It seems that no matter what metric one looks into lately, a “pick your poison” situation unfolds. One in particular is reminiscent of the pre-2007/2008 crisis shenanigans that took place within the mortgage industry. I’ll get to that one later. How you choose to invest against the current clusterf**k depends on your risk appetite. Keep in mind the losses incurred by those who bet against the housing market leading up to and during the early phases of the great financial crisis, as the film “The Big Short” exquisitely portrays. And there lies the rub.
When investing prudently, you are ideally looking beyond the horizon to get right and sit tight vs. just a near-term gain. More often than not, opportunity presents itself well ahead of the trigger point, and the ability to participate without fear of volatility after the fact is gone. It is better to be three hours too soon than a minute too late.
Plunges in the stock market indices are easy to capitalize on by finding the most liquid ETF available, although finding less conventional investment vehicles with larger returns well ahead of the herd requires due diligence and time. One area where large institutions roam is the derivatives market. That’s not a recommendation, but just pointing out where potential trigger points could be hiding. The following data points are examples of where cycles are approaching tipping points, but timing is the key. You will not find the answer down the street at your local fortune teller. The best part about researching for the appropriate investment is that the symptoms of a trigger are usually hiding in plain sight, if you take the time to look. I won’t provide you with specific advice, but I can steer you along your way to finding that next big short (or long, for that matter)…
…Outstanding balance (in $blns) MBS guaranteed by Ginnie Mae and serviced by nonbanks vs banks. Source: Ginnie Mae (Figure 2)
…A potential trigger point appears to be developing within the non-banking industry of mortgage securitization. And there is likely more fire in those institutions than just mortgages…
Read the full article by TraderStef at CrushTheStreet – originally published on Mar. 14, 2018.