Schwab gave me the ff message: "! This stock [XHB]is either ineligible to be shorted or shares must be borrowed externally. Lenders of hard-to-borrow securities charge a fee in the form of interest. Clients who wish to short a minimum of $100,000 of a hard-to-borrow security and are willing to pay a fee to cover the cost of borrowing those shares, may contact Securities Lending at 1-800-355-2448 to determine the fee amount."
Too bad because this would have been a relatively safe way of betting on the expected continued decline of HB stocks. Oh well, there goes the proverbial "big one that got away."
I talked to a broker at TDameritrade and he said you can short an ETF - its just that XHB and ITB shares were not available at the time I placed my order. There is not enough volume on thoses stocks. He said somtimes it could go 2 weeks when no shares are available to short on low volume stocks, especially when trading online. I will try again this week by phone. Thanks for all the good info.
Thanks for that article. A great read.
I think you will do well with your shorting, although how do you deal with AHM and that huge dividend? I guess you just need to exit before you get stuck paying for it?? If so, too much to keep track of for me!! :)
Be careful with QID. I like to jump in and out of that. You are probably right in being bearish on the market, but you can get killed holding that while waiting for the market to turn. I was in BEARX and shorted the S&P too and got hurt waiting for this sucker to turn towards the end of 2006. So much liquidity still in the market. But at least BEARX has a gold component and you will be pretty good there. You might like CEF (50% gold/50% silver) if you are bearish. And of course, homebuilders are dead. The only days they go up are because of short covering or pumping by funds looking for a chance to get out.
I tried to short both XHB and ITB. TDAmeritrade won't let me. I agree that ITB looks like the better short.
So here is what I did. I shorted a basket of homebuilders: HOV, DRI, KBH. I also went short FNM and the Financials via SKF. Also in BEARX and QID. I am very Bearish.
My cousin is a small-time builder in NJ. He is getting very nervous. Good Luck to all the BEARS!
By Svea Herbst-Bayliss
NEW YORK (Reuters) - Investment industry icon Jim Rogers, who helped launch one of the world's best performing hedge funds, said on Tuesday that he is betting against U.S. home builders and expects the sector will suffer more losses.
"I am short home builders and Fannie Mae (FNM.N: Quote, Profile, Research)," Rogers, who co-founded the Quantum Fund with hedge fund industry legend George Soros, said at the Reuters on Tuesday.
"They will go down a lot more. You just don't clean out a speculative bubble in six months," added Rogers, who now invests only his own money. Rogers' calls, particularly his views on commodities, still resonate with other investors. He said he was short American Home Mortgage Investment Corp (AHM.N: Quote, Profile, Research) and other mortgage companies as well.
The U.S. housing sector has taken a hit in recent months as home builders are reporting slumping orders and the number of U.S. borrowers falling behind on making payments on riskier types of mortgages is rising.
As a group, home builders have lost about 18 percent of their value this year, according to the Dow Jones U.S. Home Construction Index (.DJUSHB: Quote, Profile, Research), an industry benchmark.
Rogers said the call was not difficult to make considering the obvious risk at a time lenders were becoming far more lenient than ever before.
"Never in American history has there been a time where you could get a mortgage for no money down," Rogers said.
However some other investors, most notably Legg Mason's Bill Miller, considered the best U.S. stock picker for having beaten the Standard & Poor's 500 index 15 years in a row, said in December he expected home builders to show new promise in 2007.
Mutual funds won't release data on the investments they made in the first quarter until later this spring.
Rogers said he is also betting against some of the big investment banks which have been making headlines with multimillion dollar pay packages for top executives.
"That is one of areas where there are excesses," Rogers said, noting "Even though hedge funds and mutual funds aren't doing so well, people are making gigantic amounts of money."
Last year five hedge fund managers, including Centaurus' John Arnold who topped the list of star earners, took home at least $1 billion. Goldman Sachs (GS.N: Quote, Profile, Research) chief executive officer Lloyd Blankfein earned $54.7 million in 2006.
Even though hedge funds are pulling in money from investors like pension funds at a record pace, Rogers said the $2 trillion industry is poised for a setback.
"There will be many disasters coming both from incompetence and dishonesty," Rogers said adding "Right now the best way to make money is in the private equity and hedge fund industries and some people will be wiped out. It is all going to come to a bad end," he forecast.
I am short a small position and have shorted this off and on for awhile. Its been kind to me but shorting etfs isnt where you go for "home run" type stuff. It is, however, a nice way to bet against a sector and avoid a lot of "event risk" in individual stocks.