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Wall Street has a knack of bringing new financial products online just as the demand for them is at its zenith. In Wall St. parlance: when the ducks are quacking, feed them.
I’ve already mentioned several examples of this: Don’t Buy What Wall St. Sells
On May 4th 2007, the iShares FTSE NAREIT Mortgage REITs Index Fund (REM) started trading around $50.
It then promptly lost half of its value in the next few months (at its lowest point):
I pleaded the same case when Blackstone (BX), the private equity outfit went public in late June:
I’m not saying that these firms are bad investments. On the contrary, they create a lot of value. But buying here and now at these prices? I’m not sure that’s wise.
Seeing as how it is their job to know when to sell what, it makes perfect sense that they would flip their shares to the public when they knew they would get the highest price for them. Blackstone fell from a high of $38 to a recent low of $22.
Now that all things related to mortgages are avoided like the plague, it would take a smart contrarian to buy the mortgage ETF here.
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