The Message of the Stock Market.......

[goofer44]

The action of the housing stocks (joe, kbh, tol, bzh, dhi, hov, phm, ctx ) is telling us the Fed is finished raising rates. The market is also telling us that there will be a recovery in housing in the spring of 2007. The next major move in rates is DOWN. The Fed's work of the last 2 years raising rates has slowed the economy and tempered housing. The economic statistics will contine to deteriorate as well as the housing statistics but make no mistake about it, the recovery is coming in 2007. The Fed will begin lowering rates in the spring to generate growth. We will experience a growth rexession, which means GDP growth of 1-2%. We will NOT have a full blown recession...the FED will make sure of that. The stock market is a forecasting mechanism. The dawn is coming !!!

[Bob]

What would $100/barrel oil do to your forecast?

[redfisher]

You could have asked the same question 2 yrs ago about $75/barrel oil?...What would your response have been?...My reply is I don't have a clue, but here we are...

[SHELLY]

The action of the housing stocks (joe, kbh, tol, bzh, dhi, hov, phm, ctx ) is telling us the Fed is finished raising rates. The market is also telling us that there will be a recovery in housing in the spring of 2007.

Can you expand on what you mean by a "housing recovery?"

[bdc63]

The action of the housing stocks (joe, kbh, tol, bzh, dhi, hov, phm, ctx ) is telling us the Fed is finished raising rates. The market is also telling us that there will be a recovery in housing in the spring of 2007. The next major move in rates is DOWN. The Fed's work of the last 2 years raising rates has slowed the economy and tempered housing. The economic statistics will contine to deteriorate as well as the housing statistics but make no mistake about it, the recovery is coming in 2007. The Fed will begin lowering rates in the spring to generate growth. We will experience a growth rexession, which means GDP growth of 1-2%. We will NOT have a full blown recession...the FED will make sure of that. The stock market is a forecasting mechanism. The dawn is coming !!!

... and they all lived happily ever after.

[aquaticbiology]

i worry about this alot - hopefully your idea is not rose-colored glasses

i can see predicting the downturn (bound to happen), but how do you get a fed-induced recovery in spring 2007 - wishful thinking?

our "new" fed chairman (greenspan was a genious next to this guy) believes "the printing press was invented for a reason" and is printing money (creating black to offset the increasing red) like no tomorrow, and playing the currency markey like a country band fiddle to keep the dollar up

i won't say 'the dollar is toast - get out get out get out' but i will say to watch your assets

a worldwide depression affects all forms of currency and asset valuation, so pick something that holds its value, is small and transportable, and won't be destroyed by nuclear attack or glaciers

what is it that hold its value the best? lots of people have different ideas (and its even mentioned in the bible) and let me know when you find it

at least i can eat the fishies if it all goes pear shaped

and enjoy it while you have it!

[SHELLY]

what is it that hold its value the best? lots of people have different ideas (and its even mentioned in the BIBLE) and let me know when you find it


FOUND IT!! (http://a1204.g.akamai.net/7/1204/1401/05040811011/images.barnesandnoble.com/images/9350000/9354773.jpg) :biggrin:

[spinDrAtl]

On the bright side, 15 and 30 year fixed mortgage rates have improved over the last 2 weeks.

[Bob]

You could have asked the same question 2 yrs ago about $75/barrel oil?...What would your response have been?...My reply is I don't have a clue, but here we are...Unfortunately we see now what $75 oil does to the economy. My question is, what is Washington doing? Minimum wage, health care, immigration, social security, energy issues are all being dealt with equally. Nothing substantive is being done, because the status quo benefits our leadership.

[Rita]

Unfortunately we see now what $75 oil does to the economy. My question is, what is Washington doing? Minimum wage, health care, immigration, social security, energy issues are all being dealt with equally. Nothing substantive is being done, because the status quo benefits our leadership.
http://i38.photobucket.com/albums/e129/gulfwindsway/hammernail.gif
.

[goofer44]

Not including an exogenous event ( like a nuclear device exploding in the middle east ) I think oil is going down. higher prices brings more exploration, development of alternative energy sources, and also conservation....that is what history tells us. the fed will start to lower rates next year to jump start the economy after sluggish growth. there is a lag time of usually 6-12 months when the fed goes to work. we are seeing the effects of the fed interest rate increases of the last 18 months. the economy will bottom in the next 6-12 months which during this time the fed will start easing.
as far as a "housing recovery" is concerned....granted there is a lot of inventory but there will also be a lot of pent up demand. the housing situation of south walton is not the norm of the u.s. we are a second home market. our situation will be the last to recover but it will recover ( 2-3 years) history shows the economy is a dynamic and expanding force. and lets not forget the consequences of a weaker u.s. dollar. that will create foreign demand for u.s. assets. what has and is occuring is part of the natural business cycle. the sky is not falling. nothing different or onerous in the latest cycle.

[redfisher]

Bob its taken many years, but I've resigned myself that there are always naysayers...Fact is of no use to them, only the possibility of what could go wrong...Maybe oil will go to $500/barrel and we'll find out if your right...But @ $75 the economy grows @ 2.5%...that's where we are...Bye the way, did you tell a story when you said you voted for W?...

