My IWM Short Mistake, Rising Rates And Real Estate

While we typically focus on the stock market, real estate is actually a bigger share of our national wealth and rising rates are highly bearish for real estate. According to the WSJ’s Mike Bird, real asset wealth, which includes real estate, was $44,349 per adult in 2019 compared to $34,008 in financial assets in 2019 (“The Real Rally To Watch Isn’t In Stocks”, Mike Bird, WSJ, Friday March 12, 2021 [SUBSCRIPTION REQUIRED]). So while we’re focused on the effects of rising rates on Growth stocks we shouldn’t forget their impact on real estate as well.

In another WSJ article yesterday (“Cathie Wood’s Ark Finds Gains and Pain in Money-Losing Companies”, WSJ BI [SUBSCRIPTION REQUIRED]), Michael Wursthorn pointed out that 36 of the 56 holdings of the Ark Innovation ETF (ARKK) were not profitable during their latest fiscal year. In other words, ARKK is the ultimate Speculative Growth stock vehicle with the vast majority of its portfolio companies’ profits forecast to come in the distant future. That’s why rising rates have hit it so hard. I’m happy with my 15% short position initiated Thursday.

 

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Kurt Benson 2 months ago Member's comment

IMO, covering your small cap short is compounding your mistake. Let it pull back.