Sunday, March 30, 2008

Flip This House?

Shockingly, MSN Money ran an article today about how people are still making out in this housing market. The bulk of the article centered on people flipping houses. That's great. It's a strategy that worked so well for Americans over the last few years that they'll be in debt forever. Keep up the optimistic reporting and I'll keep up the reality check....for example:

Forgot to mention KB Homes putrid results on Friday. They lost (what else can homebuilders do?) $3.47/share last quarter. Sales were down almost 70% and the CEO said things look bleak as foreclosures will continue to glut the market and margins will continue to be reduced. Surprisingly, their stock fell a little as perhaps the worst isn't over yet, although Lennar continued to climb.

A little birdy (thanks, Dr. Mike) recod a possible strangle or straight up short play on Corus Bancshares (CORS). This is a company that went from conservative banking strategies to funding almost all condo loans in housing bust markets, with a disproportionate amount of those loans in Miami. Their profits fell 96% last quarter and their loan loss reserves seem a bit underfunded as projects will be coming due in the next year and ain't nobody going to be living in them.

Recapturing some concern from an "Anonymous" comment, we have 2 synergistic forces working that may further hinder financials and equities in general. First, Paulson will release his plan for an expanded and domineering Fed tomorrow which will entail much greater oversight of the SEC, futures, and mutual funds. This happens about every 20 years or so as our markets go kablooey and people ask why there isn't more regulation. Then we go without an adverse event for awhile and Wall St. clamors for deregulation. Then we come up with stuff like CDOs and leverage ourselves 20-1 and go kablooey again. This in turn leads to a revival of the Dems and impending corporate tax hikes and regulation. Markets don't like that, they like Bushisms. By definition, more taxes equals less profits. Don't get too excited about financials and the omnipresent XLF reco!


Tiger Coach said...

CORS could be a good play. After additional research it is determined that this outfit has a presence in the thriving real estate markets of
California, Nevada, and Florida...looking at its competitors profile none other than NCC was listed!!! HA!

AX said...

I know, talk about getting overleveraged in bad markets, this had been a traditionally conservative bank! NCC is in rough shape, down another 2% today...your other sources are good, I always have marketwatch running in the background.