“Deposits And Traffic Dancing On The Bottom”: CEO
Some housing bubble reports from Wall Street. Bloomberg, “Toll Brothers Inc. said fiscal fourth-quarter profit slid 44 percent as orders tumbled and the company wrote down expenses for land. Net income in the three months ended Oct. 31 dropped to $173.8 million from $310.3 million a year earlier. Fiscal 2007 earnings may drop as much as 62 percent, Toll said today in a statement.”
“‘This spring is going to be very important,’ said analyst Todd Vencil. ‘Last year it was bad. It was not a good selling season. People just never showed up.’”
“Toll took a pretax charge of $115 million on optioned and owned land in the fourth quarter. On Nov. 7, it forecast a charge in the quarter of as much as $100 million. Toll included a pretax charge of $60 million for land- related writedowns in fiscal 2007 in its earnings forecast.”
“The company cut the number of lots it controls to 74,000 at the end of the fourth quarter from 91,200 six months earlier.”
“Toll said on Nov. 7 that orders slid 58 percent in the fiscal fourth quarter as more than one-third of customer contracts were canceled. ‘With these cancellations creating unintended specs, we could face increasing margin pressure as we seek to move these homes,’ CEO Robert Toll said. Nearly 25 percent of the cancellations came in the Orlando, Florida and Northern California markets, Toll said.”
“‘Fifteen months into the current slowdown, we may be seeing a floor in some markets where deposits and traffic, although erratic from week to week, seem to be dancing on the bottom, or slightly above,’ said Toll in a statement.”
“Morningstar analyst Eric Landry cautioned against reading too much into a possible bottoming out of the housing market. ‘It’s not hard to be better than it was, because it was awfully bad,’ he said. ‘It’s still pretty much a given that there’s too much inventory on all the home builders’ books right now.’”
From CNN Money. “Late payments on subprime loans have surged, The Wall Street Journal reported on its Web site on Tuesday, and while economists don’t expect major harm, a continued rise could hurt investors in mortgage-backed securities.”
“Based on current performance, 2006 is on track to be one of the worst ever for subprime loans, the report said. It cited the bank saying that roughly 80,000 subprime borrowers who took out mortgages packaged into securities this year are behind on their payments.”
“HSBC holdings Plc, the world’s third- biggest bank by market value, said third-quarter revenue growth slowed as bad loans rose in the U.S. and the U.K.”
“In the U.S., where the bank gets the biggest share of pretax profit, loan delinquencies and writedowns increased from the first part of the year due to more bankruptcies and a weaker housing market, London-based HSBC said in a statement today.”
“‘There is little in the statement that will calm fears of a slowdown,’ said Colin Morton, who helps manage $1.8 billion, including HSBC stock, at Rensburg Sheppards Plc in Leeds, England. ‘People were looking for signs of a stabilization in bad debts, and things seem to be worsening.’”
“The main risks for earnings are ‘further weakness’ in U.S. housing, employment and consumption, the lender said today. A slowdown in mortgage lending will raise delinquencies as a percentage of all loans, HSBC said.”
“‘It’s not a case of pulling in our horns, but we are being cautious on loans,’ said CEO Mike Geoghegan. ‘We won’t go out’ with unprofitable loans, he added.”
“HSBC miscalculated some borrowers’ ability to repay mortgage loans in the U.S., Finance Director Douglas Flint said today. ‘The situation has worsened since we looked at the third- quarter numbers,’ Flint said. There was a ‘weakening trend’ in the fourth quarter, he said.”
From MarketWatch. “If Federal Reserve chairman Ben Bernanke hadn’t let on that he and some of his colleagues had a target range for inflation, he wouldn’t have to keep repeating over and over how worried he is about the pace of price hikes.”
“Former Fed head Alan Greenspan resisted the notion of publicizing an inflation target because he feared the very thing that’s happening now, above-range inflation combined with below-trend growth.”
“Right now, the Bernanke Fed is between a rock and a hard place. If it accepts above-range inflation, it loses credibility as an inflation fighter. If it doesn’t, it risks dumping the U.S. economy into another recession.”
‘Steel prices are continuing to slide from summer highs and the weakness appears to be spreading to niche markets like pipe and beam, which were largely unhurt before. ‘More steel goes on sale when the economy is weaker,’ said independent steel analyst Michelle Applebaum, who thinks some producers are selling hot-rolled sheet for less than $500 a ton.’
I think we can tell which way Dr Keller leans with the title of this column:
‘Why a declining dollar is good news’
Ben,
Go ahead and tell me all the items we sell into the global marketplace…
A weak Dollar means nothing, if the cart you are selling from is empty.
I hear we move depleted uranium in many markets.
LOL. Not exactly at their request, however.
Aren’t the entertainment industries (music and film) some of our biggest exporters in terms of dollar amount? Who needs all that manufacturing when you have such ubiquitously necessary products like Britney Spears and Alien vs. Predator?
You know,
I was thinking the other day that there are still dozens of 1960’s and 1970’s tv shows hollywood could make really bad 1 1/2 hour films out of.
They are creatively bankrupt.
we make tanks and then deposit them in the desert- GDP for you and me
The CIA World Factbook entry for the US lists American exports at about $900 billion. Not too shabby, except that imports are $1.7 trillion.
Higher education services…
here’s a partial list. bombs, bullets, tanks, planes, guns, cannons, software, financial *expertise, marketing prowess, movie films.
A close friend of mine is in the steel fab business….All his big private sector jobs are gone but he is still very busy….All public sector work…Schools etc….Float those Bonds and keep building I guess….
That would be a good way to temper the slowdown… IF WE HADN’T CHARGED EVERYTHING TO THE “USA VISA” CARD THE LAST FIVE YEARS!!!”
Increase in bankruptcies????!!!!! Not in the US! The BK laws changed 10/17/05. For the 12 months after that BK filings were at an all time low. They are just now starting to come back to “normal”. Now, maybe in the UK they were high but I know lenders will blame everyone, and everything else, except their own idiotic lending practices for the Coming Apocalypse.
scdave: regarding the bonds, I shudder when I ponder what future taxes will have to be like here in CA. Another reason to consider leaving the state.
And you really think CA won’t come after you? Sounds silly but think about the people who drop off of the electric grid. They still get an electric bill. It covers things like insurance on nuclear power plants that were never built.
“You can checkout any time you like but you can never leave.”
What was the name of that British tv series with the theme song , ‘ Secret Agent Man’,?
In San Jose, Silicon Valley, and a good economy now, the city is projecting 2B deficit next year. The state 10B seems conservative.
Another reason to not buy property in Cali — because when the debt burden comes home to roost, it will be capitalized into housing prices, in the form of a discount…
That brings up a political question: Why do right-wingers like debt?
Cheney recently said “debt doesn’t matter”. But don’t bigger things, like bigger debt, rely on more bigger things, like bigger government?
Right wingers like debt for the same reasons lefties do; spending on agendas. You are confusing that with why we true conservatives used to like debt. In the Reagan Era debt was a tool of state to hogtie Federalism and prevent social statism. It worked for a while.
“Why do right-wingers like debt?”
Because it leaves less money for social programs while the interest payments go the the “right” people.
Democrats = tax and spend
Republicans = tax cut and spend
We need a balanced budget amendment to save us from our politicians.
It’s just too early to call a bottom. I think it’s safe to say that things can get worse in 2007 with more supply coming online, ARM resets kicking in on many mortgages, more cautious lending in the subprime market, a weak $, and a Fed that is still fairly hawkish. If the 10 yr. goes north of 5.5%, the housing market is toast.
On the other hand, if the 10 yr goes much south of 5.5%, the housing market is toast along with the rest of the macroeconomy. So let’s all hope the 10 yr stays locked in at 5.5%…
Isn’t the 10 year around 4.5% right now? I agree if mortgage rates go up dramatically there will be disaster. Maybe we will see soup lines again?
