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Dave Kranzler  

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  • New Home Sales Jump In October, Median Sales Price Plunges: Implications [View article]
    Your analysis has a number of questionable assertions and it relies on accepting the Census Bureau data at face value. We know the CB's reports for employment are highly flawed. In fact, the CB has been caught a couple times simply making up some of the numbers that go in to the new home sales report. It says right in the report - in the fine print - that if a surveyor can't reach builders in sample area that it extrapolates contracts signed based on housing starts data for the area. I've written recently on my website,, about the highly problematic CB methodologies and flaws.

    Having said that, the SAAR 495k missed the Wall St consensus forecast of 500k. Furthermore, nowhere do you make mention of the fact that homebuilder contracts - which are what the CB calls "a sale" - are now running at a cancellation rate of over 20%. For some builders the cancellation rate is approaching 30%. I have individual homebuilder research reports on my website which go into detail on this with actual data from homebuilder 10-k's and q's. Of note: the cancellation rates are starting to approach the levels we started seeing in 2006/2007.

    Finally, you state "when inventory becomes available." Not to be harsh, but how much due diligence have you conducted on actual homebuilder financials vs. just using the CB report prima facie? I have studied the financials of many homebuilders and ALL of them have inventory levels - finished inventory levels - that are as high as they were at the housing bubble peak in 2005/2006. This is units, not just value. The problem? Actual sales - from the builder reports, not the CB report - are running at 1/3 - 1/2 of the sales rate at the peak. See the problem?

    There's plenty of new home inventory at ALL levels. Just ask Beazer. They recently showed a financial report that indicated they are letting their inventory level start to bleed off. Same for PHM. I have those reports on my website. PHM sells to the lower end, for the most part. If demand is strong as you indicate, why would they not replace inventory with what they've most recently sold?

    Here's a good look at an analysis that shreds the CB numbers:

    Happy Thanksgiving
    Nov 26, 2015. 11:01 AM | Likes Like |Link to Comment
  • Why The Fed Wants To Raise Interest Rates [View article]
    How do excess reserves translate into higher leverage for the banks? Excess reserves exist BECAUSE the banks have less assets against which they've created leverage.

    Please explain this concept
    Nov 23, 2015. 10:11 AM | Likes Like |Link to Comment
  • Is The Slump In U.S. Manufacturing Easing? [View article]
    Superficial analysis. You have to dig into the reports themselves to see what's going on. The headlines are nothing but "seasonally adjusted" statistical cassoulet. Here's a detailed analysis of the KC Fed manufacturing report released on Friday that triggered the parabolic bounce in stocks after it hit the tape:

    The KC Fed manufacturing survey was released today. It nudged into positive territory after registering negative to highly negative readings for the previous 8 months in a row. It turns out, if you scan through the details of the report – KC Fed manufacturing survey (http://bit.ly1VcK3QV~/media/files/p... – you’ll see that the reading of 1 (“one”) in the composite index was achieved using “seasonal adjustments.”

    It appears that the composite index was “juiced” both with seasonal adjustments and with expectations six months out – aka the “hope index.” A further, deeper reading of the report shows that on a not seasonally adjusted year over year comparison basis the “composite index” was -5 (negative five) for November. In addition, the production index was negative to deeply negative on this basis for 10 of the last 11 months. Ditto for average employee workweek, shipments and new orders for exports. In other words, the economy is in bad shape and getting worse.

    The Fed may well raise in December. But if it does, it will throw the U.S. economy into a depression that will make the 1930’s depression look fun. Having said that, I believe that the sudden and covert meeting called for Monday is nothing more than an opportunity to use a hike in the meaningless discount rate to jawbone/frighten the market into believing in December’s Santa Clause appearance just after the FOMC meeting.

    The rest of my analysis here, including a discussion of why the sudden Fed meeting on Monday is nothing but showtime:
    Nov 22, 2015. 10:53 AM | Likes Like |Link to Comment
  • Why I'm Not Sweating Slippage In This Housing Measure [View article]
    The housing sentiment index is largely a "fluff" number. I don't know how closely you look at and analyze the financials of individual homebuilders, but both PHM and BZH reduced their units in inventory during the last quarter. It was the first time since 2011 that these builders reduced their inventory after building them up to levels that exceeded their peak at the top of the big bubble.

    The housing market isn't about interest rate expectations or chimerical labor shortages, it's about whether or not the buyer can make a monthly payment. Taking interest rates down to zero, mortgage rates down to record lows and FNM/FRE/FHA down payment requirements down to almost 0% has pulled forward any real demand and saturated the majority of the populace who can - for now anyway - afford the monthly cost of home ownership.