[Paradise Sea]

High oil prices are here to stay and they will go higher. Right now the world is pumping over 1000 barrels/second (It's true, do the math.) and needs to discover the equivalent of an Iraq (2 million barrels a day) every year just to replace depleting wells, not to mention keeping up with demand from China and India whose economies are growing at 9-10% year. Total world demand is conservatively projected to increase by 1.0-2.0 million barrels/day for the next few years.

Alternatives are being developed. Unfortunately, history shows us that it takes 10-20 years to adapt to new energy technologies. Meanwhile, we will have to live with higher oil prices and it can be done. The UK and Japan use about the same amount of oil today as in 1975. However, the US can't conserve it's way out of this one. No MAJOR oil fields have been discovered in the last 30 years and the entire world has been pretty well surveyed and explored. Chances are oil supplies will actually decrease and the alternatives won't be developed and implemented fast enough to compensate. It's best to just face reality and make the necessary adjustments in lifestyle and investments. It's a major trend that will create wealth for those who adjust and ruin for those who don't.

[TooFarTampa]

Even if oil does go down in the short term (2-3 years say) I think Paradise Sea is correct.

[Bob]

Bob its taken many years, but I've resigned myself that there are always naysayers...Fact is of no use to them, only the possibility of what could go wrong...Maybe oil will go to $500/barrel and we'll find out if your right...But @ $75 the economy grows @ 2.5%...that's where we are...Bye the way, did you tell a story when you said you voted for W?...Yes,I voted for GW, and although the trends I see are negative, I'm not a naysayer. To be brief, the fly in the ointment of our economy is the rapid rise in the cost of energy, and the way prices react to that rise. I, before anyone, want the Fed to pause this week, and I want inflation to take a break....

[Paradise Sea]

Rising energy prices will ensure a high rate of inflation for years to come. There's very little the Fed can do about it short of raising rates so fast they create a recession or, even worse, a depression. The cost of energy affects the cost of virtually everything else to one degree or another. I think the next few years will look a lot like the early 1980's. High inflation and very slow real growth.

By the way, this isn't necessarily bad for the houseing market or those holding fixed rate mortgages. In the early 1980's housing prices overall actually outpaced inflation and made housing, even with high mortgage interest rates, an attractive investment vs. the stock market.

[bdc63]

the latest "message of the stock market" from the building sector ...


(Forbes)
Toll Brothers' Q3 Surprises CEO
Greg Levine (javascript:fdcBioWindow('greglevine')), 08.09.06, 5:25 PM ET
http://images.forbes.com/media/assets/spacer_white.gif http://images.forbes.com/media/assets/spacer_white.gif Toll Brothers' third-quarter earnings report likely wasn't a total shock to anyone -- but its chief executive didn't soft-soap his disappointment.

On Wednesday, Toll Brothers (nyse: TOL (http://finapps.forbes.com/finapps/jsp/finance/compinfo/CIAtAGlance.jsp?tkr=TOL) - news (http://www.forbes.com/markets/company_news.jhtml?ticker=TOL)- people (http://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=TOL)), which makes its money through building, financing and selling upscale residences, announced that the three-month period saw total revenue drop by 1.2% to $1.54 billion, with its construction segment's revenue slipping 0.5% to $1.53 billion.

Besides sagging sales, the value of confirmed contracts was slashed by nearly 50%, down to $1.07 billion.

By region, most Toll Brothers activity went according to tepid expectations, with one nice surprise: Sales declined in the Mid-Atlantic, Midwest, and California arenas; predictably, revenue was healthiest in the Southeast and Southwest -- and surprisingly, in the Northeast.

For the fourth quarter, the firm has projected delivering fewer homes: between 2,500 to 2,800 domiciles, as compared to its previous guidance of 2,900 to 3,300 units.

Based on the relatively solid state of the U.S. economy, Chairman and CEO Robert Toll expected some housing-market aches--but not this much quarterly pain. In a statement, the eponymous chief explained, "It appears that the current housing slowdown...is somewhat unique: It is the first downturn in the 40 years since we entered the business that was not precipitated by high interest rates, a weak economy, job losses or other macroeconomic factors."

Investors seemed as taken aback as the CEO. In Wednesday early-afternoon trade, Toll Brothers' shares lost some 3.12%, slipping 83 cents to $25.75. And the ripples were felt by its rivals: D.R. Horton (nyse: DHI (http://finapps.forbes.com/finapps/jsp/finance/compinfo/CIAtAGlance.jsp?tkr=DHI) - news (http://www.forbes.com/markets/company_news.jhtml?ticker=DHI)- people (http://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=DHI)) slid 73 cents, or 3.33%, hitting $21.18; LennarLEN (http://finapps.forbes.com/finapps/jsp/finance/compinfo/CIAtAGlance.jsp?tkr=LEN) - news (http://www.forbes.com/markets/company_news.jhtml?ticker=LEN)- people (http://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=LEN)) fell by $1, or 2.16%, to $45.34; and (nyse: Pulte Homes (nyse: PHM (http://finapps.forbes.com/finapps/jsp/finance/compinfo/CIAtAGlance.jsp?tkr=PHM) - news (http://www.forbes.com/markets/company_news.jhtml?ticker=PHM)- people (http://www.forbes.com/peopletracker/results.jhtml?startRow=0&name=&ticker=PHM)) lost $1.01, or 3.37%, to trade at $28.99.

