Double Your Money in an Ugly Market

July 09, 2008



Help On the Way? Don't Count on It

There is a housing bill currently before Congress that is almost cruel in its cynicism. Supposedly designed to help homeowners, the real intention, as you might guess, is to help the banks.

Of the more than 600,000 homeowners that will be affected by this bill, my guess is that maybe one-third or fewer will be helped.

For argument's sake, let's double my estimate and say that 400,000 homeowners will be bailed out by this legislation. That's only a couple of month's worth of foreclosures.

This bill is not going to do much, folks, and outside of Uncle Sam, there isn't any kind of relief on the way. Mortgage rates are rising, loan applications continue to decline, and the spring and early summer sale seasons were a total bust.

Even well-heeled borrowers are now mailing back the keys to their second homes and investment properties because they're worth far less than what they borrowed, even if they can afford the monthly payments.

This housing virus has even spread to home equity loans that many used as a down payment for their original home purchase.

Double Down

So, what does this mean for investors?

Banks will continue to get whacked and consumers scrambling for gas money will keep cutting back their spending. This, in turn, will hit companies that depend on discretionary spending from Expedia (EXPE) to Tiffany & Co. (TIF).

Many analysts now realize that the banks don't know how much toxic waste they actually have on their balance sheets or in off-balance-sheet entities that they eventually will be responsible for -- another fallout from the housing crisis.

Citigroup (C) and Lehman Brothers' (LEH) recent announcements of more write-offs than anticipated helped move Wall Street sentiment along. As for you consumers, well, just go to a mall.

I just bought pants at Nordstrom (JWN) -- too much discretionary eating -- and they were altered and ready for pickup in three days. Last year it took 10 days, and a couple of years ago it might have taken two weeks. Now I even get e-mail solicitations from Ralph Lauren (RL) to shop at its outlet stores as opposed to its regular stores.

What I'm trying to say here is that things don't look pretty for long-only investors. But I fully expect to make a ton of money on the short side during the next six months, and I want you to join me. I've already had 15 closed trades this year in my ChangeWave Shorts service that were doubles or better.

You, too, can start making money-doubling trades in this lousy market by joining ChangeWave Shorts.




Michael Shulman

Editor, ChangeWave Shorts

P.S. Rather than letting this ugly market get you down, why not try profiting from it with ChangeWave Shorts? Get in on Michael's money-doubling trades, and soon you'll be profiting regardless of the market's direction.

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Tobin Smith is the founder of ChangeWave Research, the editor of ChangeWave Investing and ChangeWave MicroCap Investor and a contributing market analyst for Fox News Channel. His market commentary can be found in the ChangeWave WaveWire and he provides more specific recommendations and advice through his ChangeWave Investing service. Click here to learn more about ChangeWave Investing.