    The market is showing the same indicators as it did in 2006, when the big bubble popped, although some of these indicators have on slightly different costumes.

    The homebuilder stocks are more overvalued now that at any time in their history, even the peak of the housing bubble. They will be incredible short plays and I have several ideas that will be home runs in 2016 on my website:

    I pretty confident one of the homebuilders I cover will hit the wall and be forced to restructure in late 2016. That stock is down 33% from a year ago and I predict it will go well below $10 before June
    Nov 21, 2015. 03:20 PM | 1 Like Like |Link to Comment
  • Housing Permits And Starts Tell 2 Different Stories [View article]
    Actually, let's look at some facts. 1) "Starts" and "permits" are largely meaningless - it costs almost nothing for a homebuilder to file a permit and a "start" is essentially (literally, really) sticking a shovel in the ground and leaving it there. How come no one questions why the long term level of "starts and permits" far exceeds the long term level of actual deliveries?

    2) Nearly every major MSA is now engulfed with glut of new apartment inventory. Multi-family starts may continue, but rents will plummet. New apartment building rents in most major MSA's have been reduced and most buildings are offering 1-2 month free and free parking as incentives.

    3) Many major MSA's are now seeing an oversupply single family homes listed for rent. Flippers and "investors" are getting stuck with empty homes they've purchased in the last 6 months.

    4) Two of the four homebuilders I've examined since their earnings were released have not stopped increasing their inventory for the first time since 2011. The two that have not increased inventory are two of the largest homebuilders.

    5) The advent of 3/3.5% GSE down payment mortgages PLUS 0% down private mortgage originator mortgages has pulled forward just about any buyer who can fog a mirror and support the monthly cost of home ownership on a "hand to mouth" basis. As layoffs in energy, manufacturing, retail and service hit the market hard after Christmas, the housing market will start to collapse. This process has already started in some MSA's, like Houston and NY.

    There's really no positive spin that can be put on the recent housing market data, especially when you "un-spin" the absurd seasonal adjustments and undo the "annualized rate" calculus.
    Nov 19, 2015. 10:13 AM | Likes Like |Link to Comment
  • This Housing Bubble Is Set To Pop [View article]
    Au contraire, the bubble formed from 1995 - 2005. Go do some research on the data. The St Louis Fed is not the best source but it's the easies. The bubble popped in 2005. What's happened since QE started was an artificially stimulated bounce in sales volume made worse by the buy-to-rent strategy from institutions that has now failed and many are becoming sellers.

    The bear market was never allowed to correct the excesses from the 10-yr bubble. It was briefly interrupted. And now it's headed a LOT lower.
    Nov 15, 2015. 10:28 AM | 7 Likes Like |Link to Comment
  • This Housing Bubble Is Set To Pop [View article]
    Wow. There's two housing bears in the world now - you and I. Two comments: there never really was a "recovery." The bounce was a product of $2 trillion in mortgage market stimulus from the Fed and an unquantifiable amount of stimulus by the Govt in the form or 3%/3.5% FNM/FRE/FHA subprime in disguise mortgage subsidies. Second, the bubble has already popped...

    Many major MSA's are already seeing inventory gluts and price/sales volume drops, as I document here:

    FYI the housing stocks are one of the best short-alpha plays out there.
    Nov 15, 2015. 10:24 AM | 6 Likes Like |Link to Comment
  • Will GLD Get A Second Wind? [View article]
    GLD is a paper security. It does not even represent bullet-proof security interest in the gold that it supposedly holds in "trust" on behalf of the security holders. The security holders, holders of the ETF certificates, are unsecured creditors of the trust, in a strict legal sense. This has been illustrated by several analysts including myself.

    Here is what is happening with GLD:

    The real question is not about GLD "getting wind," but when will the price of physical gold break away from the paper manipulation?
    Nov 10, 2015. 10:04 AM | 3 Likes Like |Link to Comment
  • Housing Market Plods Along With Serious Disconnects To S&P And 10-Year Prices [View article]
    Interesting analysis but I would suggest starting with better underlying fundamental analysis - the number of new/existing homes being sold right now is much lower than the SAAR metrics reflect:

    On a fundamental analysis basis, the homebuilders are more more overvalued now than they were at the peak of the bubble.
    Oct 30, 2015. 09:19 AM | Likes Like |Link to Comment
  • September's Existing Home Sales Report Is Highly Questionable [View article]
    New home sales - whoops:
    Oct 26, 2015. 01:39 PM | Likes Like |Link to Comment
  • The Housing Starts Metric Has Limited Predictive Value [View article]
    Pulte Home (PHM) missed earnings by country mile:

