In my first SPF post, I talked about how the assets on the balance sheet were greatly overvalued, and would require significant further writedowns. I also brought up the issue of the two layers of financial leverage thanks to the joint-venture deals.
Also, this observation proved to be an understatement:
And when land values fall, they fall hard. They are a bet on home prices and builder profit margins.
I grant that the old JV land, and the old land owned (if any), are undervalued on the books. But my suspicion is that the amount of that land is dwarfed by the way-overpriced land.
On October 3, I questioned the reasoning behind a huge homebuilder rally sparked by Citigroup analyst Stephen Kim. Sure enough, that was not the bottom for the homebuilders.
This is an industry suffering from huge over-investment, and it needs a restructuring.
I am still short Standard Pacific, and I believe that their common stockholders will be wiped out within one year from today.