[goofer44]

I feel comfortable nibbling on kbh @ 38 ryl @34 tol @22 dhi @20 hov @25 ctx @43 phm @26 joe @42 .........all at their recent lows. at these levels they offer good value. Recently these stocks all had violent reactions to the upside on good volume. they got too cheap on a book value basis. these prices i stated indicate to me the the price points that i want to nibble at. i am a long term investor ( 2-4 years ) if these stocks return to the prices i indicated i will put on 25% positions.......if they don't return to those prices, i guess i won't own any housing stocks !! i am a very disciplined investor and perhaps a little pigheaded.....but i have done well over 30 years following this game plan.

[goofer44]

The time to buy equities is when everyone hates them ( which is the case with housing stocks ). The stock market discounts future developments. IMO that has occured in housing stocks. No one knows when the bottom happens, but you have to start building positions at some point. As I stated, at my limit prices I will put on 25% positions and then wait. At these limits these companies are trading at below book and they are STILL earning money, albeit at a lower rate than a year ago BUT they have all been cut in half !!! You need to be patient......as I have stated in the past, "buy straw hats in the winter"

[bdc63]

The time to buy equities is when everyone hates them ( which is the case with housing stocks ). The stock market discounts future developments. IMO that has occured in housing stocks. No one knows when the bottom happens, but you have to start building positions at some point. As I stated, at my limit prices I will put on 25% positions and then wait. At these limits these companies are trading at below book and they are STILL earning money, albeit at a lower rate than a year ago BUT they have all been cut in half !!! You need to be patient......as I have stated in the past, "buy straw hats in the winter"

I don't disagree with your strategy at all ... just your timing. I believe that we have many, many, many quarters of bad news ahead in the building sector (lawsuits, massively overvalued land holdings on the developer's books, ever increasing "for sale" inventory levels, foreclosures, drying up of liquidity ...).

To be a buyer of Builder stocks right now I'd have to believe that the housing bull market was still intact, and that the last year was just a mid-cycle correction in a decade long housing boom, when reality is that I believe we are in the early stages of a housing bear market.

I'd be more inclined to short Builders at this point.

[redfisher]

Mmmm...

http://news.yahoo.com/s/ap/20060810/ap_on_bi_go_ec_fi/federal_deficit

http://biz.yahoo.com/ap/060810/earns_retailers.html?.v=3

[SHELLY]

You need to be patient......as I have stated in the past, "buy straw hats in the winter"

Yes I remember, it was March 2006:

"Joe got hit today. get ready to bid 55 for some stock. maybe for a 20% position. scale down to 50 to get your full position. buy strawhats in winter. everyone hates housing stocks. time to nibble on JOE."

[SHELLY]

I believe that we have many, many, many quarters of bad news ahead in the building sector (lawsuits, massively overvalued land holdings on the developer's books, ever increasing "for sale" inventory levels, foreclosures, drying up of liquidity ...).

I agree...

Ya know that horrible time-lapse when you REALLY bang your toe BAD and you feel the bump :shock: but you know in a nano-second that the REALLY BAD PAIN hasn't hit your brain yet?.... :eek: ..Well, housing just stubbed its toe.

[goofer44]

I am not saying to buy housing stocks now. RE-read my post. Buy a 25% position at the limit prices I have suggested. Then you scale in at lower prices, But at least you have a toe in the water. It is not a stubbed toe if you wait for the limits I have set. By the time the stocks turn, they will turn quickly.......and human nature being what it is, you will be hesitant to chase. Discipline and patience.....I have a game plan I will follow. If the stocks hit my limits only time will tell if I was right or wrong. I am just stating my opinion.

[goofer44]

http://online.barrons.com/article/SB115515894570031399.html?mod=9_0001_b_online_excl usives_weekday_r1

Doug is a friend. He has been right on the housing bubble, like Shelley, but I find his comments about the stocks very interesting.

[goofer44]

Shelley
Try to be an adult not a wise-ass.

[SHELLY]

I am not saying to buy housing stocks now. RE-read my post. Buy a 25% position at the limit prices I have suggested. Then you scale in at lower prices, But at least you have a toe in the water. It is not a stubbed toe if you wait for the limits I have set. By the time the stocks turn, they will turn quickly.......and human nature being what it is, you will be hesitant to chase. Discipline and patience.....I have a game plan I will follow. If the stocks hit my limits only time will tell if I was right or wrong. I am just stating my opinion.

So in March you didn't bid 55 on a 20% position and scale down to 50 for full position?.....Holy crap!...And what am I supposed to do with this storage unit full of straw hats I bought in March?? :idontno:

I luv the stock market :wub:

[goofer44]

I eat my own cooking. I own joe from 55 to 44. with an avg of 48. ( more being bt at lower prices ) Why are you so childish ???? This forum is to inform, enlighten, discuss, and share. Not to criticize and poke fun. I have noticed a sadistic streak eminating from you on many of your posts. It is called Schandenfreud.

