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How to Profit From a Real Estate Meltdown

Thursday, January 17, 2008 | Chris Rowe

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Today I'll give you one way to profit from the Real Estate Meltdown.

Here's a topic that really hits home.  So much so, that you may even have felt turned off by the subject-line of the email.  But it's not just the real estate market that's falling apart; families are falling apart, as well.  What do I mean?

Well, meet Bob Smith.  Bob can't ask for anything more.  He has a beautiful wife, two beautiful children and everyone is happy and healthy.  He wakes up in the morning in their nice comfy house where they started this young family. 

He takes his shower, drinks his coffee and feels great as he hugs and kisses his family before going to work.  Work is great, and he comes home to his wife's stories about what the younger daughter said today and what the older son achieved in school today.  Everyone gets along great and small "disagreements" are easily resolved with compromise.

Now imagine the same exact family.  Only this time, the mortgage payment has increased 60% from the year before, and so has the cost of energy.  His employer is feeling the pinch of the declining greenback and higher commodity prices, and five of Bob's co-workers just lost their jobs.

When Bob wakes up these days, he's not as energetic because he didn't sleep as well, but he's definitely moving faster to be the first to show up for work with a polished apple for his boss.  He races to work thinking about how he's going to get the money for the mortgage payment (so they can keep that house) while he eases up on the gas pedal so he doesn't waste gas. 

Forget vacation planning.  Now Mrs. Smith will have to work full time.  Who do they trust to watch the kids?  The kids aren't getting as much attention so they misbehave in school which causes more stress. 

The same exact "disagreements" they used to have are now classified as "arguments".
"Come give Daddy a kiss"  turns into, "Your mother told me what happened in school today."
The new questions of the day are, "Who spent 90 minutes on a phone call to California?" and "What did your boss say about your year-end bonus?"

Fast-forward 12 months, and the same family who thought they could get through anything is deciding who gets the kids on the weekend.

Meet Chris Rowe: one of the luckiest guys on earth.  He saw the signs of the Real Estate market topping out early.  The plan was to rent in the Miami Beach Bachelor Pad while real estate declined to the perfect buying point.  Enter Katie Rowe (who wasn't Katie "Rowe" at the time).  Oh yeah, and enter Maya Rowe (who wasn't anyone at the time).  That bachelor pad was starting to feel a bit claustrophobic.

Meet Kim: The real estate agent who was one of the only real estate agents in Florida to generate a nice fat commission (courtesy of Chris Rowe) in the summer of 2006.  Kim kept searching for wings on my back.

Meet the real estate market: "TIMMMBERRRRR!"

So what separates Chris Rowe from Bob Smith?  The family is much happier. 

Why?  Because if one asset is losing money, another asset is making money.

As many of you know, I like to hedge.  If you're a member of my options trading service The Trend Rider, you have both bullish and bearish positions in your account.  If the market crashes like it did in 1987, it's very likely that people who trade this way will have to fight keep their composure and maintain their "poker face" while they walk out of the office and around the corner.  There, nobody can see or hear them while they celebrate with an old school Toyota commercial style close-fisted leap.  It's not classy to shout "YES!" or "YAHOO!" in the faces of those who just watched their net worth disappear. 

I want you to consider hedging your account.  If the real estate market continues to tank, there is a way to profit from it.  When you're done reading this, look at an ETF called "UltraShort Real Estate ProShares (SRS)".

The investment seeks daily investment results, before fees and expenses, which correspond to the inverse of the daily performance of the Dow Jones U.S. Real Estate index.  In other words, if the Dow Jones U.S. Real Estate index declines by 10%, SRS will increase in value by 20%.  If the Dow Jones U.S. Real Estate index increases by 10%, SRS will decline by 20%.

I am not saying that RIGHT NOW is the best time to buy.  But add it to your arsenal and consider trading it.  If the market crashes because of problems related to declining property value, this will be a sweet spot in your portfolio.

(Please let us know what you think about Chris Rowe's article.)
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“Profit from the Trend”

Chris Rowe
Chief Investment Officer
The Trend Rider


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12 Comments

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  1. Chris (1 year ago) Is this Spam?

    It's great to look back at old comments from people like "FRANK".

    People said SRS was such a bad recommendation because it went to 100.00. But now that we have the luxury of hindisight a year later, we can see that it then went to as high as $295 for about 200% return. Was shorting real estate really rocket science?

