As someone who is still quite bearish on housing in the mid to long term, what do you think of Kyle's comment that he is long US housing? Why is he wrong? Or is he right short-term?
That's an excellent question. If you listen to what Kyle is investing in, he is not putting together an investment portfolio that goes out and purchases single family homes or buys home building stocks.
What he is doing is going into the secondary mortgage markets and buying mortgage debt that he believes has been marked down too far. For example, (and its much more complicated than this), he goes into a tranche of mortgages and purchases X amount of debt on one of the tranches that is paying 8-9% interest and may be marked down significantly. He is betting that interest rate and mark down is too far and will come further in line with the rest of the market. That could occur even if home prices fall further.
It is the exact opposite of the trade he put on when he bet against subprime in 2006 - 2008, when he felt (correctly) that the debt was priced too high.
As someone who is still quite bearish on housing in the mid to long term, what do you think of Kyle's comment that he is long US housing? Why is he wrong? Or is he right short-term?
ReplyDeleteThat's an excellent question. If you listen to what Kyle is investing in, he is not putting together an investment portfolio that goes out and purchases single family homes or buys home building stocks.
DeleteWhat he is doing is going into the secondary mortgage markets and buying mortgage debt that he believes has been marked down too far. For example, (and its much more complicated than this), he goes into a tranche of mortgages and purchases X amount of debt on one of the tranches that is paying 8-9% interest and may be marked down significantly. He is betting that interest rate and mark down is too far and will come further in line with the rest of the market. That could occur even if home prices fall further.
It is the exact opposite of the trade he put on when he bet against subprime in 2006 - 2008, when he felt (correctly) that the debt was priced too high.
Thanks for all these updates and vids. Great info here.
ReplyDeleteI agree with most of what Kyle is about, except he is way more bullish on housing then I am.