Monday, March 26, 2007
Ouch. That new home sales data was bloody awful...no way to sugar coat that. Macro Man still believes that this is a 1994/5 story rathe than a 1990 story, but concedes that the thesis is coming under a bit of strain. The worst part of today's data was the supply figure, which shows a supply of new homes totalling 8.1 months times the most recent sales data- and that's with the notorious exclusion of cancellations.
The trade here is so obvious that Macro Man could hardly bring himself to do it. He sold 150,000 XHB @ 33.85 and bought 70,000 SPY at 142.75. This should be roughly beta-neutral and is simply a play that homebuilders will underperform the broad market- hardly rocket science given today's data!