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TraderMark
249 Comments
Why I'm Adding to Huron Consulting
As Building Slowdown Goes Commercial, Ultrashort Real Estate Should Speed Up
SKF is more of a credit contagion play first and recession play 2nd, while SRS is more of a recession play 1st, credit contagion 2nd. At this point the recession has gotten almost no play as the credit crisis dominates all the talk. So I think the effects of a slowdown in the economy are really being missed. We are only just now seeing the press come around to the idea - up to Dec 2007 most investment banks were not even open to an idea of a recession. And even now the only talk is of "short and shallow"
Myself, with the strained consumer, double whammy by food and fuel inflation, on top of asset deflation (homes/stocks) - I think it's going to be an ugly time. I expect malls to really suffer along with many small restaurants going out of business. So rental rates should really get hit. But all in good time. I think this is one worth holding a core position and then trading around the edges.
Bush will come back from Europe with a bailout plan for homeowners, etc - so times like that the market will spike - but eventuality cannot be forestalled forever.
Paulson's plan won't be ready until the next President is in office - its just a lot of huff and fluff for the financial media to talk about for a day. More important for the near term are the competing mortgage bailout plans congressmen (and now president) are falling over themselves to propose.
Home Prices Fall 11.4% in January: A Chance to Hit Bottom?
Tom in MN... it doesnt matter what the builders costs are if people cannot afford the mortgage. Think about a scenario where global commodity push from emerging markets with government with cash (as opposed to debt) like ours, uses their trade surpluses or petro dollars to continue to grow their economy - this will continue to push up material costs - so the costs to build a house continue to rise year after year... and builders can't build profitability. Then you are in a real pickle.
The reality is many of these homes built for $350K or $450K have nothing to do with material costs or labor costs - they were priced "at the market". Home builders were happy to sell with huge markup. Homes are built in Texas for $150K, $175K profitability. So there is no reason they cannot be built in Virginia or So Cal or Portland or New Jersey profitably for similar quotes. I do believe labor (contractors) who were in the bird seat 2-4 years ago now will adjust to the new market rates and hence labor costs will go down, but material (ex timber perhaps) will probably stay up. What % of a homes input cost is labor vs material, I don't know. But I don't think its an issue of the builder not able to make a profit. If you buy the land at a reasonable rate you can make a profit. The problem is the gold rush mentality had builders buy land at ridiculous rates. Now they are paying for it. The true worth of land? We've already seen its probably 60% lower than it was bought for...
www.fundmymutualfund.c...
The article above shows "smart money" (investment banks) took land off the books of homebuilders at 60% off. So we have a lot of impaired (ahem) assets all over homebuilders books.
Anyhow it's a moot point. How many Americans have 5-10% cash down for even a $200K home sitting in the bank? You need to walk around and talk to people - we are not a saving culture... $20K down is not something the majority have in the bank. Again, disassociate yourself from the "investor" class who reads sites like this, what I'd call the upper 10-15% of society. We have 65% home ownership in this country so you need to focus on the marginal buyer ... how many in the 60-70% percentile have $20K sitting in the bank?
This is no different than what the auto makers did post 9/11 - they went to 0% financing and pulled in years of demand early. Only cars turnover faster than homes. (or they used to before flipping became a national obsession). Now we've pulled in years of home demand by giving marginal buyers 100% financing at 0% down. Anyone who had a heartbeat could get a home. Now that all those buyers are in, who is left to be in? My point is not many. Most were already pulled in...
Prices need to come down. Then you will increase the pool of new buyers. 10% down on $140K is a lot more doable than 10% down on $280K. The people buying homes now in the high value home markets remind me of those buying tech stocks after the first 30% drop in 2000 - then had to sit for another 3 years losing money.
Home Prices Fall 11.4% in January: A Chance to Hit Bottom?