Anybody have an idea how the feds actually get the funds rate to hit their target? For instance lets say they meet and decide to raise rates 50 bps. How do they get the funds rate to get to their new target rate?
My bad not to check the facts…
http://www.bloomberg.com/markets/rates/
It’s actually below 4.5% (4.45% to be exact). The Fed can only directly control the Fed Funds rate, not the ten year rate. Depending on its goal, the Fed simply raises or lowers the Fed funds rate which is the interest rate that it charges its member banks to borrow overnight to meet their reserve requirement with the Fed. The Fed has other tools at its disposal to control the money supply (open market operations and changing reserve requirements with banks) but the overnight rate is probably it’s most widely used and powerful tool.
“the interest rate that it charges its member banks to borrow overnight to meet their reserve requirement with the Fed. ”
I was just curious how the Fed knows if the reserve is being met or not….and how long in general before these “overnight” debts are repaid.
The Fed is the bank to the banks. The Fed sets the reserve requirement, so if a member bank has a sum below its reserve requirement “on deposit” with the Fed, the Fed is well aware of the fact.
Every morning the fed has a meeting with its 21 primary dealers (Goldman Sachs, Citibank, Bank America, Lehman Bros…etc…) to determine how much credit is needed to keep the o/n rate in the target band. Then the dealers submit their offers, called repos (repurchase agreements). Finally the fed accepts the amount of repos it feels is necessary to maintain the target rate.
This morning they accepted zero repos. Yesterday they accepted $7.5b in overnight repos. Everyday the duration and amount is different.
Would you please comment on whether the Fed buys and sells Fannie Mae debt (assuming you know)?
Do you have a link or could you explain this more? I wasted my college education on something other than finance..
Another question…are repos part of M3?
Dipster,
Great information. Can you elaborate more on this? The repo subject seems interesting.So is the rate set by the biiding on repos for that day?
Repos are part of M3
everyday the primary dealers bid on repos. The fed determines how much to accept, how long to let the repos run and what their stop out rate is. So yes, to an extent their is an open auction to set the repo rate for the day.
Today the o/n rate is 5.25%. Sometimes the bids aren’t there. So the fed may choose to reach down and take a bid at 5.10%. On the otherhand sometimes they don’t take enough of the bids creating a stop out rate of 5.35%. This is the usual band around the 5.25% target. So you could also argue that the fed has an agenda to micro manage reserves outside regardless of the target rate.
Last two weeks have seen the stop out rate at the top end 5.35-5.40%. Some of the tea leave readers suggest, based on this action, that the fed will rates at the next meeting 12/12. Personally I doubt it. But I also doubt they will cut rates anytime in the near future.
oops. last paragraph should read:
Last two weeks have seen the stop out rate at the top end 5.35-5.40%. Some of the tea leave readers suggest, based on this action, that the fed will raise rates at the next meeting 12/12. Personally I doubt it. But I also doubt they will cut rates anytime in the near future.
also a little lower you will find where to get more info & the type of collateral that is accepted by the fed.
Good post. Thank you.
At Costco over the weekend Mr Gwynster found a curious item: It was a tube of emergency food. Just add water and you had enough meals to feed a person 3 meals a day for 3 months. I wished I’d had a camera because I think I found our new “FB rations”.
bah replied in the wrong thread
270 meals, same flavor, same texture…mmm…btw, how big is this tube?
It’s actually pretty cool. About the size of the orange buckets at home depot. (10 gallon?) The problem for California however is that a major disaster will probably be an earthquake. In a major earthquake the water lines into So. Cal will be destroyed over the faults and the water will not get where it’s needed. All this food needs water to be prepped. (And energy to cook although you could probably eat it cold.) Water will be the problem in a major earthquake - not food. Great for bird flu though!
What self respecting Californian doesn’t have any bottled water at the house?
My wife noted that as well, at Sam’s Club a few weeks ago. We are going to start buying some. Along with someone’s (either Gekko or GS) recommendation that we have some gold on hand.
By the way, the rules for obtaining a passport will change on Jan 23rd. For those who care…
Iodine tablets such as ‘potable aqua’ brand sold in camping section of walmart/outdoor sporting goods shop would be a good item to put in your emergency kit. Supposed to make bacteriologically contaminated water safe to drink in case you cannot boil water. I keep 6-10 1-gallon filled water jugs stored away in case of a SCal Natural disaster. They say that you need 5 days worth of emergency food/water put away in case of a Scal disaster, or min 1 gal per person each day. A portable backpack butane/coleman backpack camp stove also might be an item worth having.
“Anybody have an idea how the feds actually get the funds rate to hit their target?”
The Fed controls the money supply “through purchases and sales of U.S. Treasury and federal agency securities.” I don’t recall the latter as being part of traditional open market operations; will have to check my old money and banking college textbook on that point. I assume that the Fed is now buying and selling Fannie Mae (”federal agency”) debt to jointly fund the housing bubble and supply liquidity to the stock market? (Small wonder that Fannie Mae’s stock price is so resilient, despite the ongoing absence of financials!)
Anyway, when the Fed buys a bond, they create money that did not previously exist; then there is further expansion of the money supply through the money multiplier effect. The increase in the quantity of money in circulation reduces its price, which is known as the Fed Funds Rate. Conversely, when the Fed wants to tighten rates, they sell Treasuries or agency debt, taking money out of circulation.
More info is given here:
http://www.federalreserve.gov/fomc/fundsrate.htm
china controls long rates- so solly
Thanks for the information on fed funds rate GS.
The fed repos come in three flavors: US treasury debt, US Agency Debt & Mortgage debt (which is FNM, FRE, Sallie, etc packaged debt but not there bonds)
Repos can be 1 day - 90 day. The bulk are 1-7day and 14 day. 30,60,90 are pretty rare. More information can be found on the NY fed bank site under Temporary OMO (open market operations)
Fed also does Permanent OMOs which are called coupon passes. The fed basically buys bonds from banks creating a permanent liquidity injection as opposed to repos which have a definite expiration. The same three collateral classes are available, but the fed is usually pretty specific about the type of collateral it wants to buy.
Thanks
It is amazing TOL is getting a bid, that report was weak. The earnings shift with the accounting change is a total misdirection play. Also check out average expected selling prices they assume for next year. This was a large guide down and the stock is up! This after a big run recently - all news is indeed good news.
As to subprime land, anyone know why (how) 2004 and 2005 loans are holding up so well. I mean 2006 is falling apart so fast and nicely but 2004 and 2005 should be weaker???
Maybe it is short covering today. Something real fishy is going on with the homebuilder stocks. I think this is a suckers rally myself. I do not think there is enogh bad news built into current prices. Seems like a lot of speculative money floating around that sector right now.
“Maybe it is short covering today.”
Right — in fact we have had six straight months of short covering now!
LOL. You hit it head on. Irrational stock market and irrational housing market. All guesses, all guesses.
“It is amazing TOL is getting a bid, that report was weak.”
No wonder why some of us who post here occasionally entertain tinfoil hat theories, as builder share prices have moved in consistent opposition to news releases since May 2006.
Well I have been short a few builders since July 2005 so the stocks have come down a lot. A trading bounce was expected - some on this board even said it - but that is usually a pure trading bounce. TOL’s stock has done very well recently. This report is not weak enough to send the stock down huge (in this all news is good world) but it was certainly weaker than expected. The stock should not be up today. As for short covering, that is what has been driving this months rally, so tough to think it is just limitless. The bulls just don’t care about any news - of course that will eventually change….I think.
I generally think that people are playing the “wait until spring hand”; assuming that weaker sales in the offseason is less telling than a weak spring sales market.
Delinquencies (especially subprime) are continuing to spike, which is a troubling sign for financing appetite and pricing come the new year–I expect delinquencies will get worse.
If/When (I suspect When) there isn’t a significant rebound in housing in the spring, I wouldn’t be surprised to see another leg down in HB stocks.
Not long or short, but definitely interested to see what happens.
Are people expecting more McMillionaires to suddenly emerge from hiding right after the Super Bowl?