    The Dow Jones Home Construction index is down 3.5% today and PHM stock is down 6%
    Oct 22, 2015. 09:46 AM | Likes Like |Link to Comment
  • Amazon: To Believe Or Not To Believe [View article]
    My AMZN report drills in-depth into AMZN's accounting and I show that, on average and in general, AMZN ultimately loses money on every sale. It subsidizes the cost of getting the product from the shelf to the customer's doorstep. It's the greatest Ponzi scheme on earth. But I show with numbers and footnote adjustments direct from AMZN's SEC filings that it does not make money.

    Hey Kudos to anyone who has had the stupidity to stay in a stock that is a overvalued as AMZN. It's dumb-luck like winning the lottery. But thank Greenspan and Bernanke for your luck, it's not a product of investment savvy. Even blind squirrels find nuts.

    By the way, I use AMZN as much as possible. You never know when they might have to eventually jack prices and charge for shipping so take advantage of it while you can.
    Oct 21, 2015. 04:05 PM | 8 Likes Like |Link to Comment
  • Amazon: To Believe Or Not To Believe [View article]
    This article has several incorrect assumptions and zero substance. For instance, the author asserts that many investors don't own AMZN because they don't trust the business model. Huh? AMZN is one of the most widely owned stocks by hedge funds and mutual funds.

    The author says that AMZN "plows" its cash flow back into its business. The only problem is that it does not generate economic cash flow, although it does a great job misleadingly presenting "GAAP" cash flow. It's Free Cash Flow metric is a made up metric and AMZN admits this deep in the bowels of its footnotes.

    I have a report available on my website that goes deeper into AMZN's accounting and business model than any report ever written:

    AMZN is a Ponzi scheme that depends on finding ways to generate revenue growth to cover cash outflows. When this gerbil wheel slows down and revenues decline, AMZN will blow up.

    This is why it has had to borrow $9 billion from junk bond investors over the last 24 months and most of that cash is already spent.

    The facts please.
    Oct 21, 2015. 01:48 PM | 14 Likes Like |Link to Comment
  • Why Rental Housing Is In Danger Of Collapsing [View article]
    Furthermore, sorry but I have more facts here, the FHA share of the mortgage market hit a two-year high in Q2 this year:

    That represents a lot of first time buyers who are using a 3% down payment mortgage from FHA to buy a house they really can't afford to maintain. I see this happening all over Denver and know some young couples who have been sucked into home ownership because of the allure of a cheap mortgage. Many of them borrowed to make the down payment so they don't have ANY skin the game.

    Anyone who bought a home in Denver in 2015 this way is now underwater because the price reductions across the board in the market are spreading like the bubonic plague.
    Oct 4, 2015. 11:14 PM | Likes Like |Link to Comment
  • Why Rental Housing Is In Danger Of Collapsing [View article]
    Yes,great point. Let's do look at average down payment for mortgages. I'm glad you brought that up because you don't investigate the facts.

    The data is available thru Q1 2015. The average down payment of Government-backed loans, not including VHA which are 0% down required, fell to 3-yr low of 14.8%. This about where it was in the middle of the housing bubble 2005-2008.

    HOWEVER, the share of 3% or LOWER down payments jumped to 27% in Q1. The share of no down payment/3% down payment purchase mortgages has been lower since Q2 2013 than at ANY TIME in the last decade.

    And down payments now are defined to include gifted money OR seller concessions. The number of mortgages in which the buyer puts up NO money is even greater than what is shown in the numbers that get reported.

    In the metro Denver area - one of the hottest markets in the country - because of themonth to month (not yr/yr) price declines since June, anyone who bought a house this year thru June and used a 3% or less down pmt mortgage is now underwater. By the stats, that means at least 27% of all buyers this year thru June.

    In other MSA's it's worse. Thanks for bringing up this point because the perception out there thanks to media disinformation and propaganda is wrong vs the facts.

    The fact is the credit profile of the average buyer now is WORSE than it was at the peak of the bubble. And many buyers now either defaulted and/or were foreclosed on previously the first time around (in the big bubble years).

    Here's the data:

    And that's thru Q1 2015. Those numbers have deteriorated considerably since then based on the data that is available on a monthly basis.
    Oct 3, 2015. 10:45 AM | Likes Like |Link to Comment