[SHELLY]

It is called Schandenfreud.
"Gesundheit"

<So sorry, it was just too hard to resist a set-up like that. :funn: >

[BeachSteelers]

Shelly you really bullish on JOE. Its way back down.I was thinking of adding to my Oakley instead of JOE. :idontno:

[SHELLY]

Shelly you really bullish on JOE.

In a word, No.

I was thinking of adding to my Oakley instead of JOE. :idontno

Sunglasses aren't my thing :cool: but I took a quick peek at OO. Doing a deal with Motorola to combine Blue Tooth and Sunglasses (Stereo Sunglasses)?--How Dorky is That? (http://oakley.com/news/orokr_reviews/) (will probably be a hit, because those folks who walk around with that appliance sticking out of their ear and yacking into space probably think they look "cool"--add a speedo and there ya go!)

Great sales revenue, but crappy operating income--if you're happy with the way they can 'splain it away....it's your dime. :D

[Bob]

http://articles.moneycentral.msn.com/Investing/JubaksJournal/TheFedHasVotedForStagflation.aspx?page=2 say it ain't so

[goofer44]

For those that missed it, there is a front page article in this weeks Barron's recommending buying some of the homebuilders based on a valuation basis. Most are trading around book value. I have been reading more and more articles like these. Remember, the stock mkt is a forecasting mechanism. With all the bad news, negative estimate revisions, and industry comments....the stocks have all traded up recently. They are washed out. Worst case is dead money for six months. Best case 50% gain, or more, in 18months when the Fed starts lowering 1st qtr 2007. http://online.barrons.com/this_week?mod=9_0031 If your are not a subscriber it is worth paying the $4 to buy a copy.

[bdc63]

For those that missed it, there is a front page article in this weeks Barron's recommending buying some of the homebuilders based on a valuation basis. Most are trading around book value. I have been reading more and more articles like these. Remember, the stock mkt is a forecasting mechanism. With all the bad news, negative estimate revisions, and industry comments....the stocks have all traded up recently. They are washed out. Worst case is dead money for six months. Best case 50% gain, or more, in 18months when the Fed starts lowering 1st qtr 2007. http://online.barrons.com/this_week?mod=9_0031 If your are not a subscriber it is worth paying the $4 to buy a copy.

Worst case is not just "dead money" for six months.

As an example, earlier this year Toll Brothers traded at $49.10. It's now trading at $26.25. But 5 years ago it was at $9.00. Could it go all the way back to $9? -- I don't know, but I would sure want to understand everything about that stock & the housing market & the economy when it was $9, rather than just look at where the price was 3 months ago and deem that it's "range".

I think that there is quite a bit more downside risk with the builders than you are letting yourself believe (even if the valuations look good today).

[goofer44]

Only time will tell. Believe me , I do a lot of reading and analysis on the subject of investing. Charts are only a roadmap for me, less than 10% of the tools used. All I am saying is that there is value in housing stocks and that most of the bad news is ALREADY FACTORED IN. I have publicly stated on this forum the stocks I am bidding on and where I have bought them. Throw rocks at me in 6-12 months or congratulate me.......Only time will tell.

[goofer44]

The action of the housing stocks (joe, kbh, tol, bzh, dhi, hov, phm, ctx ) is telling us the Fed is finished raising rates. The market is also telling us that there will be a recovery in housing in the spring of 2007. The next major move in rates is DOWN. The Fed's work of the last 2 years raising rates has slowed the economy and tempered housing. The economic statistics will contine to deteriorate as well as the housing statistics but make no mistake about it, the recovery is coming in 2007. The Fed will begin lowering rates in the spring to generate growth. We will experience a growth rexession, which means GDP growth of 1-2%. We will NOT have a full blown recession...the FED will make sure of that. The stock market is a forecasting mechanism. The dawn is coming !!!

This post was August 3, BEFORE the FED paused.The mkt, in its infinite wisdom, was telling us the Fed was done. Look at the action of housing stocks since then. There have been land option write offs, negative estimate revisions, negative comments galore from Bob Toll and others and yet the stocks have rallied. The bond mkt has rallied precipitously and consequently rates are coming down. No question, the economy is slowing BECAUSE OF THE 17 RATE INCREASES BY THE FED. The FED is done and as the economy continues to slow , not spiral down, the FED's next move is to lower rates.What does that TELL YOU. We all know the fundamentals suck and that inventories are at historic highs and that there is a housing glut but yet the stocks have begun to rally. The market might be sensing something conventional wisdom has not considered. Just my humble opinion.

[destinsm]

This post was August 3, BEFORE the FED paused.The mkt, in its infinite wisdom, was telling us the Fed was done. Look at the action of housing stocks since then. There have been land option write offs, negative estimate revisions, negative comments galore from Bob Toll and others and yet the stocks have rallied. The bond mkt has rallied precipitously and consequently rates are coming down. No question, the economy is slowing BECAUSE OF THE 17 RATE INCREASES BY THE FED. The FED is done and as the economy continues to slow , not spiral down, the FED's next move is to lower rates.What does that TELL YOU. We all know the fundamentals suck and that inventories are at historic highs and that there is a housing glut but yet the stocks have begun to rally. The market might be sensing something conventional wisdom has not considered. Just my humble opinion.

