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Dave Kranzler
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I spent many years working in various analytic jobs and trading on Wall Street. For nine of those years, I traded junk bonds for a large bank. I have an MBA from the University of Chicago, with a concentration in accounting and finance. Currently I co-manage a precious metals and mining stock... More
My company:
Golden Returns Capital
My blog:
Investment Research Dynamics
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  • The Mortgage Purchase Index Plunges – Again

    The lack of movement for the purchase index underscores the lack of traffic and lack of demand in the housing sector. - Bloomberg News

    Once again the Mortgage Bankers Association purchase applications index fell 5% week to week and 9% year over year (LINK). Mortgage rates have fallen 30 basis points over the past month and 10 points over the past week. This is stimulating refinancings but not buying.

    Cash/investment buyers disappearing - cash buyers were 24% of new home sales in September this year compared to 33% in September 2013. If the number of buyers who require a mortgage are falling and cash buyers are fading, who is going to buy homes? This situation is exacerbated for new homebuilders, as 93% of a newly built homebuyers use a mortgage.

    I wrote an analysis of yesterday's existing home sales report which goes into detail as to why the reality is much different than the headline reports you may have seen: Existing Home Sales Drop Yr/Yr For the Eleventh Month In A Row.

    The homebuilder stocks have bounced back up to a level which is ripe for shorting. My three latest homebuilder reports explain why these homebuilders are particularly good short-sell candidates, especially my latest one: Homebuilder Short-Sell Reports.

    These homebuilders are riddled with misleading accounting, excessive inventory and debt levels and declining unit deliveries. They are more overvalued in relation to their underlying business fundamentals than they were at the peak of the housing bubble. My reports go into detail on all of those issues. In short, homebuilders are insanely overvalued.

    At the very least, any money manger who is long these stocks has a fiduciary duty to look through my work and reassess their investment strategy with regard to this sector. If you happen to be invested in mutual funds with exposure to this sector, get out now.

    Disclosure: The author is short KBH, RYL, DHI.

    Oct 22 12:25 PM | Link | Comment!
  • Great Mining Stock Trade Idea

    I want to predicate this by stating that any trade in mining stocks right now is dependent on the ability of gold and silver to sustain an uptrend or a least move side-ways, without the successful intervention in the market by the Fed and its agent bullion banks.

    Having said that, I wanted to update a trade/investment idea that I first posted at the end of July. The short term play on this idea worked out. I think this idea offers the potential for a short term move of 10% and a longer term investment return of at least 30%. I also believe that this stock will outperform its peers and the HUI index.

    You can access this trade here: Mining Stock Research Reports. It's the first item on the list.

    I have added some updated information and some graphs which I use to explain my investment rationale. I also have included an options strategy section with specific strike-price/strategy ideas. This idea was originally published at the end of July. If you think may you have already purchased it, please email me and I would be happy to share the updated material with you.

    This stock has been hammered, along with almost every other mining stock since gold has been methodically taken lower through intense market intervention in the sector by the Fed and its agent bullion banks. It has dropped 33% from late July thru late September.

    However, it has outperformed its peers during this period AND has diverged positively from the HUI index. It has carved out a series of higher lows since the 3rd quarter of 2013. On the assumption that the gold take-down has run its course and gold is headed higher through the end of the year - This stock is set up to provide either a profitable short term trading opportunity and/or a spectacular investment rate of return through at least the end of the year.

    If my short term call is accurate, you can make 10x to cost of the report with just 100 shares of this stock.

    Oct 15 2:00 PM | Link | Comment!
  • Homebuilder Stocks Are Burning Down

    I made the assertion that when the S&P 500 finally rolled over - and the jury is still out on whether it has or not, as I suspect Grandma Yellen will follow her orders to stimulate a big bounce at the 200 day moving average (1,904 on the cash index) - it would exert particularly brutal force on the homebuilders. I am focusing on the homebuilders right now because - in the face of inexorable Fed/Govt intervention in the precious metals which will ultimately fail - shorting the homebuilders is the easiest place to make money in this market.

    As an example, since September 17th, the DJUSHB homebuilder/home construction index is down 8.4%. In this same time period, the S&P 500 is down only 3.8%. The DJUSHB is down 2.4% as I write this.

    Now, the argument is being thrust out there that lower interest rates per the FOMC minutes will stimulate housing sales. Let's see how that argument has fared in the last 12 months (click to enlarge):

    (click to enlarge)

    This graph shows the DJ Home Construction Index vs. the 10-year Treasury yield. How's the "lower rates will stimulate home sales" argument looking? The 10-yr yield is at a 52 week low. 30-year mortgages are priced off the 10-yr and they're near all-time lows. The only reason the homebuilders are not at a 52-week low - YET - is because of the enormous amount of Fed liquidity being injected in the stock market.

    As I've detailed in previous posts, existing home sales have now declined year over year for 10 months in a row. The year over year comparison is the only way to strip away some of the "seasonal manipulation" that the National Association of Realtors and the Census Bureau impose on the data samples. Exiting home sales are 90% of the market. If existing home sales are tanking, so are new home sales. This is despite 1-year lows in interest rates. We are seeing this in the serial weekly decline in mortgage purchase applications nearly every week this year. 93% of all new homes are purchased using mortgages.

    Earnings season is coming around again for some of the homebuilders starting October 23 for Ryland, Pulte and M/I Homes. DR Horton dropped 11% when it reported its earnings in July. You can position yourself with short positions and/or options strategies in four of my best homebuilder short ideas by following this link: Homebuilder Short-Sell Reports. They're posted chronologically from top to bottom.

    I include options and trading strategies in the 3 most recent reports. I believe the company in the first report I published (bottom link) will hit the wall before this renewed bear market in housing is over. It would have gone belly-up in 2009 if it weren't for the Fed and the Government.

    Disclosure: The author is short DHI, KBH, RYL.

    Oct 10 1:26 PM | Link | 2 Comments
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