Why Am I Buying Lennar? No Good Reason

Why am I buying Lennar (LEN)? No good reason - it's down 15%. Which means sometime in the next few weeks it will be up 15% for no good reason. Trading market. Just making trades. Increasing the position from 0.3% of fund to 2.1%. in the $7.40 range. This name was $10 two sessions ago - for you keeping track at home that's a 26% loss in a day and a half based on... nothing. Just another week of HAL9000 trading making "beta" (returns) out of thin air. If it goes to $6 I'll load up more I suppose.

At some point people will get giddy as there is a $15,000 handout to any person who wants to buy a home coming in the stimulus 2.0. They'll run up housing stocks talking about bottoms in 6 months. We'll sell. At some point they will realize no bottom coming; they'll sell. We'll buy. Yawn. I don't even bother to use technical analysis on a company like this. Buy panic sells - guesswork where they bottom; sell euphoria - guesswork where it tops out. Rinse. Repeat.

We're back at S&P 840 so I have no conviction either way as the index is now back in the middle of its range (roughly 800 to 870). White noise area and I need to balance my book with some long positions in case the next direction is up. Took some profits on the ETF shorts (that were underwater). We're on a road to nowhere fast. And stuck here. After a miserable few days last week watching the market surge 5% while we were flat, today we're flat with the market down 3%. I seem to be perfectly hedged if nothing else. Ultimately I'd like to be a bear south of S&P 800 or a (ahem) bull north of S&P 880 but we're not getting the chance. We're stuck in nowhere land.

For any of us who trend trade or buy breakouts this past year and has been heartbreaking -- once the commodity trade died last summer. That whole style of investing has gone out the window. So now you buy dips, sell rips. And keep repeating. The problem is some of these dips have no bottom to them which is why I hate the style. But this is the only thing working.

The Casino bars anyone with more than a 7 day holding period.

Now we await the hype about the stimulus plan as a reason to talk about mustard seeds....

Long Lennar in fund and personal account

Comments

[Dave Lewenz:]

Lennar has more problems then a leopard. The Chinese drywall mess in south Florida, over 100 homes and counting, this could cost them 200 million dollars, Law suits on co-mingling funds in land deals out west, and with no turn around in sight, not sure if they have the cash reserves to keep the doors open much past this year

Feb 11 08:17 AM

[rber:]

But while Lennar's sliding down the drain pipe there's got to be at least 3 or 4 good trading opportunities for Mark.

Feb 11 09:09 AM

[Tom Armistead:]

Movement in the homebuilders is mostly meaningless volatility.

I haven't looked at Lennar recently but my impression when I sold it was an opaque balance sheet and a lot of joint ventures.

Feb 11 09:53 AM

[gordon:]

We work as a consultant for Lennar, for over 10 yrs. Won't anymore. Getting paid is like pulling teeth! Like past recessions, they'll call you in a panic to get some work, "we don't issue POs anymore..." great... less paperwork. Be worried you'll never get paid! Inland Empire down to 3 people running 3 offices, trying to put old smaller floorplans on finished lots, to pacify the initial (paid too much) buyers who raise hell that they live next to vacant lots and they can't build any rec centers or amennities without selling a min # of homes. Finally got paid after 60 days. If we didn't have inside connections with marketing/sales going back years, they would of sat on our invoices.
You all may be forgetting THE 5-YEAR TAX LOSS CARRY BACK. This is what builders are counting on, this is why no BKs/mergers, they will get TAX REFUNDS for all tax paid in 2002 thru 2007 (I think it goes, if passes in the stim bill), meaning MASSIVE BOOM YEARS REFUNDS in 2002, 2003!
Nobody is talking about the estimated $ 1.5 TRILLION in tax refunds that will be drained from the gov't revenues, as all BANKS, HOMEBUILDERS, WHO ELSE? GETS THE 5-YR CARRY BACK?

Feb 11 12:18 PM

[john s. gordon:]

5-yr carryback/tax refunds for banks & homebuilders = looting of the u.s treasury ?
> jack

Feb 11 07:56 PM

[San_Fran_Sam:]

Wow. At least your reasoning is honest. Unlike a lot of the usual B******t that gets tossed around.

good luck with your trade.

Feb 11 09:52 PM

[Rockon:]

At least your reasoning is honest. Unlike a lot of the usual B******t that gets tossed around.

good luck with your trade.

Feb 12 08:18 AM