Burst Bubble: Similarities Between Toll Brothers Today and the Nasdaq 100 Five Years Ago

We have largely left the housing bubble meme to other writers. We saw significant differences between the run-up in housing prices in the early 2000’s and, for example, the late-90’s run-up in tech stocks. That’s not to say it wasn’t a bubble - simply that we weren’t confident enough to call it one. We did, however, see a similarity in company’s desire to call a quick end to the troubles.

Toll Brothers: Scraping the Bottom?

The colorful CEO of luxury homebuilder Toll Brothers (TOL), Robert Toll, stepped forward on Dec. 5 with the claim that some housing markets might be stabilizing. His comments came as a slight disconnect from the company’s quarterly news: Profits plunged, customers canceled more orders, and the company took a deep hit on its property holdings.Most analysts and builders are bracing themselves for further tough times in the housing market, noting that the pain has yet to go around — especially as homebuyers stomach steeper mortgage rates and monthly payments — or, at best, hemming and hawing about what happens next.

If it was a bubble, we have a pretty good guide as to what happens next. Without peeking at the ticker, can you tell which of the charts below belongs to Toll Brothers recently and which belongs to the bubble era Nasdaq 100 (QQQQ)?

16 months after its peak, the QQQQ was just above $40 (and still is), barely a third of its peak level. 16 months after the peak in homebuilders, Toll is cut nearly in half.

So if history is any guide, Toll Brothers may be going essentially nowhere for the next five years.