Hedge Funds Are Shorting Australian Retailers as Home Prices Fall

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Hedge funds have found a new way to profit from the sorry state of Australia’s housing market: playing off how much poorer consumers feel as their home values decline, Bloomberg News reported. Managers including Totus Capital and Sydney’s Regal Funds Management are heaping bearish wagers on companies from JB Hi-Fi Ltd. to Harvey Norman Holdings Ltd., betting discretionary retail stocks will wobble as the country’s decades-long property boom goes into reverse and people shop less. It’s a twist to the infamous “widow maker” trade, where hedge funds took large losses over the past few years betting against Australian banks after prematurely predicting house prices would crash. This time, the theory is that rather than default on their mortgages, homeowners stung by 10 straight months of nationwide price declines will curtail spending -- what economists refer to as the wealth effect. Read more.