I learnt a lot from this book… Just by taking 1 idea from this book gave me helped me gained a substential amount of profit to buy 50copies of the book.
I borrowed the idea of identifying the ripple effect caused by a event. I m sure everyone by now would have known about the sub prime woe affecting the USA housing market. All I did was to start buying puts of the housing developers on their very next earning reports.
I was not very surprised that their earnings were terrible.
This is really a very good book. If you are into trading, have this book on your shelves.
2 responses so far ↓
1 Drizzt // Jul 26, 2007 at 12:09 am
Essentially that may not be a ripple effect, there is no direct relationship between subprime lending and homebuilding.
What may be the cause of homebuilding underperformance is due to demand and supply rather than subprime troubles. the repurcussion of subprime is directed more at financial institution link direct to CDOs.
2 Zeag // Jul 26, 2007 at 7:18 am
Probably housing development is not the 1st wave that was affected. Picture this scenario.
Sub prime woes –> People loses their house –> Institutions start to lose money from Sub prime (This are the most obvious when sub prime hit) –> Rental might increase due to people not owning a house (Side track a bit) –> People not able to get houses anymore –> Receivables not able to be recovered by developers –> demand drop –> profits drops –> less houses –> less need for furnishings for homes
This scenario is just 1 of many branches that could be happening that is related. We can maybe discuss if there is a flaw in my depiction of the scenario. Side note, the 2 home builder/loan companies that I m trading puts on are LEN and KBH.
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