Read this one???
http://www.thestreet.com/_rms/markets/activetraderupdate/10305349.html

Doesn't look like your charts are showing a bottom, as supported by this research... but good luck to ya!

Still Not Time to Move Home, by Dan Fitzpatrick


This column was originally published on RealMoney Aug. 22 at 11:21 a.m. EDT.
This week, the market seems fixated on the housing numbers. Today we heard from Toll Brothers (TOL (http://tools.thestreet.com/rmy/quotes.html?pg=qcn&symb=TOL) - news (http://find.thestreet.com/cgi-bin/texis/find/results.html?tkr=TOL) - Cramer's Take (http://find.thestreet.com/cgi-bin/texis/cramertake?tkr=TOL&site=tsc)). Tomorrow morning we get the July existing-home sales numbers. Yawn. Thursday brings the new-home sales numbers. Key point -- they're not going to be good. Everybody knows that. The question is whether they are going to be as bad as everyone expects. When it comes to the homebuilding stocks, there are three camps -- and two of them are inhabited by bears. First is the aggressive ursine bunch (http://www.thestreet.com/markets/realestate/10302860.html) who believe that these stocks are only resting on a cliff before moving much lower. Second are the more wary bears (http://www.thestreet.com/p/rmoney/jimcramerblog/10301786.html), who still don't like the sector but feel that it's a crowded short. Finally, there are the apologetic, tentative bulls anticipating a sustainable bottom. These are the folks who believe that all the bad news has already been factored into the sector.

I'm still comfortably ensconced in the first camp. I am hearing about a lot of cancellations. High cancellation rates can effectively nullify any new sales. Builders are now taking a cue from their prospective buyers and walking away from land deals. This is not breaking news -- but it's so rampant and widespread that I don't know how it's possible to accurately discount this into the stock price.

For example, when Standard Pacific (SPF (http://tools.thestreet.com/rmy/quotes.html?pg=qcn&symb=SPF) - news (http://find.thestreet.com/cgi-bin/texis/find/results.html?tkr=SPF) - Cramer's Take (http://find.thestreet.com/cgi-bin/texis/cramertake?tkr=SPF&site=tsc)), a California-based homebuilder, posted results last month, it disclosed that it had written off $16.3 million in deposits and due diligence (preacquisition) costs for abandoned or uncertain projects.
Similarly, Hovnanian (HOV (http://tools.thestreet.com/rmy/quotes.html?pg=qcn&symb=HOV) - news (http://find.thestreet.com/cgi-bin/texis/find/results.html?tkr=HOV) - Cramer's Take (http://find.thestreet.com/cgi-bin/texis/cramertake?tkr=HOV&site=tsc)) recently disclosed (http://www.thestreet.com/newsanalysis/homebuildersconstruction/10301888.html) that it will be walking away from substantial land-option deposits. The company couldn't even quantify the cost in its forecasts.
We are seeing similar expenses incurred by D.R. Horton (DHI (http://tools.thestreet.com/rmy/quotes.html?pg=qcn&symb=DHI) - news (http://find.thestreet.com/cgi-bin/texis/find/results.html?tkr=DHI) - Cramer's Take (http://find.thestreet.com/cgi-bin/texis/cramertake?tkr=DHI&site=tsc)) ($52 million), NVR (NVR (http://tools.thestreet.com/rmy/quotes.html?pg=qcn&symb=NVR) - news (http://find.thestreet.com/cgi-bin/texis/find/results.html?tkr=NVR) - Cramer's Take (http://find.thestreet.com/cgi-bin/texis/cramertake?tkr=NVR&site=tsc)) ($26 million), Pulte Homes (PHM (http://tools.thestreet.com/rmy/quotes.html?pg=qcn&symb=PHM) - news (http://find.thestreet.com/cgi-bin/texis/find/results.html?tkr=PHM) - Cramer's Take (http://find.thestreet.com/cgi-bin/texis/cramertake?tkr=PHM&site=tsc)) ($62 million), Centex (CTX (http://tools.thestreet.com/rmy/quotes.html?pg=qcn&symb=CTX) - news (http://find.thestreet.com/cgi-bin/texis/find/results.html?tkr=CTX) - Cramer's Take (http://find.thestreet.com/cgi-bin/texis/cramertake?tkr=CTX&site=tsc)) ($36 million) and Lennar (LEN (http://tools.thestreet.com/rmy/quotes.html?pg=qcn&symb=LEN) - news (http://find.thestreet.com/cgi-bin/texis/find/results.html?tkr=LEN) - Cramer's Take (http://find.thestreet.com/cgi-bin/texis/cramertake?tkr=LEN&site=tsc)) ($22 million).
Now, it would be a mistake to believe that expenses of this kind will continue. They won't, but they'll persist longer than you might imagine. How could that be? With only so many deals in the pipeline, how many more deposits are left to forfeit? Well, lots of these deals are land-development deals and may not be scheduled to close until 2007. Also, homebuilders make money when they sell finished product, so the continual slowing of construction starts equates to decreasing revenue and profit going forward.
In addition, I have a thesis, based on anecdotal evidence, that divisions are not being straight with the corporate offices. In a slowdown of this magnitude, executives become fearful of losing their jobs if they disclose the "real deal." Employment insecurity reigns supreme in this environment and fosters selective disclosure. Sales agents are being instructed to conceal cancellations until they have resold the unit. That's wrong.
Refundable deposits on units that have not yet received a "final report" are being reported as bona fide sales. That's dumb. Acquisition-related marketing reports are being fudged in order to make deals look better, with the hope that the economy will pick up in time. That's suicide.
So let's take a look at a few of the bigger names. Remember, strong stocks can become overbought and remain that way far longer than most folks realize. Conversely, and more to the point, weak stocks can become oversold and remain that way for quite a while, too.
http://images.thestreet.com/markets/activetraderupdate/34237.bmp

