Continuing the Housing Discussion ...
A Contrarian View on Housing
"With a resounding thud, the next shoe in the mortgage crisis is about to drop. I'm not talking about the commercial real estate shoe that has garnered so much attention already, but rather the payment option adjustable-rate mortgages that are due to reset in the coming months. In these resets, mortgage payments can balloon by fivefold to tenfold overnight, and this has federal and state officials acutely concerned about further acceleration in residential mortgage foreclosures."
"With such conflicting forecasts for the residential housing market circulating, I propose that Fools determined to invest in the space consider companies with exposure to a broader range of drivers for construction demand. If my expectations for prolonged impairment of the housing sector pan out, then shares of homebuilders like Pulte Homes may not offer much shelter. With exposure to anticipated demand from stimulus spending in roads and other infrastructure, however, aggregates suppliers like Vulcan Materials (NYSE: VMC) and Martin Marietta (NYSE: MLM) could stand to gain handsomely. If I am wrong, however, and a sustainable recovery in housing materializes sooner rather than later, this aggregates segment could be expected to participate as well."
Floridabuilder2 may opt to focus upon transcation activity over macroeconomic fundamental analysis, and I wish him all the luck in the world, but through the entirety of my investing experience, investing in accordance with carefully interpreted fundamentals has never led me astray. If I relied upon transactions to shape my outlook, then I may have presumed the gold bull market was over when the metal crashed by 31% last year and mining equities were brought to the very brink of collapse. Without my confidence in the fundamental underpinnings of that market, I may have sold my positions at a substantial loss, but instead I recognized the correction as a deep and irrational market dislocation and left my positions entirely intact. I pay attention to market activity in real time, but the entirety of insight drawn therefrom is painted upon a canvas of comprehensive fundamental analysis.
In short, fundamental qualitative analysis is the one tool in this investor's tool box that I would never invest without. :)