DSX Lover

Dangerous Optimism in Homebuilders

Homebuilders are way too overpriced and they will keep loosing money for at least 6-18 months. Their Book values, will continue to decrease, and unlike Banks, their cash flow from operations is decreasing because of lower revenues (less sales). Banks in the other hand, have steady cash flow, and with lower rates, are earning a higher interest margin. Once the write downs are finished the banks will be swimming into a pond of cash. The correct move here is to short the Homebuilders and to go long on large strong banks.