Thursday, February 7, 2008

Not a Pot to Piss In

Ironically, my wife and I were shopping at Macy's yesterday looking to spend some hard earned gift certificates at the mall in Palm Beach Gardens, Florida. This is a pretty high end mall with Saks and Nordstrom's as 2 anchors. A few observations. The mall in general could only be described as a ghost town. If it weren't for women with strollers and retirees, there wouldn't have been anybody there. Also, my wife commented to me that there were way too many people working there considering the # of shoppers. Macy's didn't disappoint, a mere 3 hours later they layed off 2,500 on a 7.1% decrease in sales. Two salesmen were talking and they asked how sales were going. To that point around noon the had made a combined $9 sale of a t-shirt. They weren't too thrilled as I chuckled.

Even retailers who had a good 4th quarter will get smoked this year. Wal-Mart came out with crappy sales last month and this brought out Cramer. Anytime you see Jim Cramer on CNBC in the morning, you know it's only to "refute" all of the bad news. The fed cut rates, things aren't so bad, some retailers had great 4th quarters, blah blah blah. People are broke. Nobody can get a loan with the new lending standards which were the old standards that should've been maintained.

An analyst from Bank of America actually upgraded the housing sector 2 days ago, upgraded it. He insists that cheaper mortgages and availablity of homes will lead to a resurgence in sales. Hmmm, let's see what Bob Toll and Mr. Eller, CEO of Centex have to say about the bright future of homebuilers. Diana Olick reported from Capital Hill, where Eller and other CEOs were pushing tax relief and sub-prime support, that Eller admitted to her, "this will ultimately be the deepest and longest housing correction since World War II." The CEO of Lennar added, "There really isn’t any visibility as to where the bottom is.” Bob Toll upon giving horrific earnings yesterday said he, "doesn't see much light at the end of the tunnel in the housing malaise." Far from being insulated by the higher end buyer, Toll sold far fewer homes, had huge cancellations, and has been very slow to correct prices.

Again I ask. If homebuilders have negative earnings and no foreseeable earnings this year and maybe next, how do their stocks have any value? Oh, land you say. That's right. Tons of land that they overpaid for in Florida, California, Arizona, and Texas that they are now trying to sell for less than they paid. Also, if they don't own any land, where are they going to build homes? If homebuilders don't build homes, what exactly is it that they're doing to make money. See?

One more thing, I thought MBIA said last week on their 4-hour conference call that they had plenty of cash. So why do they need an additional $750 million all of a sudden? I'm going to write them and find out.

IOD: XLY again, retailers go kablooey.
TOD: If you actually put money down on your house, write your congressman about not bailing out sub-prime losers.

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