I love it when blog comment experts proclaim that the sky is falling (i.e. The Homebuilders). How many people here were on the tech bandwagon in '99? Or the mortgage bandwagon in '04?
The fact is most people/sheep will go with the prevailing sentiment of the day.
That is why Warren Buffett is Investor #1. He ignores CURRENT sentiment and looks ahead 5 - 10 years. For example, he bought The Washington Post during the '73 stock market recession when no one would ever buy advertising again because things were so bleak.
No one would ever drink Coke again after the "New Coke" disaster in 1985. So he bought huge amounts of KO stock.
During the Internet boom, Buffett bought (merged) General Re Insurance at close to book value because, as everybody knew at the time, TRUE investors put their money in Pets.com or TheGlobe.com to make an easy double in two weeks.
And now, as everybody knows, no one will ever be able to afford or build a home again.
You know what's hot? Commodities!! They just go up and up! I think I'll put my money there because THIS boom will never end (like all the other ones). Ha!
I believe you are correct. Invest is what everyone else is not investing in and one day you will be on the top of the heap. In the early 1990's I had a ton of oil services companies and I was crying every nite what a poor investment. If I only would have stayed the course I would have been retired by now. Same with gold. The lesson here is everything does turn around eventually, and we will have a solution for the oil crisis sooner then later. I feel oil is in a bubble and a few years from now people will say, if I only would have sold at the top of the market.
I truly encourage all of you to buy homebuilders so that we can short them to 0. How can you guys fail to see that the average american nowadays is awash in debt and can barely afford to survive, many times by piling up more debt? Where will the average Joe find the money to buy a house? In the meantime the greatest idiot on the face of the earth by the name of Bernanke keeps killing the dollar, while the supermorons in Congress and the White House keep throwing money to the wind further lowering the dollar, while unemployment is rising and wages are stagnant. And where does all this money go? To China, while we are left with the same amount of dollars which are worth less and less every day.
Buying homebuilders now is a terrible idea. I have clients in the industry and let me tell you it really is a disaster right now and there is no rational discussion of a near-term turnaround. I understand the contrarian philosophy, but it's way too soon to go long. The news is going to get even worse over the next 18-24 months - I would advise waiting for even darker days before considering going long. They are on the horizon.
I don't think you can compare buying homes to drinking coke. There are only so many beverage choices and eventually it had to come back. You don't have to buy a home renting is just fine. People have been convinced that you are not living the american dream if you don't get a home and two kids and a puppy. I think the dream turned into a nightmare for allot of people, and I don't think they will be running back to buy another.
I do agree that warren buffet has made good decisions but even he is not getting back into housing related stocks. I think there are better plays than the HB's.
Richard, you make a valid point. In fact I am buying XHB AT THE OPEN TOMORROW based on a neural network software I use. I myself cant see why anyone would buy, and thats exactly when you should! However... I do like quite a few oil and gas stocks as well as RIO very much. I dont think this commodities boom is going to end until someone at every gathering is talking about how much they are making in gold. Give it another year or 2. -)