Investing in interest-rate sensitive equities.

on-ramp · 04-20-2004, 05:27 PM

I'm looking for specific equities i can invest in "betting" that the interest rates will begin to rise.

any ideas?

thanks.

on-ramp · 04-21-2004, 05:26 PM

no investors here?

what's up?

304065 · 04-22-2004, 06:47 AM

Hey On-Ramp,

No surprise that folks are reluctant to offer investment advice: given the highly volatile nature of equity investments, my guess is that folks are afraid you'd get burned on something they recommended.

A broker will lose their Series 7 license for making a recommendation to an anonymous person over the internet, not knowing anything about them their tolerance for risk, growth objectives, etc.

Is your retail broker coming up with any good ideas? From time to time I sit down with mine, make them buy me lunch, and talk over strategy, portfolio allocation, risk-tolerance and macro factors like interest rates.

All the bulge-bracket shops (Merrill, JPMorganChase, etc.) have private client folks that can be helpful.

Hope that helps!

Dantilla · 04-22-2004, 07:08 AM

I'm buying more real estate while interest rates are low.

trj911 · trj911's Garage

There really isn't such an animal. Stocks are earnings and sales related and bonds are debt and interest rate driven. The problem is, as interest rates rise, bond prices will fall. To get an investment that will go up in price when interest rates rise, you would need to look for an investment tied inversely to the price of bonds. As interest rates have fallen in the past few years, bond prices have been going up, and now rates are rising and prices are beginning to fall and will continue to do so. So you need to look for a bond fund that is "short", or one that uses hedging and has a net short position. And such a fund would have had terrible returns (-20% -30% per year) over the past few years so even if one existed, it would look like a bad investment based on it's past performance. There are lots of guesses out there, but nothing that I know of that will go up in price just because interest rates go up.

on-ramp · 04-22-2004, 08:12 AM

TomJ,

Thanks...that's along the same lines of what i was looking for. I will research a few stocks/funds that short bonds.
When the stock market was declining (from Nasdaq 5000), i had purchased the BEARX fund (bear market fund) and made some money on that.

now that i feel the interest rates have bottomed and will begin to rise, i want to "bet" some money on the new trend.

btw, nice car, i got the same one....83 sc cab, red/black. is that a euro?

trj911 · trj911's Garage

Nope, it's from the good old USofA. My seats and door panels are actually white. I wouldn't have chosen that combo new but I like it. Is your interior all black?

I traded some of the RYDEX funds during the Nasdaq decline. They respond very similarly to the BEARX fund you mentioned.

jrdavid68 · 04-22-2004, 02:38 PM

If you have the cash and you believe that the housing market is eventually going to crash as rates go up, then stocks to short would be:

MTH - $68/share
RYL - $80/share
BZH - $103/share

tabs · 04-22-2004, 05:38 PM

Take a look at Bank Stocks...have done no research on this though, just some musing

As the economy is improving...companies that facilitate businesses doing business...Smurf Stone Container

tabs · 04-22-2004, 05:39 PM

RE rite now is for those who like to buy high and sell low...

on-ramp · 04-22-2004, 05:48 PM

Quote:

Originally posted by trj911
Nope, it's from the good old USofA. My seats and door panels are actually white. I wouldn't have chosen that combo new but I like it. Is your interior all black?

I traded some of the RYDEX funds during the Nasdaq decline. They respond very similarly to the BEARX fund you mentioned.

yep, my interior is all black..original leather driver seat that i'm looking to replace due to a big rip

turbo6bar · 04-22-2004, 07:13 PM

Quote:

Originally posted by tabs
RE rite now is for those who like to buy high and sell low...

No, RE is for those who have cash and are ready to snap up good deals. It's all relative, big guy...

trj911 · trj911's Garage

Tabs, Bank stocks tend to decline in price in a rising rate environment due to a higher cost of funds and decreased margins. That's not true in every case, but it seems to be the consensus of most analysts.

SRISER · 04-23-2004, 11:23 AM

1. Short bonds
2. Rental property while CAP rates are low...
3. Long equities

Buy an old 356...did you see the price change over a 10 year period for some of them? See this months Excellence. Decent investment actually.

SRISER · 04-23-2004, 11:23 AM

Sorry, "old" and "356" is redundant.

trj911 · trj911's Garage

Quote:

Originally posted by SRISER
Sorry, "old" and "356" is redundant.

LOL!

on-ramp · 04-24-2004, 06:13 AM

i still dont have any specific recommendations on which stock to buy based on rising interest rates.....anybody?

SRISER · 04-24-2004, 07:17 AM

Any blue chip with a dividend. Nobody is going to provide you with specifics...

Generally, equities perform decently in a rising interest rate environment. Shorting bonds can also bring in some cash.

If it were my money, I'd probably short the bonds (but ones with shorter durations that say 4-5 years...duration and life are not the same thing...if you are interested I will post the calculation to determine duration if you like...)