1) Markets are hard to predict. Anyone who tells you otherwise, hasn’t been around the markets long enough. Here’s the most recent head scratcher from my book; why have housing-related equities sold off in the past few weeks..???
2) A few months ago, we all “knew” the bear thesis. I even posted on it at the peak of the mortgage rates spike and said I wasn’t too concerned. adventuresincapitalism.com/2021/03/22/who…
3) What has happened since then?? 30-yr Mortgage Rate has pulled back 35bps. Lumber is down by 2/3. Labor is slowly getting better in some states. Affordability is better.
4) What has happened to my housing names....??
5) Moral of the story; markets are unpredictable and sometimes they do not follow the historical model. Rates and costs going down is usually bullish. Did fund flows out of value overwhelm the thesis? Is this directionless summer action?? Did the thesis change??
6) I focus on strong micro-trends and ignore the volatility along the way. Clearly someone is selling down 25% in a month. I have a feeling, they’ll be regretting it because everything tells me the thesis is playing out white-hot. In my mind, this is what creates opportunity...
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