The Philadelphia Housing Index has been treading water since last month, with no real sign of a turnaround. Notice how oversold the relative strength index (RSI) had become, falling well below 30. That doesn't happen often, and is a sign of extreme weakness. But unless the HGX moves back above 210 or so, I'd look at the current weakness as an opportunity to unload some shares. Let's take a look at a few stocks now.

http://images.thestreet.com/markets/activetraderupdate/34235.bmp

Beazer Homes (BZH (http://tools.thestreet.com/rmy/quotes.html?pg=qcn&symb=BZH) - news (http://find.thestreet.com/cgi-bin/texis/find/results.html?tkr=BZH) - Cramer's Take (http://find.thestreet.com/cgi-bin/texis/cramertake?tkr=BZH&site=tsc)) took a 50% haircut from the January high, but it doesn't appear as if it was enough. A series of lower highs and higher lows after a sustained downtrend is typically a continuation pattern -- not consolidation. I'd look for more downside if the stock falls below the support line I've drawn above. I would not be surprised to see the stock test $30 before this is through. (Let the hate mail fly).

http://images.thestreet.com/markets/activetraderupdate/34236.bmp

D.R. Horton is showing the same type of pattern we saw in Beazer. Notice how long the price-by-volume bar (http://www.thestreet.com/p/rmoney/technicalanalysis/10261801.html) is at the $22 level? A lot of stock has been changing hands here. I'd look for additional supply to push the stock lower. If the price drops below $20, it's probably not a good idea to stick around.

http://images.thestreet.com/markets/activetraderupdate/34240.bmp

MDC Holdings (MDC (http://tools.thestreet.com/rmy/quotes.html?pg=qcn&symb=MDC) - news (http://find.thestreet.com/cgi-bin/texis/find/results.html?tkr=MDC) - Cramer's Take (http://find.thestreet.com/cgi-bin/texis/cramertake?tkr=MDC&site=tsc)) has been trying to find a bottom around $42. RSI is showing extreme weakness. It's not even faking a bounce. I'd be a seller on any move below $42, and if you're looking for a better reference point than this weekly chart, then zoom out to a monthly chart.
http://images.thestreet.com/markets/activetraderupdate/34239.bmp

This is for those who keep saying, "The homebuilders just can't go down any more." Enough said.

http://images.thestreet.com/markets/activetraderupdate/34238.bmp

Want to see a strong homebuilding stock? Go south of the border to Mexico. Desarrolladora Homex (HXM (http://tools.thestreet.com/rmy/quotes.html?pg=qcn&symb=HXM) - news (http://find.thestreet.com/cgi-bin/texis/find/results.html?tkr=HXM) - Cramer's Take (http://find.thestreet.com/cgi-bin/texis/cramertake?tkr=HXM&site=tsc)) is the strongest of the bunch, but seems stalled at $40. I wouldn't be a buyer until this stock breaks through resistance.

That's my current take on the homebuilding group. If you want to know when these stocks are likely to turn around, I'll let you in on the best "tell" for this industry: It's you! When you start seriously thinking about buying a new house -- or hear your friends talking about it -- then you've got a pretty good idea that you're getting in on the ground floor of a meaningful advance. I just don't see that happening for many, many moons. Be careful out there.

[goofer44]

BDC 63

5 years ago the Fed went on an unprecedented mission of lowering rates after 9/11 to keep the wheels greased. They continued until Fed Funds bottomed at 1 %. Consequently because of cheap money and easy terms, real estate prices bubbled up from speculative demand. The fact that Fed Funds went from 5/12% to 1% is why TOL went from 9 to 60 and other housing stocks followed suit. In the SUMMER OF 2005 the music began to stop and the stocks started their year long slide. The STOCK MARKET sensed the top was at hand.
This was not yet apparent to most in the the real world real estate mkt as the speculators continued to gorge. ( Agent comments )? Now as all the chickens have come home to roost because of the excesses, the stock market is sensing the worst maybe behind us. Certainly there will be further estimate revisions downward but IMO the stocks will rally because the mkt senses the next move by the FED is to LOWER rates setting the stage for the next cycle . The subsequent cycle may take longer to begin because of all the inventory but the seeds will have been planted. I am a patient investor because I feel I will get a very good return over the next 2-4 years owning a package of housing stocks.

