GO
Loading...

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."

(Read More: Warren Buffett on CNBC: I'd Buy Up 'A Couple Hundred Thousand' Single-Family Homes If I Could)

The Federal Reserve would drive drive price appreciation, Barrack said, especially for those who see housing as a proxy for the creation of wealth.

Barrack also noted that shares of home builders, such as Lennar and Toll Brothers, have surged, as they benefited from deferred taxes and current value of their unused inventory of lots.

(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
The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment banking revenues. Morgan Stanley and its affiliates do business that relates to companies/instruments covered in Morgan Stanley Research, including market making, providing liquidity and specialized trading, risk arbitrage and other proprietary trading, fund management, commercial banking, extension of credit, investment services and investment banking. Morgan Stanley sells to and buys from customers the securities/instruments of companies covered in Morgan Stanley Research on a principal basis. Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report. Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions.

Symbol
Price
 
Change
%Change
LEN
---
TOL
---
SPDR SP HB
---

Featured

Contact Halftime Report

  • Showtimes

    Halftime Report - Weekdays 12p ET
    Fast Money - Weekdays 5p ET