How You Should Play This
Battered Market... And When You Should
Play It
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By: Marc Lichtenfeld
Senior Analyst
Xcelerated Profits
Report & Smart Profits Report
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Published:
March 17, 2008
It's one of the biggest investment topics being discussed at the
moment...
The news coming from this sector has become so bad, and
sentiment has become so negative, that I mentioned to my wife
the other evening that perhaps we should look to capitalize on
it.
The Mrs. is very bright (that must be where the kids get it
from), but one thing she is not is a risk taker. And certainly
not when all hell is breaking loose in the markets.
Like many other folks, she'd rather hunker down and wait for
things to calm down. I can't blame her. It's tough to have the
courage to buy any kind of investment when prices are plummeting
almost across the board.
But I theorized that this particular situation was the
proverbial "blood in the streets" opportunity. I have a hard
time picturing things getting much worse.
And recently, I ran into an acquaintance of mine, who's a
lifelong expert in this field (he's in his sixties now) and has
made a multimillion-dollar fortune from it. He confirmed my
theory, but also provided some valuable other insights that I'm
going to share with you today.
Read on to find out what you should do with your money when it
comes to the real estate market...
There's Blood, But Is It In The Streets Yet?
While discussing the current housing environment, my contact
(let's call him "Mr. Big") said to me: "Marc, I've seen every
kind of market, including 17% interest rates. It always bounces
back." He then gave me the exact same words that I'd said to my
wife the previous evening: "The time to buy is when there's
blood in the streets."
Okay. "But is there blood in the streets now?" I asked.
He quickly responded, "No. I think it's going to get worse."
But here's the interesting thing. Without knowing that I write
for a newsletter myself, this guy stated: "You know, I see all
these newsletter writers saying we're headed into a nasty
recession or depression. They're all so negative, so I have to
think we're near the bottom now. But we just have a little way
to go yet."
(Quick aside: This "blood in the streets" investing theory is
just one way that the real pros make money in the stock market.
We've talked about it in the Smart Profits Report before because
it's an important concept. Xcelerated Profits Report subscribers
know exactly what I'm talking about because this is the approach
taken with two recent recommendations -- both in a battered
sector, but both super-solid, top-ranked firms in little danger
of going under and which will likely lead the recovery. For more
details on how to invest like a pro,
check out this link.)
But back to my story... why should I listen to this guy about real
estate, and how can we apply the "blood in the streets" theory to
this market?
Mr. Big's One-Way Route To Real Estate Riches -- An Essential
Skill In A Market Stuffed With Bad News
The reason I listen to Mr. Big is simple. While exuberant guys
like Donald Trump like to brag about their real estate wealth,
this guy didn't make and lose his money several times like him.
He made his riches just once -- and then grew the money into a
nine-figure fortune.
And that kind of track record is just what you need when an ugly
market is trying to take wealth from you. Just recently, we've
seen yet more awful real estate data...
 Mortgage research firm RealtyTrac said January got off to a
miserable start, with a +57% surge in foreclosures compared with
January 2007. It was also an +8% rise over December’s figures.
The percentage of mortgages that fell into foreclosure across
America during the fourth quarter hit a record high of 0.83%,
compared with 0.78% during the third quarter, according to the
Mortgage Bankers Association.
The delinquency rate (homeowners more than 30 days behind with
their monthly payments) is also rising -- up to 5.82% during the
fourth quarter -- the highest since 1985.
The Pain Game
Global Insight estimates that 1.4 million homes will go into
foreclosure in 2008, helping to sink residential real estate
values by $1.2 trillion. Yep... that's trillion.
In addition, Kieran Quin, chairman and CEO of Column Financial,
says there are three million subprime adjustable rate mortgages
in the market. Two million of them will reset to higher rates
this year.
Those figures indicate there is more pain ahead -- and Mr. Big's
analysis seems right to me. The question is: What do we do about
it?
Your Real Estate "Percocet"
I'm bottom-fishing in the real estate sector now, researching
various markets, so I can determine where I'd like to pounce
when the opportunity is right.
And how will I know when it's time to put some money to work?
One area I'll be keeping a close eye on is homebuilder stocks.
Many are very cheap right now, and with stocks being
forward-looking mechanisms, if these shares continue to rebound,
it could signal that a bottom in real estate is near.
However, if these stocks reverse course and head lower, we may
have more time until the streets are crimson enough to look for
the ultimate bargain.
Hoping your longs go up and your shorts go down --
Marc Lichtenfeld
Senior Analyst
Xcelerated Profits Report & Smart Profits
Report
About Marc Lichtenfeld
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