Only if, after the game when the winning quarterback is asked “What are going to do now?”, instead of saying “I’m going to Disneyworld!”, responds with “I’m goin’ to go buy me a brand spankin’ new Toll Brothers Home!”
One quarterback is not going to do much to help Toll’s inventory hangover…
The Home Builders are buying back their own stock, so their year end stock option bonuses will be FAT. This is strictly an insiders play, with help from their friends at mutual funds, hedge funds, and Krammer - the pump and dump mouthpiece. I know KB Homes year ended Nov 30. I am not sure if the other Home Builders year end is Dec 31…
but this is nothing more then the execs trying to cash in their options befvore their companies declare BK.
“The bulls just don’t care about any news - of course that will eventually change….I think.”
They know the news does not pick the winners in the Keynesian beauty contest on which they are gambling.
“…Risk assets ranging from private equity all the way down to two-year Treasury Notes have been repriced in recent months/years under the assumption that future economic and financial asset price volatility will be fractions of historical levels. …
I have a strong sense that the ability to lever any or all asset returns via increasing leverage is reaching a climax and therefore… sophomoric assumptions of future assets returns in all markets may require some future compromise, as the current masquerade of high asset returns gradually morphs from cream to skim milk.”
Bill Gross PIMCO
http://tinyurl.com/yks3fl
Insiders at Toll have sold 355K shares in 6 months. The sudden nature of the HB decline has caught many big holders by surprise, so this is a engineered sell off to bring in J6P and some greedy hedgefunds to dump off shares. If you were around in the 1999-2001 broadband mania, then you would understand. If not check out JDSU in Nov 2000 and then in Nov 2001. The entire time the insiders were selling everything they had.
Yes I agree, I mentioned this above. I used to cover telecom and internet dsl/hosting crap in 1999 - I remember guys saying NT was a steal at $45! Morons.
“As to subprime land, anyone know why (how) 2004 and 2005 loans are holding up so well.”
Maybe it has something to do with those people being able to HELOC their homes, whereas people who put nothing down in 2006 now have less than nothing to HELOC out of their homes?
The value of the underyling collateral has increased alot from the 2004 and 2005 vintages, while the value of collateral this year has either stayed static or more likely fallen.
Let me get this straight. He is hoping for a turn around, yet they now have fewer lots, traffic is still slow, and orders have already sild 58%.
What do these guys smoke? Their profit is already down 44%. They know this stuff does not turn around in after 15 months. This stuff takes 4-5 years to turn around. Why don’t they say the truth?
I wonder about this CEO. In mid-2005 he said publicly that couples in the US would soon need to live with their parents into their 40’s to save up for a downpayment. I don’t know which is crazier; that he believed it or that he didn’t.
He also sold most of his stock at the exact top while telling everyone things were fine at the company. To call a bottom after so little time is silly, all that debt is still out there.
Maybe he has more stock to sell …
I think we should be long past the naïve idea that a CEO’s interests are aligned with the interests of the company or the stockholders.
Insider Purchases - Last 6 Months
Shares Trans
Purchases N/A 0
Sales 355,000 1
Net Shares Purchased
(Sold) (355,000) 1
Total Insider Shares Held 43.93M
% Net Shares Purchased (Sold) (0.8%) N/A
Insiders sold less than 1% of their totla holdings in the last 6 months and have been sellers of exercised stock options.
http://tinyurl.com/dxk7v
From Yahoo finance Insider transactions.
Also noted Institutional transactions = Net Shares Purchased (Sold) 4,320,200
Robert Toll still owns over 12.5% of the outstanding stock. That’s huge insider ownership compared to most companies. He still has a lot of skin in the game. Also he has been a buyer of the stock more recently.
He has made hundreds of millions, simply put he has FU money. The stock isn’t going to zero, but it should not keep rallying.
Please, he is now within reach of the billionaire club and he’ll do and say anything to get there. FU money only applies to people who make $50k per year, not to CEOs. They want jet money, then to be worth 10 figures, then set their sites on some sultan somewhere, etc.
Also he has been a buyer of the stock more recently.
He sold at the top and now is buying back a few of those shares (mainly as a PR stunt?) at a greatly reduced price. Charity? Personal bullishness? Hardly.
Yes, but he still owns a LOT of stock and has been a net buyer. That’s the only point I was trying to make. I wonder if you were in his shoes if you wouldn’t at least take some money (in this case less than 10% of his holdings) off the table after a huge multi-year rally in the stock.
“I wonder if you were in his shoes if you wouldn’t at least take some money (in this case less than 10% of his holdings) off the table after a huge multi-year rally in the stock.”
I certainly wouldn’t have gone on CNBC et al and talked about how we were going to be in a housing bull market for the next 10 years and then sold tens of millions of dollars worth of shares over the next few days.
And I’m not sure what you mean by a net buyer, but you should check out his entire string of transactions in 2005.
“He also sold most of his stock at the exact top while telling everyone things were fine at the company.”
Would this constitute stealing a page out of Kenny Boy’s play book?
Bob Toll was on CNBC in the winter of ‘05, I think, with his “land shortage fueled by immigration” song. SEC filings showed he sold a huge amount of his own shares within days of that appearence.
I like Angelo Mozzello (sp?) from Countrywide myself. He is refreshingly honest about all this. “I have never seen a soft landing in this business.”
The only thing we can count on in spring of ‘07 is inventories going through the roof. I liked the comment in the last thread yesterday about the false hopes placed in the current decline of inventory numbers. Like the man said, inventories are supposed to be declining by seasonal standards. But by the time we get to were the seasonal declines stop and we enter the beginning of the ‘07 market, inventories will still be double where we were at the outset of the ‘06 market. Any hope for tomorrows market would of have to taken todays inventories to at least where they were last year, or lower. Now, we all know in our respective areas how many are “lining up in the gates” to re-list or list for the first time in the hoped for “spring turnaround of ‘07″. Add to that we see no evidence of sellers “lining up in the gates” to suck up the supply. Huge supply, little or no motivated demand. What does that spell to you? It doesn’t matter where interest rates are or who has what job, until the supply/demand equation is resolved, there is no bottom in sight.
Well you gotta love the comment by Toll that Spring ‘07 is going to be very important for them. It seems that Spring ‘07 is very important for EVERYONE who wants out. And who’s got room to cut prices? Not the retail idiots, that’s for sure.
See that is what I mean, Spring 07 can’t possible be strong. The cheap money won’t be there as easy and the defaults will continue to grow. Investors/speculators will not be around. Nothing points to spring 07 helping, I would think that is obvious.
They are jamming these stocks for year end performance, have been doing that for two years now. I guess someday it might stop - doesn’t seem like it though. But I remember having the same feeling when nasdaq was 5k - so who knows.
Of course they are and my guess it comes to an abrupt halt on Monday after opex this month.
I have a similar gameplan. Dec option ex.
“It seems that Spring ‘07 is very important for EVERYONE who wants out.”
The sheeple will wake up to panic selling.
nnvmtgbkr,
“motivated demand”
Boy there’s an earful for ya! Sure, even hard case bears like myself “could” be motivated (if prices did their much anticipated FREE FALL!) Even what I think were some pretty generous incentives being offered out there failed to spur much “motivated demand”. It was probably just more first time buyers that cashed in on that stuff, not long time owners. You know the same people that are bored on a Saturday, go out shopping and come home with a new car?
“Even what I think were some pretty generous incentives being offered”
Even with the “free granite countertops” and the “free landscaping”, it still doesn’t pencil out for my family on a month-to-month basis. I expect to pay a premium for owning a house over renting, but NOT 80%-100%.
Yes, and the only reason why we expect to pay a premium for buying over renting is that it’s been like that for most of our adult lives. Have said before, my husband and I bought a small house in 1972 that was actually CHEAPER to own than to rent. Even at 7 3/4% rate. This expectation-of-profits thing has been going on for a few decades now, despite the early-90’s downturn in some areas. I could afford to pay some premium to own rather than rent, but I wonder if I’ll do it when owning costs “only” 15% more than renting, or if I’ll wait.
