benesposito

Tops and Bottoms: Reflections and Predictions

Your logic about the contrarian argument will undoubtedly one day prove true. However, it will not neccessarily help you call a bottom.

"Right . . . smells like a bottom to me.

Is it today? Tomorrow? Next month? Who knows, but it is near."

I happen to think your argument about the subprime talk would be more akin to saying something like "stay out of fiber optic companies, but invest in other tech stocks" back in the .dom bubble.

I read recently that a poll conducted by the Boston Consulting Group showed 55 percent of Americans believe they could sell their house for more money now than a year ago.

Yet the trend shows increasing inventories of homes, and fewer potential buyers (mortgages becoming harder to obtain). While at the same time huge numbers of ARM loans are resetting.

So when the polls reflect the reality, and people all feel housing is a disaster (as it is for the builder's right now), then your logic might call for the actual bottom. In a year or two.

However, that said, your suggested investments get their value based upon homes being built, and if people thikning housing is a disaster, it may be longer from that contrarian indicator until the point when construction would actually pick up.