[bdc63]

BDC 63

5 years ago the Fed went on an unprecedented mission of lowering rates after 9/11 to keep the wheels greased. They continued until Fed Funds bottomed at 1 %. Consequently because of cheap money and easy terms, real estate prices bubbled up from speculative demand. The fact that Fed Funds went from 5/12% to 1% is why TOL went from 9 to 60 and other housing stocks followed suit. In the SUMMER OF 2005 the music began to stop and the stocks started their year long slide. The STOCK MARKET sensed the top was at hand.
This was not yet apparent to most in the the real world real estate mkt as the speculators continued to gorge. ( Agent comments )? Now as all the chickens have come home to roost because of the excesses, the stock market is sensing the worst maybe behind us. Certainly there will be further estimate revisions downward but IMO the stocks will rally because the mkt senses the next move by the FED is to LOWER rates setting the stage for the next cycle . The subsequent cycle may take longer to begin because of all the inventory but the seeds will have been planted. I am a patient investor because I feel I will get a very good return over the next 2-4 years owning a package of housing stocks.

So, your arguement is that the Real Estate bubble (which was created when the Fed crashed rates to 1%) has now burst, and this will cause the Fed to step in and drop the rates back down, which will in turn recreate an asset bubble in Real Estate?

A couple of problems that I have with that:

1). With the dollar index below 85, there's no way the Fed can take rates back to 1% without turning the dollar into toast.

2). Frequently when one asset bubble bursts it is replaced by another (most recently, tech stocks to real estate). But never in history (that I am aware of) has the same asset class that just burst been the one to rise out of the ashes. Asset bubbles require an element of irrational exhuberance, and that is tough to revive after a bust.

To me the exciting prediction is not when housing will rebound, but rather what asset class will take its place.

But you are obviously committed to your strategy and I wish you luck with it.

[Jellyfish]

To me the exciting prediction is not when housing will rebound, but rather what asset class will take its place. .

Commodities

[Sandcastle]

I also believe that the next FED move will be down, and I’ve lost my fair share by “sticking with Cramer.” I’m watching TMA. If we see a dividend cut this fall and the yield curve begins to return to normal, I’ll pick some up – just a little.;-)

[goofer44]

bdc63

No where, no how, no way did I say Fed Funds are going back to 1% !!! They will not see that level again unless there is an exogenous event similiar or worse than 9/11. You are confusing the price of real estate (lots,houses ) with the price of equities when YOU talk about asset bubbles !!! My entire thesis is related to stock prices NOT house prices. The next cycle in real estate prices will revert to the mean and NOT duplicate the exagerated increases of the last 5 years because of the historically low rates. I expect a 50% return on housing stocks over the next 3 years or 4 years.....not an excessive return if my thesis materializes.

[bdc63]

bdc63

No where, no how, no way did I say Fed Funds are going back to 1% !!! They will not see that level again unless there is an exogenous event similiar or worse than 9/11. You are confusing the price of real estate (lots,houses ) with the price of equities when YOU talk about asset bubbles !!! My entire thesis is related to stock prices NOT house prices. The next cycle in real estate prices will revert to the mean and NOT duplicate the exagerated increases of the last 5 years because of the historically low rates. I expect a 50% return on housing stocks over the next 3 years or 4 years.....not excessive return if my thesis materializes.

Your original post (#33) said "the stocks have all traded up recently. They are washed out. Worst case is dead money for six months. Best case 50% gain, or more, in 18months when the Fed starts lowering 1"st qtr 2007." I engaged you because I thought that was an absurd statement (and still do). Then in post 38 you extended your timeframe to 2 to 4 years, and in post 42, to 3 to 4 years. I don't have any opinion about what will be happening to builder stocks in Sept of 2010, so I'll leave this debate to others at this point that have similar inventment windows as you.

Again, good luck with this.

[SHELLY]

bdc63
I expect a 50% return on housing stocks over the next 3 years or 4 years.....not an excessive return if my thesis materializes.

:eek:

I'd be interested in hearing your thesis that's going to produce a 50% return in home builders over 3-4 years. The builders are busy unloading their land options and taking losses and trying to lure in buyers with GCT, cars and shiny beads--there goes, at the very least, 1 year of your returns. (I'm well aware that existing homes are no competition for the builders--but even so, there's a heck of a lot of inventory out there to clear and spec buyers who snapped up contracts by dozen in the past are cowering in the corner licking their wounds.) And home builders don't seem too happy lately either: Housing Market Index (http://www.bullandbearwise.com/HousingMarketIndChart.asp)

I know you like to buy straw hats in the winter, but IMO there's still too much "upbeat" talk about the housing market to expect double-digit y-o-y returns on big builders over the next 3 years. Having said that, little builders who are ripe for acquisition may be a better play, albeit a pretty risky play should they decide to ride the slippery slope down to bankruptcy.

[goofer44]

I think we have beaten this theme into a dead horse. I have placed some bets and publicly posted them ( while others only talk about what they have done with the benefit of hindsight ). Check in 18 months from now and see the results. BDC63....We are only expressing opinions here, no need to be nasty. Opinions are just that....opinions not absurdities. My time frame is 3 years, to make 50% or more on my original entry points. my 3 bets (joe,dhi,hov) are up 10% from my cost basis posted on Aug. 10. That could change tomorrow....that is the nature of the stock market. It is not everyone's cup of tea. Good luck to all with your investments.