“… the only reason why we expect to pay a premium for buying over renting is that it’s been like that for most of our adult lives.”
Well, actually, if I “knew” prices were going to double again in the next five years, I would buy a home tomorrow with whatever kind of high risk loan for which I qualified. It is only because I don’t believe that another five years of rampant home price appreciation is possible against a backdrop of tepid wage increases and a collapsing subprime lending sector that I am 100% certain I will not buy tomorrow.
DinOR: remember the article last year (?) where a woman was quoted as saying she had driven by some condo conversion that was selling; she stopped for a few minutes to check out a unit, went to grab a cup of coffee and then came back and bought one because she said she liked what they were offering! Who does something like that? Can you imagine coming home to your spouse, “by the way, I bought a condo on my way to the office this morning.” When this type of action is being taken all over the country, you have to know that it cannot end well.
Inventors going up in spring - 2nd thoughts. The penniless realtors will refuse to take overpriced listings in the spring, cause they have no money to market them. And there will bew enough comps 20% below last springs prices, to discourage the move up McMansion crowd to reevaluate they old affordable home and decide to stay put. Keeping up with the Joneses will not be so desirable, especially if your employment is threatened. The chance of cashing in on the bubble is gone, and the only new money out there is 1st time homebuyers, looking at an affordabily problem. Listings will not materalize.
“The chance of cashing in on the bubble is gone.”
Only for those who purchased in the last 2, maybe 3 years. There is still some bigtime appreciation that longtime homeowners could cash in on. Many areas have seen houses triple in value and then some. But most are blinded by greed so will miss that gravy train.
Whatever these guys are smoking, I want a puff. Just one puff.
“Toll Brothers Inc. said fiscal fourth-quarter profit slid 44 percent as orders tumbled and the company wrote down expenses for land. Net income in the three months ended Oct. 31 dropped to $173.8 million from $310.3 million a year earlier. Fiscal 2007 earnings may drop as much as 62 percent, Toll said today in a statement.”
Good thing David Lereah has predicted that 2007 is going to be the bottom for the housing slump. So far his predictions have been 100% accurate — if you were betting against him!
IMHO the earnings from Toll are incredible, with sales down and profit only drops 44% , should there be any kind of dead cat bounce,Toll is in excellent financial shape. Just shows how much profit was buried from 2000 - 2005.
“IMHO the earnings from Toll are incredible, …”
I can follow you about that far…
Hi GS, When you read the Toll report they wrote down owned realestate, took losses on unexercised options and depreciated the completed but unsold homes! They still showed only a decline of 44% of profits on a 58% decline in orders. As I have said on this blog before and will repeat: From a financial viewpoint: Toll is one of the most upfront home builders about their intentions - including selling insider stock. From an analysts viewpoint: If there is disclosure about all the problems plus a way for the company to solve its problems, the company appears a lot healthier - they are a lot healthier than most NYSE companies that are trading at significantly higher forward pricing PEs. Would I buy them - no - because it is not my type of investment; however there I very few US stocks that I would consider buying at this time. Next week is the first reporting of 4th quarter numbers and as opposed to the 3rd quarter which came in at 19% growth, there have been about 20 profit warnings over the last 10 days - I do not recall any profit warnings for the 3rd quarter. I am looking for 4th quarter to come in ~8.5% - Anything less than 10% growth in eearnings is a nightmare.
“If there is disclosure about all the problems plus a way for the company to solve its problems, the company appears a lot healthier - they are a lot healthier than most NYSE companies that are trading at significantly higher forward pricing PEs.”
Did they disclose the small issue of potentially running out of buyers for the kind of homes they build if the economy slips into a recession next year?
Don’t worry! New emerging growth sectors such as the “Hobbit Houses” as in Bend, OR are the Mcmansion of the future!!
Don’t know how anyone can call a bottom in this market. Must be on some good drugs to do that.
Was reading the story about mortgage fraud in lincoln crossing near sacramento. How in the world do you get an appraisal for over 200k from real value? I guess they figure on making the payments for awhile from the 200k and figure they will make more money from appreciation. What the hell is going on here? Has the industry become nothing but lies and deciet?
You know. We really should be thankful that guys like Toll are so transparently clueless and or un-clever. If they tried just a little it they could make it difficult on us.
I couldn’t disagree more. I think Robert Toll has shown a masterful ability to play Wall Street and the government to maximize his personal wealth gains. Further, his massive liquidation of personal company stock holdings in August 2005 was perfectly timed for the all-time peak in the company’s stock price.
That is what I mean GS. He is so obviously BSing that my BS detector doesn’t even have to be turned on to detect it. When he says all is good that means it isn’t. Now that he has called a bottom it is safe to assume we are near the top.
Toll knew it wasn’t going to last and that there were signs of weakness in the upper price range that he builds . I guess the limo rides with booze isn’t working .
Massive liquidation in August 2005? That’s wrong; in fact he was net buyer of almost 300k shares in August 2005. Earlier in the year, he sold less than 1.5 million shares in the company and he still owns over 19 million shares or 12.5% of the outstanding stock. We can hardly describe his selling less than 10% of the stock he owns as a “massive liquidation”…
Well ,I guess it isn’t as high as I thought it was but it amounted to alot of money anyway . If he sold to much it would of looked really bad ,but I just think he knew in 2005 that demand was going south .
These seem to add up to a little more than 1.5 million. And those 300K shares you mentioned were options he exercised at about $4 per share. Wow, I’m like so impressed:
22-Jul-05 *673,300 TOL Sale at $57.13 per share.
(Proceeds of $38,465,629)
21-Jul-05 *193,700 TOL Sale at $57.09 per share.
(Proceeds of $11,058,333)
11-Jul-05 *70,000 TOL Sale at $52.56 per share.
(Proceeds of $3,679,200)
8-Jul-05 *265,080 TOL Sale at $103.49 per share.
(Proceeds of $27,433,129)
7-Jul-05 110,820 TOL Sale at $102.11 per share.
(Proceeds of $11,315,830)
30-Jun-05 55,700 TOL Sale at $102.68 per share.
(Proceeds of $5,719,276)
28-Jun-05 33,400 TOL Sale at $102.11 per share.
(Proceeds of $3,410,474)
28-Jun-05 *85,800 TOL Sale at $102.11 per share.
(Proceeds of $8,761,038)
23-Jun-05 *145,500 TOL Sale at $102.07 per share.
(Proceeds of $14,851,184)
21-Jun-05 *18,700 TOL Sale at $101.02 per share.
(Proceeds of $1,889,074)
5-Apr-05 2,970 TOL Disposition (Non Open Market) at $0 per share.
25-Feb-05 *472,500 TOL Sale at $88.60 per share.
(Proceeds of $41,863,500)
24-Feb-05 *777,500 TOL Sale at $87.74 per share.
(Proceeds of $68,217,850)
Where are the August 05 numbers? Because those were the big bombshells (which mysteriously disappeared like some of the personalities in old Soviet Union photographs).
“That’s wrong; in fact he was net buyer of almost 300k shares in August 2005.”
Please document; I think he liquidated the most in Aug 2005 of any month, but I admit the evidence is conspicuously missing from the marketwatch.com and yahoo finance web sites…
The American public has access to a majority of the information that Robert Toll has…..the law is structured to provide rewards to those who do research. Most of the people on this board were smart and/or prudent enough to know what was going on in August 2005 just the same as Mr. Toll. He was able to make millions though because of his leverage so good for him.
I’m not bitter or sorry for him. I’m dismayed by the average Joes’ that have caused this mess. It was not caused by people like David Lereah and Robert Toll, inversely it was caused by the people who chose to trust these clowns with their magic rabbit tricks.
Moman,
Is your first name David and your last name Lereah?
