How can I short-circuit the real estate market

Which investments are positively related to the decline in the real estate market?

During the actual decline, there is very little money to be made and much to lose. When house prices go down, you lose everyone ; Banks are at greater risk of mortgage defaults, insurers pay more for "gas leaks" claiming over-leveraged homes, brokers starve as their commissions drop (even as foreclosures bring more homes to market), and people face financial uncertainty stay in their current homes instead of moving elsewhere. And builders and contractors go broke because no one wants to spend money on a new home or a big Reno that looks like a lost investment.

There can be some bright spots. Smaller hardware stores will make money as people do relatively small DIY projects to improve the condition of their current home. The bigger deals get this deal as well, but it tends to be more than offset by the loss of the contractor business (far more lucrative and something the ACEs and true values ​​don't really get into). Of course the "grave robbers" do well; Gold buyers, auctioneers, pawnbrokers, repo companies; These people eat well when other people have defaulted on loans or need to sell their things for a quick buck. Most of these companies are not publicly traded.

One thing that has been seen is higher sales at discounters like Wal-Mart, Dollar General, etc. When things are bad, middle class folks who avoided these stores for image or moral reasons learn to swallow their pride and Discount store brands to buy at half the price of national brand names. This will lessen the impact of discounters as consumer spending will fall overall. The cake is shrinking, but the discounters get a bigger chunk of the mandatory spending on groceries, clothing, etc. (and the parent retailers get it in shorts). If the cake grows again while consumer spending picks up again, discounters hold their percentage for a while as the capricious middle class can afford to buy more from the discount store but cannot yet afford to resume business in the malls . This results in a flatter "offset" price chart for discounters throughout the business cycle. They don't lose as early or as much as everyone else in a big downturn, and they turn it around sooner while everyone else is still on the way down, but since everything gets better for everyone on the upswing, it is less good for them Discount people, when they start losing customers and their dollars to competitors with better things, even as they keep spending more. This generally doesn't manifest as a true negative correlation, but it can be a good hedge.

The most important investment in a tank economy is gold. When things break down everyone wants gold. So, if you see the train wreck coming far enough in advance, you can take a big step towards gold and really make some cash on that investment. For example, when the first whispers about ARM adjustments and mass outages hit the public consciousness in mid-2005, the gold bar soared from about $ 400 to over $ 700 in nine months. It cooled down again in 06-07, but only to around $ 600 / ounce, and in late 07 it rose steadily to a high of $ 1000 / ounce. Even if you were late, investing $ 1000 in "bulk" gold in July 2007 would have earned you $ 650 in one year. that's a 65% APY. Then the economy bottomed out and many investors gave up gold on investments they believed would quickly pull out of their holes. For a brief period in 2008, gold had dropped back to $ 700. Then all the government reports came; Unemployment doesn't move, house prices are still falling, many banks are still hiding how bad their position was. If you'd seen it go bad, bad, bad, as many now multi-billion dollar hedge fund investors have done, investing $ 1000 in gold in July 05 and then paying out at the top of the spikes and buying back in the great valleys would be worth nearly $ 4,000 today. That's a return of 400% over 7 years or an average return of 57% annually. Something like this just hasn't happened in the last 7 years.