Michael Shulman

Trades to Keep You Ahead of the Recession

by Michael Shulman   12/04/08

Wall Street sold off and some investors appeared shocked that we are now officially in a recession that began in December 2007, according to the Bureau of Economic Research.

Wall Street's shock is a great indicator of where you can make serious money playing this recession, which is going to last longer than almost anyone imagines.

The Street's willful blindness in the face of hard data never ceases to amaze me and make my subscribers money.

Let's go over their blind spots and how the nature of this recession -- a nasty one that's getting nastier by the day -- is going to continue to take them by surprise.

Housing

The epicenter of the economic downturn, credit crunch and pullback in consumer spending is falling home prices.

The pundits all see a bottom in housing in 2009.

My favorite analyst, Meredith Whitney -- who has called everything right from housing to banks for two years -- does not see this happening, and neither do I.

Inventories are double what they should be, foreclosures are accelerating, every homeowner rescue has plan failed, the mortgage securitization market outside of government-backed entities is gone and consumers are not buying homes right now.

The bottom line: My math -- which is based on hard data on when and what kind of mortgages were let, defaults, foreclosures and inventory -- says prices will bottom in 2011, or when they fall another 15%-20%, perhaps more.