Housing is playing out just like nasdaq throughout 2000 - it did rally a few times. Everyone calling a bottom all the way down. It is silly to think the problems in the housing market are over, very silly. But that is just it, everyone should know it is silly, yet no one seems to care. TOL being up today is really just throwing caution to the wind.
You got the value crowd, Gates Foundation, etc. buying, want to bet against them?
Gates foundation was allegedly a rumor I thought - at least that is what Bill Fleckenstein reported - but I am not 100% sure. I am part of the value crowd and I am not buying - the entire demand part of the equation has been grossly inflated these past few years. Add in the debt the buyers have and you have a value trap.
Yet as I said above, the bounce from the lows was expected but this move today is very odd. Things are not getting better for these companies. One of these days, buying the dips won’t work. Just like with JDSU and LU and NT back in the day.
I agree with you but I learned the hard way in 2003 to stop shorting while this kind of stuff is going on. Basically worked all that year for peanuts when any idiot with a computer made money buying stocks.
Txchick57 - I was up pretty solid through mid Aug this year. Everyone else was down and fund’s were closing. I run a balanced book. I am essentially out of business due to this rip - longs underperform and shorts go up fast and senselessly. So I agree but it moved too fast for me - it is very depressing, I am literally in big trouble.
And you are right, I called a few sellside sales guys yesterday, all their mock portfolios for their mo clients are up 15%! They are all great stock pickers! Every ass with a computer is doing better than me. Doing any bit of research will hurt your performance.
The funny thing is, in Aug I was going to play the expected bounce but I didn’t because it was SO obvious. I figured it was too obvious and thus would not happen. Essentially this isn’t a business anymore, it is professional gambling. When things eventually change, which they will only thing not known or knowable is timing, these guys will lose a ton. Too bad it will be too late for guys like me.
This is exactly what happens in a classic bubble, smart/responsible money gets washed out - very ironic.
As a group, hedge funds are underperforming these indices or so I read. I think if you have any mad money left, you should look at some March index puts. They are damn cheap and can make a lot back fast. I wasted a lot of money on fall puts which I had to hedge just to get out alive and am buying the spring ones now.
I will check out those puts. I haven’t pressed my shorts on the way up - I was just too terrified it might get crazy. I try to keep my risk level low and that is why this rip from Aug has been so painful for me, I didn’t think I was taking huge risk. They just jam all beta stocks. I am not short TOL but it should not be up 50% for its lows - that is a jam job.
Mo funds had a big month in Nov - I am hearing 13% numbers. So they are not really that behind, I mean some will be but I think Nov helped them a lot. I am screwed, I am down and I look extremely bad at this point.
If anyone has an opening for a guy with 4 yrs buyside experience, 8 yrs sellside, a master’s degree, a cfa - and a decent all around person please email me at stock_regulator AT yahoo dot com. I am honest, hardworking and very personable. I also very much need a job. Thanks.
Are you interested in private equity? I do know of a few things in that area.
Yes I would be. I am being realistic about what is out there and flexible. Thanks.
The comments from both of you seem to comfort me. Back in the 1960’s when I was totally naive, I did OK in stocks. In the 70’s I “called” the 1974 bottom and did well for a while subsequently, with my tiny wad. Made a little money on shorts from time to time. I also sold every stock I had in the middle of 1987, which was not a bad call (brief Oct crash). But in the past 20 years I have learned that I know nothing at all about how to trade stocks NOW. As you said, it feels like an area dominated by professional gamblers, and certainly the dividend return are too small to motivate anyone who might have to hang onto a mistake. Despite the downturn of five years ago, I feel stocks have entered a permabubble.
Regulator: Very sorry to hear that you are having a tough year. One of the many reasons I could never go into that line of work, I simply don’t have the stomach for it. I sincerely hope that txchick or someone else here can give you a good lead for work. You write like an intelligent and genuine person, so best of luck to you!
Re your comment: “Essentially this isn’t a business anymore, it is professional gambling. ”
No kidding, ain’t that the truth. I have a bachelor’s in business, but to be honest I have a TON to learn about the stock market. The value side seems the most logical to me, but as you stated, research and rationality are useless at present! Shouldn’t there be a large correction in ‘07?
az lender said: “But in the past 20 years I have learned that I know nothing at all about how to trade stocks NOW.”
To anyone here such as txchick and stock regulator: should the younger crowd even be reading stuff by people like Benjamin Graham? I fully believe az_lender when he/she says that they are bewildered today after having invested from the 1960s-80s.
I’ve been recently wondering if the general accessbility of the stock market has now made it relatively impossible to invest intelligently.
Up until the advent of the 70’s (I think - this is history for me..) a typical middle class person didn’t own stocks. It was difficult to actually buy them and it also required quite a bit of initial outlay including paying the middle man. Now I can surf on over to Sharebuilder and plunk down all of $4.99 on Tuesdays and I’m in.
There aren’t really all that many good companies out there, considering the millions of people now invested in the market. I’ve been wondering if there’s simply too much money chasing down too few good ideas.
Value investing where a company makes an actual product and distributes the wealth to the shareholders via dividends makes sense to me. What happens into day’s market, with hedge funds, index funds, funds of funds, etc - does seem a whole lot more like gambling then investing. It all seems to rest on timing and luck, as supposed to having anything to do at all with the underlying value of the company.
Value investing where a company makes an actual product and distributes the wealth to the shareholders via dividends makes sense to me.
But things got complicated with dividends in the intervening time; Companies and individuals realized that dividends are being doubly taxed. So it is now deemed an inappropriate use of capital to pay out your profit as dividends.
Thanks for the comments everyone and any leads would be much appreciated. It is funny because I thought I was ‘hedging’ by having some shorts, but in a market like this that is death.
CA Guy - I am a big fan of free cash flow and the theories of Ben Graham. Obviously adjustments always need to be made but I am not sure how you can invest or manage money without a strategy. Today many funds seem to wing it and they are all doing well.
Steve Cohen at SAC capital says the key to his success is his ability to adapt - I am not sure what that means or how to do that but it has worked for him.
I think the advent of internet explorer in 1995 changed the game a bit and I am not sure how long that will last. Clearly everyone is now an expert - kind of like the poker world. The top players hate it because their chances of winning a large tournament are very small.
Many bears think the 2000 bubble never really ended, people haven’t felt the pain yet. I kind of agree with that. If you follow that thought process then you are drawn to the conclusion that this will all end very badly. Not down 15% or so, but down much greater. Many very smart managers seem to think that but the timing is so uncertain. I can tell you first hand it is very painful being on the wrong side of something like this.
“Many bears think the 2000 bubble never really ended, people haven’t felt the pain yet. I kind of agree with that. If you follow that thought process then you are drawn to the conclusion that this will all end very badly. Not down 15% or so, but down much greater. Many very smart managers seem to think that but the timing is so uncertain. I can tell you first hand it is very painful being on the wrong side of something like this.”
Many people are continuously bearish on everything and as such fail to consider alternate hypotheses showing the stock market as fairly or even undervalued based on the amount of cash sitting on companies’ balance sheets.
From
“Many bears think the 2000 bubble never really ended,…”
to
‘Many people are continuously bearish on everything…’
– That is a pretty big leap there, Moman.
“Despite the downturn of five years ago, I feel stocks have entered a permabubble.”
That is what has historically been referred to as “a permanently high plateau.”
“it feels like an area dominated by professional gamblers,”
I like to think of them more as professional pick-pockets.
That’s right, Fleck I think said he knows the guy in Seattle that runs the Gates fund (not sure if personal or foundation) but he said that was just a rumour. it’s easy to start a rumor like that too - it would catch on like wildfire before anyone would disprove it.
Probably trying to create the same impact Icahn had on GM shares.
If a stock group has fallen in a year over 50% and off its low has a 40% advance, how can you be down shorting? The answer is your betting pattern. The largest bets must have been after a great deal of the initial decline had passed.
