metalhead

Beazer Homes: Option Traders Expecting Major Move Higher in Another Homebuilder

Joe, I see your point and there are safe ways to play BZH, like going long with a tight stop. However I refuse to play the game of speculating in short term price movements. The only people getting rich are Goldman Sachs and other trading houses playing these short squeezes with OPM (other peoples money.)

I just picture some poor guy dumping a good chunk of his savings into this and forgetting to set a stop loss, then waking up one fine day to see CNBC announce they've filed ch. 11.

Beazer Homes: Option Traders Expecting Major Move Higher in Another Homebuilder

I've taken a detailed look at this companies balance sheet, and unless you are a quick trader I'd stay far away.

They aren't generating enough sales to offset debt service. They've pulled out of markets, slashed staff and costs, but their land positions are still huge. Available cash is down around $400 million, and they have a coupon payment due next month ($136 million.) Unless they can generate significant increases in sales, they will be bankrupt in early 2010.

I am projecting about 3-5K closings for FY 2009, based on past quarters numbers. Unfortunately, if they aggressively slash prices to meet quotas they will take more balance sheet impairments. This will reduce their tangible net worth below covenant thresholds, potentially triggering margin calls on 10% of their debt (another $180 million.) If that happens, they will probably file ch. 11 later this year.

Wednesday Outlook: Commodities, Global Markets

Kommissar Obama ... classic!

Don't turn around
Der Kommissars in town!

Obama's 'Bad Bank' Plan Is a Turning Point

One little problem ... actually two.

First, who is going to pay for this? The amount of bad assets out there is 3-4 trillion, conservatively. I see only three options 1. The Treasury issues more T-bills 2. The Fed prints 3. The FDIC sells covered bonds or some kind of debt to raise capital for the bad bank.

1. and 2. will end up destroying the dollar and possibly blow interest rates up. Number 3 might work, but would require an enormous amount of private investment which just isn't there.

The other problem is that this has already been considered. The original language of the EESA stated that the money would be used for just this purpose, to buy troubled assets. Say what you want about Paulson, but he abandoned this for a reason.

The Fed refuses to grant Bloomberg News's request to disclose the recipients of more than $2T of emergency loans from U.S. taxpayers and the assets it's accepting as collateral. "If they told us what they held, we would know the potential losses that the government may take, and that’s what they don’t want us to know."

This is truly outrageous! Do we no longer live in a free nation?

Let's hope some Federal judge throws the book at the scofflaws at the Fed.
Bernanke deserves to rot in a jail cell.

Surely if we can grant "rights" to enemy combatants under the Bill of Rights, we can allow our citizens to see the truth of how our government is spending the tax dollars of future generations.

Thursday Outlook: Commodities, Emerging Markets

Nice job as usual David. The bond market is trying to tell us something now. Since early November, it has completely abandoned the usual inverse relationship with stocks.

Generally I trust the bond market to be wiser than the stock market. A lot of dumb money is going to pile into stocks towards year end, I suspect.

Hank Paulson: A Rare Keeper

You're joking, right? Paulson is a crook who should be promptly perp-walked out of the oval office when Obama wins.

I guess stealing trillions of dollars from our kids future means nothing to you.

The Dead Cat Returns to Earth

"Historically markets have rallied into presidential elections."

Oh really? Like the Nasdaq in 2000, falling from 5000 to 3000 during the Bush/Gore race, quite a "rally" !

FiOS, Cellular Won't Save Verizon - Sanford Bernstein

More competition is good for the consumer. For too long the pigopolists at Comcast and TimeWarner have enjoyed a monopoly. Good for Verizon and AT&T.

A weak economy hurts Comcast and Time Warner too. People will give up cable TV before they give up their cell service.

Google Proves Mortal: Opportunity Knocks?

Anyone buying GOOG here is making a big mistake. Former leaders of past bull markets never return to their old glory. Don't believe me - read Bill O'Neill's (of Investors Business Daily fame) "The Successful Investor."

Low 400's next stop.