The biggest drag on the stock market this year can be summed up in one word: Housing. Because home prices have dropped, banks have cut back lending. Which, in turn, is slowing down the economy. And though many gurus are trying to call a bottom in the housing market, they’re dead wrong. I continue to see home prices dropping.
Last year, you couldn’t find a decent condo in West Palm Beach, FL for less than $200,000. But for the past two months, I’ve been seeing them at drastically reduced prices. I’m talking about 2/2s for under $100,000. That’s a 50 percent price drop – far greater than the five percent drop government reports would have you believe.
And in South Florida, the market is still falling. This year, we’ll see a huge spike in foreclosures. As banks try to offload those foreclosed properties, neighborhood prices should drop even further. That means there’ll be a lot of opportunities here if you’re looking to buy a home in six months.
That also means housing won’t stop dragging the market down for some time. You can continue to expect a bear market in stocks, so stay away. Instead, buy the Ultra Short Dow Proshares ETF (DXD), which gives you a two percent return every time the Dow Jones drops one percent.
Buying this ETF is easy too. All you have to do is contact your broker (or get an online brokerage account) and follow their instructions.[Ed. Note: Charles Delvalle is a contributing editor to ETR’sInvestor’s Daily Edge newsletter, and a regular contributor to INCOME. INCOME lets you in on the safest high-dividend-paying companies, with the goal of providing you with a total return (dividends plus capital gains) of at least 14 percent per year.]