    This happens all of the time. If you go to TheTycoonReport.com and look at the archives, 4 out of 5 recommendations worked out very well. If you look at the ones that worked out the best, you'll see that when I wrote about them, people wrote all these negative things about me, and the recommendations. But if you also pull up a chart today to see what happened, you'll see what I mean about 4 out of 5 right.

    In addition to the thousands of financial pros that read this publication, a great many small investors read it too. These are typically the ones who leave the negative comments as they focus on the here and now more than the future, which is the major handicap they have when trying to invest. Investing is based on the future. not necessarily the next week or months either.

    As for KEN,

    We didn't all act in concert to recommend Citigroup. It was a coincidence. Citi was obviously one of the recommendations that didn't pan out. And if seeing a loser come from someone and to then say they are bad traders or investors, that just shows what kind of market experience you have.

    CHRIS ROWE.

  2. Frank (1 year ago) Is this Spam?

    Nice Call on SRS .

    You people are Playing games.

    Look at URE.

    The Other side of SRS.

    Stay Away From These people.



    UJU

  3. Frank (1 year ago) Is this Spam?

    Srs Is down big time 1 22 08.



    Citigrop down big time 1 22 08.



    Hmmmmm

    Bad moves at this time.

    Time to go to side lines .Tired of losing money.

    Pick some winners.



    Frank

  4. Ken (1 year ago) Is this Spam?

    Sorry.

    I really dont mean to dog Chris or his service. I think what he does here is fantastic.



    Its just that of all the editors he's the one I understand and relate to the best. He's doing a lot of what I do, and try to do. And I cant help but be critical. There are fundamental differences in our styles.



    But in spite of that, what bothers me the most, is the huge disparity between the very good free product Tycoon Report gives out, and the extremely expensive product they sell. And dont try to tell me you "get what you pay for", thats not necessarily true. The trading education business is an absolutley huge money making operation. Where else can a trader make over a million dollars a year and never put his own money at risk.



    Further theres a definite clique here. If one says buy Citigroup, they all say it. Its up to us to add a voice of reason.



    But its really the refusal to use a stop. The insistance that fundamental homework somehow will protect you from making a mistake, the refusal to acknowledge that time is money too. These are the things that separate traders from value investors.

  5. Ken (1 year ago) Is this Spam?

    John M,

    Have you looked at Chris's trades in the Trend Rider? The accual trades not the published records.

    Chris's track record may be very good. But Trend Rider is a VERY expensive newsletter with an agenda to be right. Being right and maintaining a track record is probably more important to future sales than the amount of time spent waiting out mistakes. There is another reason to buy all that extra time, other than the bell curve, and the fact that you might catch a great trend that lasts that long.

  6. Ken (1 year ago) Is this Spam?

    I would have liked to have been untrashort the overall market this month. Maybe we'll see a new lower high and we can ultrashort the market for the rest of the year?

  7. John M (1 year ago) Is this Spam?

    edwingrusd



    you are trying to make money. If you follow technical analysis you have to wait for the buy signal which usually comes after the stock has some momentum. On the sell side he waits for a sell signal which usually comes after some negative momentum.



    The key is to make money not find bottoms or tops. IT IS IMPOSSIBLE TO FIND TOPS AND BOTTOMS ON A CONSISTENT BASIS.



    You make your money in the middle. If the stock trades from 10 to 20 and you can make money from 12 to 18 thats good.



    And as far as the stock has already lost a lot of value... In 2000 JDSU traded from 175 own to five. Would you have been stupid to short at $25 per share. He trades based on the indications his technical analysis provides.



    I would look closely at Chris record in the Trend Rider.



    He doesn't loose often!.

  8. Sharon (1 year ago) Is this Spam?

    Hi Chris,



    Great article, great example for today's challenges and thanks for the heads up on SRS. Will put it on my watch list for sure.



    Have to disagree with edwingrusd, what I see is that you wait for confirmation before placing your buy/sell recommendations.



    Keep it up, Chris, you and the rest of The Tycoon Report editors are number one in my book.



    Best,

    Sharon

  9. edwingrusd (1 year ago) Is this Spam?

    The problem with the Chris Rowe method of hedging, as I see it in the short time I have been a subscriber(and I respect his work, is that he also buys late and sells late, eg buying calls on Aem, when it had already quadrupled, and buying puts on retailers, when they had already plummeted.

  10. Kevin (1 year ago) Is this Spam?

    Great article, always good to have more tools in the toolbox. Thx Chris!

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