Chicago Bridge and Iron Earnings Mixed, but Buffered by Global Exposure
The action has perplexed me, I'm a big infra fan. Lots and lots and lots of resistance in the chart at $44-$45. It will need to get back over that level to bring back the momentum guys. But its a heck of a value here. Been concentrating on FWLT, FLR, and MDR of late.
SGR is also strangely weak.
I think people think projects will get cancelled or they are reliant on US credit markets for their customers to get funded for said projects. True for the more US based infra, but most of these are heavily global with customers in Asia and Middle East (cash rich)
but you cannot talk sense to a herd :) Still like the long run, technically its broken in the near though.
Why I'm Adding to Huron Consulting
Nick correct, restructuring is not a big part of their business or as big as say a FCN or even NCI. But we have litigation, financial consulting etc - and with the mess we are in it should still help them. I do agree much easier to grow if you are smaller but now at this point we are talking 14 PE on 08. Not terribly expensive. Accenture is a different form of consulting and still solidly growing... much larger.
CVRD's Cancellation of Xstrata Deal is a Good Thing
I think what these guys own in their mines is only going to go up in value each decade as the worlds population booms. I am curious if this BHP-RTP deal gets through, what a behemoth this would form.
This is just a huge acquisition (Xstrata) so even a smaller one like FCX ("only" $40B) might weigh less on the stock. These are just huge numbers though :)
Taking Profits on Solarfun's Day in the Sun
I think solar now has some value to it, unlike Oct 07
Further as we move into election and people see even McCain will look like a tree hugger compared to what we have now solar should benefit\
The group does tend to move together though so until I see more charts behave its tough to not take profits. Only JASO FSLR CSIQ really are north of 50 day.
solar_bull
metallurgical polysilicon seems to be the culprit
I'd be careful on WFR in the "long long run"
one day polysili will be $40/kg again and you can see what WFRs stock price was 4-5 years ago to see what that means. My gut is that in 3-5 years we will have many WFRs dotting China.
Russia-India Deal a Boon for Potash
www.fundmymutualfund.c...
I disagree that defense or inflation hedge is what is running these stocks - otherwise they'd trade with health care stocks or gold. The supply/demand dynamics are 90% of the reason.
Whatever the reason the trend is up, but I heartily disagree with your analysis of analysts - I've been watching the earnings estimates for a year and theyve been off by a factor of 100% from where they were a year ago. Across the board. They totally missed the boat. And continue to.
Taking Profits on Solarfun's Day in the Sun
Why I am Closing My Position in KHD Humbolt Wedag
Why I am Closing My Position in KHD Humbolt Wedag
As Building Slowdown Goes Commercial, Ultrashort Real Estate Should Speed Up
Why I Am Cutting Back on Commodities
My cutting back is simply 5-10% here or there. Mosaic has been my top position 90% of the time (when Ultrashort Financial has not been) the past 4-5 months.
It is not an abandonment of the thesis; simply a statement that the thesis was being ignored last week. Nothing changed fundamentally last week either but the price levels dropped off the cliff. Nothing changed in early to mid January fundamentally but the prices fell close to 40%. Etc. Simply a statement on the market's bipolar nature not a change on the long term fundamentals. I'm the first defender of the ag trade every time I hear it's over - you can see me posting about the coming potential famine conditions we are creating for the world's poor (and middle class in poorer countries) every week.
I was in there buying in the selloff last week, I just lightened up some early this week on the first bounce in case more "hedge fund liquidations" ensued. So far they have not... it would be a nice market when hedge fund liquidatations and Fed actions meant less, and fundies meant more... thats my main commentary here.
Thanks for your comments, all.
Main Street Sacrificed to the Gods of Wall Street
It is sad the normal folks have so much more sense than leadership. Or put another way, leadership has a lot of financial incentives just to keep things going on the track they are.
One day this will come to a head as more of the regular folk realize what is happening to them. Just sad it has to be this way instead of some proactive good we can do; we are always reactive instead of proactive in our policies. Oh well, back to the nuclear fall out shelter ;)