For what its worth to those of you squeezed by the building stocks, it appears to be over. It is a bear market advance helped along by the failure of the 10 year bond to break above its 20 year down trend tops line. That line came through around 5.25% last June. I commented on the prospect of a decline in rates at that time. An expected break of that line (currently at 5.15%) should herald an advance to 6 1/2 to 7% on the 10 year.
The building stocks are in a bear market advance. In the midst of the 1973-74 bear market there was an advance into October 73 that took many dog stocks up 50% in a short squeeze. In the 1929 crash the Dow fell from 383 to 198 and then advanced into April of 1930 back to 297…around a 50% net advance…but not a new high. The Dow then fell to 42 by July 1932 as the FED attempted to stop the decline by lowering the discount rate from 6 1/2 to 1 1/2 %. This time around, because the USA is a debtor nation, the FED will probably be unable to cut rates but must raise them to defend the dollar.
Since I am turning bullish on the dollar for a bear market advance this interest rate squeeze may be 6 to 12 months away. Patients friends.
Nothing has been making sense in the market lately, IMHO. There is every reason for stocks to be flat to declining at this point, but they are rocketing up based on ???? A whiff of hyperinflation? Deflationary growth (thanks, Larry Kudlow)?
Question is whether or not it will correct to the downside or if this is the Stock Bubble, Part II. I’m beginning to wonder about Dow 36,000.
“There is every reason for stocks to be flat to declining at this point, but they are rocketing up based on ????”
May be money that would have gone to RE that instead is going back to the stock market. I’ve heard some call this a “sucker’s rally,” that spro’s are taking money off the table while the newbies pile in again.
IMHO it is not the fears of inflation; it is that the Fed, contrary to tightening, expanded the money supply and now the world is awash in dollars looking for any home.
Hoz,
Yes, that is what I’m referring to WRT inflation.
“…but they are rocketing up based on ????”
My guess is the ten year note and the assumption lower rates will buoy the housing market.
“If Federal Reserve chairman Ben Bernanke hadn’t let on that he and some of his colleagues had a target range for inflation, he wouldn’t have to keep repeating over and over how worried he is about the pace of price hikes.”
Too bad that talk is the cheapest commodity on earth, and taking necessary actions to convince the markets that you plan to follow through on inflation targeting rhetoric is very expensive.
“taking necessary actions to convince the markets that you plan to follow through on inflation targeting rhetoric is very expensive.”
Profound comment. It’s too expensive if the result is a debt implosion coupled with massive asset deflation. Maybe Paulson and BB will convince China that it’s in our mutual interest to decouple yuan from the dollar and let us manage their banking system? A few hundred million middle class Chinese added to the debt requestor pool is just what we need to keep this thing going.
“Maybe Paulson and BB will convince China that it’s in our mutual interest to decouple yuan from the dollar and let us manage their banking system?”
So far, so good on convincing Asians to keep loaning us money. How much longer this guy can stay wrong after 29 years is anybody’s guess, though…
http://www.amazon.com/Great-Depression-1990-Ravi-Batra/dp/0440201683
Sorry — I guess I subtracted wrong (2006 - 1987 = 19 years).
Does anyone know where I can buy a “house bubble” shirt?
If I have to have one printed up, I’m thinking the following for the back of the shirt (inspired by one of the contributors here):
Adopt a Landlord
Pay 1/3 of a specu-vestor’s
carrying/opportunity costs
to live in their
“million dollar home”
while it goes DOWN in value!
Maybe somone more creative can help me refine that??? I would like to have a picture of a house sitting on a bubble on the front of the shirt… any graphics around?
I haven’t had a haircut in around 8 months so my hair looks something like a blonde carrot-top. The fact that people would write me off while wearing that shirt is not lost on me, but when I roll up in a $60,000 Mercedes wearing that shirt I expect to get a different reaction.
Thanks in advance!
I made up this one earlier in the year:
http://www.cafepress.com/nnjbubble.68233219
And this one:
http://www.t-shirthumor.com/Merchant2/products/hbbl.html?Category_Code=topsis one:
I have that image in a refrigerator magnet I bought in a little shop in Victoria, CA. I love it!
That one is my favortie.
BTW, “favortie” is Salagno-Croation for “favorite”.
Egad, “Salagno” is Croatian [sic] for what?
Nothing, i just made it up to cover up my tpying miskate.
Ben — I smell revenue opportunity here.
housingbubbleblog™ t-shirts.
Perhaps you could add your signature of authenticity. There is a lot of value in personalized memorabilia. Afterall, we’re all witnesses to a historic event; an event we are certain to share with our progeny.
“HSBC miscalculated some borrowers’ ability to repay mortgage loans in the U.S., Finance Director Douglas Flint said today. ‘The situation has worsened since we looked at the third- quarter numbers.’”
HSBC was a well-run and highly profitable global consumer bank. Then, not too long ago when it was trendy, it decided to by sub-prime mortgage lenders Beneficial and HFC, along with some sub-prime credit card companies.
Just think how much more money the people who made that decision earn than you do.
I saw that quote as well. It sickens me how much some of these investment goons make in salary and bonus. Miscalculated? Please, show some respect for our intelligence! One does not need a Harvard MBA to know that a $60K income cannot afford a $500K house! The dishonesty that is so prevalent on Wall Street is another reason why I shied away from that field of employment. It’s just not in my nature. Let’s be honest here, Mr. Douglas Flint of HSBC: You guys were making a killing for a few years and your insatiable greed got the best of you.
Thanks for the links to the shirts. I really didn’t have any interest walking around in one before it was generally accepted that real estate doesn’t always go up because I didn’t want to get into arguments with people about it.
I think in this day people will be less inclined to call me an idiot to my face and try to start an argument.
I own the Mr. Hou$ing bubble one. I wear it every now and then. No one understands it.
Well, I was at the post office and someone saw it and was giving me a death stare. A business type of guy. A stare as in “I’m going to murder you.” Then I get to the counter and the clerk is dying laughing at my shirt. At this point I’m embarrassed a bit. She’s calling the other tellers to look at it. Then starts talking about how she used to love the bubble bath and making bubble beards and what not. At this point I realize she has no idea about it. I look back at business guy and he is still staring at me like he wants to beat me with a lockbox in a pillow cover.
Other than that, maybe 2 people have commented on it. My commercial property management lady thought it was funny. My apartment property management lady looked like she was going to cry.
I’ll wear it with pride and battle anyone that wants to argue. I can take on any realtor with the knowledge I’ve gotten from blogs. I can counter any argument. They wear clown shoes.
That’s a great t-shirt. Excellent dark humor, therefore I like it!!
It is amazing how many people still have no idea that we are in a RE bubble, that prices are insanely disconnected from fundamentals.
Fun to wear at open houses
Well, that’s what you get when you get one-sided news coverage for years on the housing market . You would think those guys should of done a little more research ,(course who funded the research in alot of cases ).
Maybe a bit more honest reporting would have been good, too. Whoops — report honestly that the housing market is toast and a dead tree paper’s real estate ad revenue drops…
Honest reporting from the ‘Drive By’ media ? No such thing. That’s why the Rep.s lost the election.
The Reps own the drive-by media
Toll said this in their report. A bottom has been reached! According to Toll.
“Fifteen months into the current slowdown, we may be seeing a floor in some markets where deposits and traffic, although erratic from week to week, seem to be dancing on the bottom or slightly above.”
“Fifteen months into the current slowdown”
HA ! 15 months ago you couldn’t convince anyone that RE was going to slow down ! I like how they make it sound like we’ve been in this situation for a long time now, so that it might seem like we are close to a bottom time wise.
The truth of the matter is this will go on for years.
Although I think we’re nowhere near the bottom, consider that it IS possible that we are, even if hardly plausible.
Can you suggest any scenario where the “soft landing” mantra comes to pass? Or are you just reiterating that one should “never say never?”
I’m in the “never say never” camp.
A soft-landing is currently possible if corporations dumped their cash into expansions, hired thousands of new people and created some massive demand for homes and goods.
