Fed Firepower – Can Bernanke Rescue Housing?


Mortgage rates are falling. Has the Fed’s plan to jumpstart the economy already kicked into gear?

Rates on 30-year mortgages plunged this week to their lowest levels since January, and are poised to fall further. That comes just one day after the Federal Reserve launched a new effort to prop up the flailing housing market by buying long-term government bonds.

Their goal is two fold 1) stimulate the economy by making it more affordable to buy a home and 2) cajole investors into riskier assets -- such as stocks -- by making the safer Treasuries, less and less appealing.

The housing part of the equation is certainly attracting investors. As Pete Najarian told you on Wednesday, options activity in the Homebuilders ETF suggests big money is bullish on the sector in the days and months ahead.

But not everyone sees it that way.

Josh Rosner, managing director at Graham Fisher & Co. appears to be quite bearish on the plan “At the end of the day is it going to change the face of housing? Probably not.” says Rosner on Fast Money.


“About 30-40% of homes purchased in 2004 and 2005 were second homes and investment properties and they’re still coming into the market,” he explains. “We still have overhang and downward pressure on prices.”

And to make matters worse, Rosner says he’s expecting inflation.

What’s the trade?

According to Rosner, the best way to play it is with Treasury Inflation Protected Securities such as the iShares Barclays TIPS Bond Fund

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Trader disclosure: On Mar. 19th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour Owns (AA), (BAC), (EEM), (FXI), (VIP), (TS); Seymour's Firm Owns (PBR); Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Macke Owns (GE), (SDS), (MOS); Macke Is Short (BRK.b); Najarian Owns (C) Call Spread; Najarian Owns (GDX); Najarian Owns (GD) Call Spread; Najarian Owns (GLD) Put Spread; Najarian Owns (MS) & (MS) Calls; Najarian Owns (MSFT) & (MSFT) Calls; Najarian Owns (TGT) Call Spread; Najarian Owns (WFC) & (WFC) Puts; Najarian Owns (XHB) Call Spread; Najarian Owns (MCD) Calls

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