because, after the bottom, rates will be much, much higher. Taking on heavy debt on real estate is really the same thing, in many ways, as shorting Treasury securities.
But the ultimate focus on real estate is because of the dramatic drop it has taken, and everyone now knows about the future liquidations coming, so you are a buyer in a sea of sellers.
If it was the stock market that was as pulverized and the real estate market that was climbing again, I would be much more positive on the stock market and less so on real estate. You have to watch where the money is going and that's where Fed tightening will do the most damage.