However I think we’re all hung over from the last binge drinking session so this isn’t likely and much of the extra earnings would go into reducing debt instead of new consumer spending.
I didn’t realize you could have a custom t-shirt made for seventeen bucks at that site. Though you have to provide the .JPG…
Can anyone out there help me get the following into a JPG so I can order a t-shirt (centered)?
Adopt a Landlord
Pay 1/3 of a specu-vestor’s
carrying/opportunity costs
to live in their
“million dollar home”
while it goes DOWN in value!
I bought my
MERCEDES
with the CASH I saved
by renting my home
from a specu-vestor
while his investment
went DOWN in value
Thanks.
Yes, I’m feeling a littler ornery today about being a bitter renter (by intelligent choice not circumstances).
There’s a clumsy way to do it with Powerpoint. Write your words into a textbox on a Powerpoint slide, formatting the text however you want (custom colors, emboss etc). Right click, and click on “save as picture.” Make sure to Save As Type “JPEG.” That saves the whole Powerpoint slide as a JPEG. I guess you’d have to import the JPEG into Photoshop (or similar) to crop or size it correctly.
Another clumsy way is to start with a “blank canvas” in photo shop and use the Text tool to make your words, but Photoshop doesn’t have a lot of text options.
Sorry, that’s all I have off the top of my head; I’m not a graphics jockey.
i made a few housing bubble t-shirt designs at cafepress.com from witty suggestions gleaned from this blog many months ago, and can make the files you want — but they’re rather wordy, no? sure you don’t want to make shorter? and is that for front and back of 1 shirt or 2 separate shirt fronts? and any suggestions re font? will check back here wednesday for answers. photoshop is the program to use. a “housing bubble” search at cafepress.com will show what people have done. mine (from a few of you - sorry can’t recall who ;>)
“i made a million in real estate* - but started with 2 million”
“Trust Me, I’m a Realtor”
“I lost a million in Real Estate — ask me how!”
have sold 2.
oops - here is link:
http://www.cafepress.com/housing_bubble3
also, housing_bubble2 and
housing_bubble
Lets do some math here… there are 1 Million home for sale on the market right now. Toll intends to build another 5700 homes next year as does every other builder out there. And then there is this little gem… 80,000 borrowers are behind on their payments !
http://money.cnn.com/2006/12/05/news/economy/loans.reut/index.htm?postversion=2006120507
The problem with the Toll forecast that a bottom may be in sight is that inventory is going to further increase a whole bunch in the near future.
“and while economists don’t expect major harm, a continued rise could hurt investors in mortgage-backed securities.”
That would tighten the credit requirements to get a mortgage ! That is going to further hurt the market ! What would housing activity be if there were no more sub prime mortgages ? That is what is going to come of all of this !
‘It cited the bank saying that roughly 80,000 subprime borrowers who took out mortgages packaged into securities this year are behind on their payments.’
That 80k who took out mortgages that ended up in MBS’ in 2006!
I didn’t realize you could have a custom t-shirt made for seventeen bucks at that site. Though you have to provide the .JPG…
Can anyone out there help me get the following into a JPG so I can order a t-shirt (centered)?
I bought my
MERCEDES
with the CASH I saved
by renting my home
from a specu-vestor
while his investment
went DOWN in value
and separately
Adopt a Landlord
Pay 1/3 of a specu-vestor’s
carrying/opportunity costs
to live in their
“million dollar home”
while it goes DOWN in value!
Thanks.
Yes, I’m feeling a littler ornery today about being a bitter renter (by intelligent choice not circumstances).
“‘With these cancellations creating unintended specs, we could face increasing margin pressure as we seek to move these homes,’ CEO Robert Toll said.”
Translation: We are buried in houses, and will have to sell them cheap, so we won’t make any money. Just say it already.
Question: is there any logical reason for Toll’s stock NOT to drop to 2000 levels (or lower?). This would have been pre-bubble, but after the market bottomed out (and presumably would rise, which would have been priced into the stock, right?). In early 2000, which was the height of stock bubble, TOL had risen to around $10.00. It is now over $33.00.
If we move to a period where profit margins are at 2000 levels, or worse, because the market is glutted with spec homes, and sales are at or below 2000 levels, is there any reason for the premium price?
Correction: in early 2000, Toll’s price was around $4.00. It was around $10.00 by the end of 2000.
Bulls will say the p/e for these companies are going to be higher forever now - so that will change things a bit. They say the companies are better run than previous bubbles. Still I would agree TOL should be mucher lower. Tough to short on valuation only though. On the other hand it sure seems like TOL is about to suffer from a business shift back to normal, so it is not only a valuation short. Either way take it from a guy that is short during this (not TOL but others) it is very painful.
Don’t know if you read Suttmeier’s analysis of the HBs (he’s bearish now - I posted it in the bits bucket). I’ve found he tends to right, though early.
Lots of people will turn out to have been right but early on this matter…
“On the other hand it sure seems like TOL is about to suffer from a business shift back to normal,…”
Wrong. You cannot go directly from manic euphoria back to normal without first going subnormal for a while.
I agree but for now I will settle for normal. I haven’t seen one short over shoot on the down side in the past two years. Can anyone think of one?
I agree it should happen and when it does things will be ugly, but right now I would settle for normal.
Biotechs with drugs that blew up. RNVS, etc. but I know those are special situations.
JDSU got halved again, more than halved from the ‘06 high
There’s probably a few others.
Yeah I don’t count biotechs and pharma because I generally never short them if they are real companies. MRK under $30 was a great risk/reward type of play. Litigation risk is/was there but still I got too cute there - wish I owned it.
I am just saying I haven’t seen a lot of companies that have over shoot were they belong. JDSU belongs in the dog house.
CMGI - a Cramer favor a year ago (maybe less) got crushed as well. I thought his new book coming out today/yesterday would coincide with a massive selloff. I was just hoping though.
I wish some time someone would ask JJC just how much of his personal net worth is in the stock market other than his TSCM stock. I’ll bet it’s less than 5%.
So he should shut the hell up. Although he makes a lot of money for people who fade his calls
Someone should ask him about the calls he used to get before stories were on cnbc - he is a scam. Spitzer was a large partner in his fund, most people don’t know that I don’t think.
His new book - Watch TV / Get Rich should have crashed this market.
Enron. Pets.com. Myriad other dot com companies…
stock regulator,
I made buckets of dough from CMGI before the bubble burst. Bought in 1995 and sold in March 2000 when it started spiraling down but got out with enough cash to last a lifetime. Was thinking of buying some when Jim Cramer recommended it but then I researched the source of the recommendation ;-).
“Bulls will say the p/e for these companies are going to be higher forever now…They say the companies are better run than previous”
Hey, is it “the new economy” again? God, this deja vu is getting old…
“It is now over $33.00.”
Correction: It is now over $66, split-adjusted.
Thank you, DC Too. I’m assuming the 2000 valuations are also split-adjusted as well, though.
Either way, I cannot think of a single good reason for these stocks to be up so much at this point.
Appreciate everyone’s input. Thanks!
All you need to do to convince yourself of where housing stock prices are going in the long run is to look at long-term charts of any of the public builders. Since the ‘97-’00 period, most have gone up 10-15X. The charts reflect a huge mania in this group. Manias usually end with prices retracing most if not all of the prior moves. Homebuilding is, after all, highly cyclical. I personally know 2 builders that have gone under multiple times and come back. I think the long-term is clear, the short-term, however, is anything but clear. We housing bears nead to stay alive in the short-term so that we can succeed in the long-term.
“I personally know 2 builders that have gone under multiple times and come back.”
I suspect that part of the business model will retrospectively turn out not to have been updated… Where is the downside to folding up the shop for a few years and enjoying your millions of dollars taken off the table at the top while the market is in the tank?
