Looks like I'm not the only one seeing plenty more downside for the homebuilders.
How far can homebuilders fall?
Wednesday, September 26, 2007
Tuesday, September 25, 2007
1st Position
Bought 3 contracts of Jan 2010 $40 puts for Centex (YYVMH). Paid $16.50 per share. I would have made this trade yesterday, at a lower price, but my brokerage delayed my funds transfer (even though it was in house). I would go on a rant about that, but it is not as interesting as the one I would like to talk about.
So, last night I did some more reading on Centex. Their 10k from last year is truly abysmal. I am not sure how anyone can expect them to return to profitability any time soon. But guess what, someone does, none other than UBS. They put out a new coverage announcement declaring that Centex is a buy. I assume that they are bottom trolling. Apparently no one there has any idea that the housing downturn is just getting started. Some of the pricing for this downturn is already in the market, but there is a hell of a lot more to come. This announcement has a little bit of a personal aspect for me as well.
I used to be in the Navy, and one of my Commanding Officers, who I respected a lot, went to work for UBS after he retired. He was a reasonably intelligent person, but he had absolutely no financial knowledge. I remember having conversations with him where he was happy that the stock market was faltering (2000 time frame) because his retirement was his Navy pension and his house equity. He had absolutely no interest in investing or economics. I too was glad that the internet bubble was deflating, but only because it was an irrational entity. Over a lifetime stock markets obviously provide one of the best ways to grow an investment base. My point of this though, is that UBS hired someone who had no concept whatsoever about investing. (This is not an exaggeration). Knowing that UBS is a large company and operates many divisions, it is highly unlikely that he is working as an analyst, but I think my point is still valid. UBS, like other large financial institutions, hires people based on their reputation (what Ivy you went to) not their inherent knowledge or skill. I am sure the hack that recommended Centex this morning is just as financially illiterate.
So, last night I did some more reading on Centex. Their 10k from last year is truly abysmal. I am not sure how anyone can expect them to return to profitability any time soon. But guess what, someone does, none other than UBS. They put out a new coverage announcement declaring that Centex is a buy. I assume that they are bottom trolling. Apparently no one there has any idea that the housing downturn is just getting started. Some of the pricing for this downturn is already in the market, but there is a hell of a lot more to come. This announcement has a little bit of a personal aspect for me as well.
I used to be in the Navy, and one of my Commanding Officers, who I respected a lot, went to work for UBS after he retired. He was a reasonably intelligent person, but he had absolutely no financial knowledge. I remember having conversations with him where he was happy that the stock market was faltering (2000 time frame) because his retirement was his Navy pension and his house equity. He had absolutely no interest in investing or economics. I too was glad that the internet bubble was deflating, but only because it was an irrational entity. Over a lifetime stock markets obviously provide one of the best ways to grow an investment base. My point of this though, is that UBS hired someone who had no concept whatsoever about investing. (This is not an exaggeration). Knowing that UBS is a large company and operates many divisions, it is highly unlikely that he is working as an analyst, but I think my point is still valid. UBS, like other large financial institutions, hires people based on their reputation (what Ivy you went to) not their inherent knowledge or skill. I am sure the hack that recommended Centex this morning is just as financially illiterate.
Sunday, September 23, 2007
First Post
After years of simply reading housing blogs I have decided I need an outlet to post my own views regarding the developing situation. This is partially a result of my wife's observance that housing and the economy are all I seem to talk about. My hope is that this blog will allow me to express all my opinions and frustrations with the economy in a forum where others are just as interested in this topic. I have learned in my personal life that it is a rare person that gets excited about a discussion surrounding the money supply or the federal deficit. Fortunately, the web provides a great means of allowing a minority of the population to get together as a majority, in a new forum.
Another goal of this blog is to glean investment advice for profiting from the significant downturn that I feel is in store for our economy. This is where I came up with the name for the blog. My basic idea is to take a $5000 portion of my savings and invest it in a manner that provides the potential for high returns and thereby also has high inherent risk. If the morons on Wall Street can run hedge funds that profit off of loans that no one is ever going to pay back, I feel it only makes sense that someone profits as these horrible investments unravel. In the rare chance that someone reads this blog I have added Google Adsense in an attempt to increase my investment base. I have also placed a donate button on the page in the even more unlikely occurrence that someone reads this and then feels compelled to aid me in my goal of making some gains off of the downturn in our economy. Any money I receive, from either ads or donations, will be added to the investment base of my Housing Hedge Fund (HHF).
My first investment (Monday morning) is going to be $5000 of January 2010 put options for Centex. I plan on purchasing the $40 contracts (YYVMH.X). As mentioned above this is a high risk hedge fund. I will have %100 of its assets in one position. (Yes, I know that makes the term hedge fund a misnomer). I have watched this stock over the last couple of months, and done some research into their financials, and I feel that they have nowhere to go but down. I realize they have already taken a large hit, but they are losing money each quarter and I don't expect them to reverse this trend in the current environment. I welcome any and all comments on housing, investments, the economy, or anything else that is related thereto.
Another goal of this blog is to glean investment advice for profiting from the significant downturn that I feel is in store for our economy. This is where I came up with the name for the blog. My basic idea is to take a $5000 portion of my savings and invest it in a manner that provides the potential for high returns and thereby also has high inherent risk. If the morons on Wall Street can run hedge funds that profit off of loans that no one is ever going to pay back, I feel it only makes sense that someone profits as these horrible investments unravel. In the rare chance that someone reads this blog I have added Google Adsense in an attempt to increase my investment base. I have also placed a donate button on the page in the even more unlikely occurrence that someone reads this and then feels compelled to aid me in my goal of making some gains off of the downturn in our economy. Any money I receive, from either ads or donations, will be added to the investment base of my Housing Hedge Fund (HHF).
My first investment (Monday morning) is going to be $5000 of January 2010 put options for Centex. I plan on purchasing the $40 contracts (YYVMH.X). As mentioned above this is a high risk hedge fund. I will have %100 of its assets in one position. (Yes, I know that makes the term hedge fund a misnomer). I have watched this stock over the last couple of months, and done some research into their financials, and I feel that they have nowhere to go but down. I realize they have already taken a large hit, but they are losing money each quarter and I don't expect them to reverse this trend in the current environment. I welcome any and all comments on housing, investments, the economy, or anything else that is related thereto.
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