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Minyan Mailbag: Levitating Housing

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All looks quiet and comfy until risk comes undone...

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Prof Succo-

With respect to your last post, would you agree that some big funds (it is month end, quarter end and year end after all...) have been playing "goal line defense" with some of the homies (see Centex (CTX) and Beazer (BZH) and Accredited Home Lenders (LEND) although not a homie...) trying to keep their gains up and NOT having to sell and take a tax hit (and of course goose performance)??? The HGX in my view (as limited as it is...) is "levitating" by only the "year end tricks" by some of these managers and "hangers on/momentum guys."

Another example of "risking dollars for nickels?" Why not, there is NO RISK right???

Minyan Steve

MS,

I absolutely believe that is happening. One would have to be naïve to think otherwise. And of course, no one complains as they make money on paper. It is nearly irresistible for most not to do this with OPM in their desperate search for returns.

Of course we all pay the piper at some point. All I see this doing is increasing risk and compression.

I know I sound like a broken record, but that is the nature of the beast. All looks quiet and comfy until risk comes undone and everyone looks around and asks what happened. That is how markets work. Most corrections occur from merely the weight of things.

With bullish investor sentiment now at 60.4%, option prices at a secular low and funds set up to make money if the market doesn't go down and pensions and housing dependent on higher asset prices, we have a very crowded trade.

-Succo
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