The Best Trade of the Past 20 Years?
Foreclosed single-family homes, available for below replacement value, are one of the top trades around, Colony Capital founder and CEO Tom Barrack said Monday on CNBC.
"When we look at a trade, we're always just trying to figure out what's the best mispricing at the moment. And usually, that follows some governmental intervention, and today that happen to be foreclosed single-family housing," he said.
On "Fast Money," Barrack said that this trade offers opportunity in terms of "contrarian play, market barriers to entry and mispricings."
Asked about whether the housing market appears as good as some bulls say it is, Barrack said that it was complicated.
"The Fed has one major play in its playbook," he added. "That is, to print money by hitting a character on a typewriter, use that printed capital to buy mortgage-backed securities and Treasuries, originate mortgage-backed securities through GSEs – GSEs which are now in conservatorship that have cost us $200 billion since 2006.
"In return, the GSEs go to originating banks and encourage them to originate single-family mortgages at low interest rates that can then be bundled into mortgage-backed securities and thus provide affordability to a homeowner, not the scarcity of housing but the availability of credit."
The Federal Reserve would drive drive price appreciation, Barrack said, especially for those who see housing as a proxy for the creation of wealth.
(Read More: Stocks Better Investment Than Homes: Robert Shiller)
"For sure the lack of supply over the last five years has caused demand," he added.
Trader disclosure: On Feb. 11, 2013, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Josh Brown is long AAPL; Josh Brown is long HD; Josh Brown is long XLF; Stephanie Link is long AAPL; Stephanie Link is long GS; Stephanie Link is long WFC; Stephanie Link is long CSCO; Stephanie Link is long HD; Stephanie Link is long ADT; Simon Baker is funds long AAPL; Simon Baker is funds long XLY; Simon Baker is funds long GOOG; Simon Baker is funds long XLB; Simon Baker is funds long QCOM ; Simon Baker is funds long DIS; Simon Baker is funds long QQQ; Simon Baker is funds long UTX; Simon Baker is funds long JNJ; Simon Baker is funds long WFC;
For Adam Parker
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