[goofer44]

I have an idea. Similiar to the Chess games at the Cerulean, why don't some of us meet to discuss investment ideas and theories. This seems to be a very impassioned and intelligent group on this thread and who knows, we all may learn a thing or two. Anyway, it could be fun and profitable. I will be in Grayton Sept 19 thru Oct 19. What do you think ???

[SHELLY]

I have an idea. Similiar to the Chess games at the Cerulean, why don't some of us meet to discuss investment ideas and theories. This seems to be a very impassioned and intelligent group on this thread and who knows, we all may learn a thing or two. Anyway, it could be fun and profitable. I will be in Grayton Sept 19 thru Oct 19. What do you think ???

Sounds like funn, but my cover would be blown :shock: . Of course I can show up in disguise -- maybe "The Loan Ranger" :floor:

[goofer44]

Shelly
Don't wear a straw hat....that's my trademark.;-)

[goofer44]

For the record....took my profits today in my housing stocks. After the huge run up in housing stocks in last 6 weeks, I decided to book my profits. Averaged 15%-20% on the individual trades. They ran up too far too fast. Still holding my buy write in JOE until late October. If the stocks come back down I will consider doing it again.

[goofer44]

For the record....took my profits today in my housing stocks. After the huge run up in housing stocks in the last 6 weeks, I decided to book my profits. Averaged 15%-20% on the individual trades. They ran up too far too fast. Still holding my buy write in JOE until late October. If the stocks come back down I will consider doing it again.

[goofer44]

DESTINISM

You are a fan of street.com. I assume you read this. Any comment?http://www.thestreet.com/_tscnav/funds/madmoneywrap/10309192.html

[redfisher]

Just curious...Did anyone ever figure out what the msg of the stock market was?...

[goofer44]

redfisher

Re-read post #'s 1 11 18 19 36 49

The message was you could have made a lot of money in 6 weeks buying those stocks I mentioned. The housing stocks have continued to go up. Now everyone seems to be liking them, including the "great" Jim Cramer. I just got lucky and bought them early near the bottom.

[redfisher]

I don't need to re-read posts to know you are offly "proud" of your picks...

[Smiling JOe]

redfisher

Re-read post #'s 1 11 18 19 36 49

The message was you could have made a lot of money in 6 weeks buying those stocks I mentioned. The housing stocks have continued to go up. Now everyone seems to be liking them, including the "great" Jim Cramer. I just got lucky and bought them early near the bottom.

Better begin thinking about selling them.

[goofer44]

SJ
Read post 50.

Redfisher
I am proud of my picks. And, oh boy the way thank you for your congratulations. Quite gentlemanly of you !! ;-)

[iqueequeg]

I don't need to re-read posts to know you are offly "proud" of your picks...

My interest was peaked by the word offly, which gave me pause until a realized you meant "awfully".

For many years, my sister thought the expression "dog eat dog world" was "doggie dog world".

Check out the archive of misheard lyrics. http://www.kissthisguy.com/ From Smash Mouth "All star"

real lyrics:
She was looking kinda dumb with her finger and her thumb
in the shape of an "L" on her forehead.

misheard as:
She was looking kinda dumb with her finger in her bum
and the shape of a elf on her forehead.

[Mango]

SJ
Read post 50.

Redfisher
I am proud of my picks. And, oh boy the way thank you for your congratulations. Quite gentlemanly of you !! ;-)

BTW, I am "awfully" proud of your picks!:clap_1: I think Shelly would even give you a ^5. When in my neck of the woods, please feel free to stop by and review my portfolio and make suggestions:wub:

[Sandcastle]

Congratulations!!!:clap_1: :clap_1: :clap_1:

[Bobby J]

The action of the housing stocks (joe, kbh, tol, bzh, dhi, hov, phm, ctx ) is telling us the Fed is finished raising rates. The market is also telling us that there will be a recovery in housing in the spring of 2007. The next major move in rates is DOWN. The Fed's work of the last 2 years raising rates has slowed the economy and tempered housing. The economic statistics will contine to deteriorate as well as the housing statistics but make no mistake about it, the recovery is coming in 2007. The Fed will begin lowering rates in the spring to generate growth. We will experience a growth rexession, which means GDP growth of 1-2%. We will NOT have a full blown recession...the FED will make sure of that. The stock market is a forecasting mechanism. The dawn is coming !!!

WoW! Goofer you were right on here!!!!!:clap_1:

[Jellyfish]

Speaking of homebuilders and investment climate, does this graph bother anyone? Looks scary....

http://photo.xanga.com/russwinter/f8b1c74138103/photo.html

[flyforfun]

Sure hope you are correct with your prediction or at least give me a glass of what ever you are drinking! I know you would not be were you are at today without some fundamental knowledge on the subject, and glad you are going to be my neighbor. Enjoyed meeting you during the WS HOA this past weekend. Next time your down, I would like hear more of your encouraging thoughts and ideas :clap_1: .....:shock:

[redfisher]

Goldilocks...

[redfisher]

Goldilocks...


What was that message again?

[seacliffes]

What was that message again?


You nailed that one!!!

Marty