Tuesday, April 1, 2008

Post-Market Update

Aside from Lehman blowing up 15% today and short-seller accusations, unbelievable developments with UBS up 10% on a day they lose $20 billion. In reference to today's post, Centex has found suckers, err, land partners in Cali and Nevada on a joint venture. The deal is worth $161 million, estimates are that they made back $.18 on the dollar, nice! Furthermore, Centex had valued this land at $528 million on their books. This should lead to immediate markdowns on other land assets. Also, the Frank bill is moving right along into the Senate and might make it through now that is has stripped judges of the power to rewrite loans in bankruptcy. In addition to helping homeowners, the bill will allow homebuilders to receive huge tax refunds. XHB up 7% today...we might be too late! Let's wait for a better entry point though, and 2010 still looks attractive as we might get the double bump of bailout and a true turnaround. Failed in my limit order to set up a strangle on NCC as they met with GS today. My thought is either they will be sold in pieces or be acquired. A decision may have to be made before earnings on 4/22, so I may severely shorten my time horizon.


Tiger Coach said...

Ax..Do not be surprised if this rally is DOA by Friday!

While banks attempt to put bad business behind them...in many ways the stain is still on their hands...and will not just go away with a few massive write downs. Consider the three factors:
1. Tight consumer credit...and a portion of the population that will not be able to even qualify for loans.
2. A weakening job market

3. Gasoline prices that are only finding a resistance point...and the prospect of 3.50 gas again by this summer.

A bit of a stinker...I cannot under ANY circumstances justify a move on any of the homebuilders...

Maybe we are failing to see a "mega-trend" Maybe just maybe the financials have access to the nation's credit card! Now that would be scary!


Kevin said...

Are we half way to Thanksgiving yet??????

When banks are in question, the economy is uncertain, and the growth markets are fuzzy..... just look at the balance sheets that will be able to thrive in an unhappy MOODY environment... JP Morgan and Johnson Controls are about to gobble gobble gobble.

As for the homebuilder.. pick your time.. when will it be over? How undervalued are the stocks? How quick will they jump 40% at the first sniff of a recovery? My opinion, buy and wait. If it takes a year.. 40%/1 if it takes 2.... 40%/2... Could be wrong, but I'll buy you a shot if I am. After all, it's only money.

AX said...

Good post KG and will give a look to Johnson controls. As far as your assessment of homebuilders, undervalued how? A good example is Centex, look at how grossly overvalued their one asset, land was. If you can't sell your product and your one tangible asset shrinks in value every day, why should you be worth anything. We're a long way from foreclosures ending. I do postulate that if the Frank bill passes, none of that will matter however. I will be buying some XHB Jan 10 calls on the downside...put a strangle on NCC out to October, we'll see how it plays out. Thanks for taking the time.