I see quite a few “spec” homes at Toll Bros’ El Dorado Hills (Sacramento foothills development. A few months back, each of the homes under construction had a nice sign that described the lot, plan, and last name of the family that had purchased/under contract for the home. There were maybe 4-5 homes, about 10%) that were listed as “available”. NOW, they have removed the names (privacy reasons?) for those still under contract, but there seems to be a whole lot more ‘available’, about 50%. These are homes with base prices in the low $900s up to $1.2M or so. So there are lots of million dollar spec homes piling up and they are still building.
Toll Brothers stock price appears to have reached a permanently high intraday plateau.
http://tinyurl.com/ghbsr
That’s about as flatlined as it gets. Code blue? Amazing….
Unfortunately I don’t think Bob will say anything too terrible on the call to make it fall - but there is always hope. Maybe an analyst will ask about their pricing assumptions next year or this new accounting. Or the fact that calling a bottom is stupid when nothing has firmed up.
Any idiot who thunk about it for twenty seconds could tell that luxury McMansion demand is going into the crapper for maybe the next five years. Why should the markets care about how Toll spins the facts?
Hmmm, Toll from $4 to $66 in 6 years? That’s over 1600% in 6 years during a time of nominal inflation…
Sounds like you are just bitter because you weren’t smart enough to buy early.
This Toll thing is going to be the next BIGGIE, the next Cisco. Nah, the next Berkshire Hathaway! Stocks will be $100,000 each (split adjusted) in 15 years so you better buy now, while you still can.
Don’t you get it. Peole are tired of the DOTCOM stocks where you are buying something you can’t see and has failed them before (tech bubble of 2000). Real estate only goes up so let the foreigners have the internet with it’s stock crashes; it’s so passe anyway…
Americans want to buy a good old fashioned American company that produces something tangible that you can see and touch (oh, and gold).
Toll is the next CSCO; the homebuilding sector will replace the dotcom sector which will be reflected in every patriotic American’s portfolio.
Housing has already replaced stocks, the problem is that 67% of Americans are homeowners while only 20% have active portfolios. Thus the leverage effect is far greater than many people imagine. Everyone will be hurt in this bust at a greater amount than the comparable dot-com bust.
I wish the fools had stayed in the stock and equities markets…..collateral damage would have been much less…..
San Diego foreclosures jumped to 1409 today.
http://www.foreclosure.com/search.html?st=CA&cno=073&z=&tab=f
If about 25% of these end up as trustee’s deeds, i.e. get sold, as this link would indicate:
http://www.foreclosureforum.com/stats.html
Then 352 of the monthly sales would be foreclosures?
According to this link:
http://www.sandicor.com/statistics/stats2006/10statistics.html
…there were 2189 closed sales in San Diego county in October.
So 352/2189 = 16% of the sales in San Diego county are foreclosures?
Very interesting. Nice analysis.
Of course, we know Gekko is in this crowd
http://www.news.com.au/story/0,23599,20880421-401,00.html
“Many people in high-income countries have negative net worth and - somewhat paradoxically - are among the poorest people in the world in terms of household wealth,” the report said.
Yep
Is it me, or does the information on this site lead the media and the general public by about 6 months ? Not to give us too much credit, but we seem to figure things out before the general public does.
Is it just me ?
I’m astonished at how poor the media is at reporting the real story. They take a few quotes from obviously biased industry insiders and leave it at that. No analysis, no unbiased second opinions, no nothing.
Maybe this is why blogs are getting so popular ! Who wants the gibberish the media reports when you can get it straight from the horse’s mouth on a blog.
Anyone else feel this way ?
BTW: I too think TOLL is way over valued !
I am with you 100%!! When I first started reading this blog in spring 2005, I definitely was in the bear camp, but was still a bit skeptical of some of the predictions being thrown around here. Lo and behold, almost all of them are playing out now. Some have come sooner than expected, and some we’re still waiting on. Regardless, views here are consistently 180 degrees opposite from main stream reporting, and people here continue to be proven correct while the media and Wall Street continue to rattle off gibberish that any rational and objective person should see as bull$hit propaganda.
Here is a tidbit for you… I was the first person to post a reply on Ben’s site. For the first while Ben posted articles and nobody commented ! It went on for a while like that. Then some of us started commenting. And then it grew like wildfire.
I’ve learned so much through all this.
I am still amazed at how out of touch the media is with this whole situation. I’m shocked at how often and blindly they quote DL.
I know each town/city is different but I wonder if its possible to calculate pent up demand for a town/city and at what moment (rates/prices) buyers will show up? btw I heard Shakespeare sold real estate.
I think the CEOs recognise things disconnecting from fundamentals. They just cash in as long as they can. People are so bullish that conservative CEOs get fired quickly. The downsides are so large that these guys are going to get canned their anyway. So, the best course of action is run with the hot market, get as much as you can, protect yourself from fraud acusations. Just like the crooks at enron. Stockholders are clearly partialy to blame as they always look short term here.
How many stocks do you guys/gals hold long term as investments? Most people are busy day trading (speculating) instead of investing.
I’ve owned Countrywide stock since 1995. Loomis Sayles bond fund since something like 1983 or so. Some Canadian blue chips which I inherited from my grandfather who bought them 80+ years ago. Intel and Microsoft 15 years or so.
Stock holdings (all “long-term”) constitute about 1% (one per cent) of my assets. Because (as posted above) I no longer have any confidence that I know what I am doing in that area. Foreign sovereign debt feels a lot safer even though I am a Forex novice.
Well, according to CNN all is well! Time to go out and buy a house…
Headline…
http://tinyurl.com/wxzmg
“Home builders see bottom of housing slump
The worst of the housing slump may be over - but it could take a while before prices rebound.”
And they still have the link to the “Bubble-proof markets”.
“Income trends and development restrictions have made each of these top cities safe bets for investors”. The safe bets include LA, SF and Boston. I think it’s safe to bet that you’re going to lose money if you invest in these markets…..
Hopefully Bob Toll will be like John Chambers in late 2000 - I think he is setting up that way. It’s all good, no worries….I sold a few homes in DC….
While I love this blog and other like it and the info is for the most part very informative, I am not sure they will help you invest in this environment. I think my advice for if you think things are going down, just get out and wait patiently. Shorting is playing offense and in a bear market (long term bear) the one who losses the least amount wins - sad but true. You also need to trade more on the downside because nothing goes straight down or rarely. Hope springs eternal, remember that.
” I think my advice for if you think things are going down, just get out and wait patiently.”
Amen, brother ! I love how the markets are rallying when one can plainly see there are clouds on the horizon. Its a game of musical chairs… who is going to get left holding worthless stock. Sure corporations had record profits LAST YEAR. What about NEXT YEAR ?
Anyone that doesn’t think we are going to get hammered when the housing market truly collapses is a fool.
“I love how the markets are rallying when one can plainly see there are clouds on the horizon.”
It reminds me of the day in 2005 when San Diego coastal authorities issued a tsunami alert. There was more traffic driving in to the coast than away, as lookie loos wanted to catch a real-time glimpse of a tsunami coming ashore.
“Toll took a pretax charge of $115 million on optioned and owned land in the fourth quarter. On Nov. 7, it forecast a charge in the quarter of as much as $100 million. Toll included a pretax charge of $60 million for land- related writedowns in fiscal 2007 in its earnings forecast.”
How do all the charges Toll is currently taking stack up against the $500m+ value of chips that Robert Toll took off the table in 2005? (Not sure of the exact amount of stock he sold in August 2005, as the record has mysteriously disappeared from publicly viewable info sources like yahoo financial and marketwatch.com…)
Kellner: “What do Fed members see that the rest of us don’t?”
Stucco: M3?
“Late payments on subprime loans have surged, The Wall Street Journal reported on its Web site on Tuesday, and while economists don’t expect major harm, a continued rise could hurt investors in mortgage-backed securities.”
Many economists have seemed perpetually clueless and repeatedly surprised by worse-than-expected housing market numbers ever since the August 2005 peak.
“We’re confident that we are at or near a bottom” — 283,459 analysts regarding the NASDAQ April 15, 2000- May 20, 2003.