January 10, 2006

Analyst corruption (again)? Merrill housing analyst Lorraine Maikis goes directly against Merrill Chief Economist David Rosenberg

File this under very very very strange things indeed. Perhaps we add "Wall Street Analysts and Bankers" to our list of Real Estate Industrial Complex participants?

There's been good talk here at HP in the past few weeks about how dangerous it is to short stocks, and homebuilder stocks. Short term that couldn't be more true. Manipulation and insider games will kill the small investor. But long term I can't see a way out for the major builders.

Especially odd today is Merrill Lynch housing analyst Lorraine Maikis (who can be reached at 212-449-1157) coming out with a positive recommendation on the homebuilders she follows (perhaps a bit too closely if you know what I mean), when David Rosenberg, Chief North American Economist for the very same Merrill Lynch (and a MAJOR and VOCAL housing bear), recently said:

“A lot of the economy’s fortunes hinge on the housing market, and yet it doesn’t look like it’s all that stable to me,” Rosenberg said. “The last leg has been fueled by a mountain of leverage and a lot of speculation"


"The demographic story behind the housing market boom, as we always thought, was a giant hoax"


"The Fed is in some sense caught in a box,'' said Rosenberg, who estimates 60 percent of the U.S. is experiencing a housing-price bubble.

Do Mr. Rosenberg and Ms. Maikis ever talk? Any way you slice it, Merrill has (another) big stench around it today. I'd encourage the media reading this blog to dig a bit at the investment banking relationships of Merrill and the likes of Toll, Pulte, Lennar, etc. A Merrill analyst popping the stocks of these companies, whose insiders have been dumping like crazy, frankly stinks.

Here's today's action:

Shares of big homebuilders jumped on Monday after a batch of positive analyst reports painted an optimistic outlook for the housing sector in 2006, reassuring investors that the nation's homebuilders may have more room to rally after nearly five years of frenzied growth.

"Long-term housing demand remains strong, (with) housing starts over the next decade to be in a range of 1.8 to 2 million per year," Merrill Lynch analyst Lorraine Maikis wrote in a report dated Jan. 9.

Merrill's bright forecast for the industry coincided with bullish reports issued by other investment banks on Monday.


Anonymous said...

Anybody have info on the seattle housing market. Thanks

Anonymous said...

There all liars. How can she predict the next decade. Everyone knows alot people are spending way to much. How will they ever retire if all monies go to house payment.No savings. It will all come to a head. Guaranteed.

Anonymous said...

Yeah....the seattle market stinks. There is no way anyone not working at Microsoft can afford anything......

veritas_faust said...

Thanks for the number! I probably won't call her, but its nice to know that everyone is touchable.

hm said...

The home builders profit margins are so ample that they can keep making plenty of money even at much lower prices and construction rates.

In fact, that's one of the reasons we can expect it to take a long time to work off the supply glut that's been built up. The builders will just keep on building, dropping their prices however much it takes to sell (probably building smaller and cheaper homes, too). Most of their costs are variable, and will drop as the market cools.

The people who are going to suffer a world of hurt are those who bought at bubble prices and are going to be competing with those new, low-cost homes when they have to sell.

Anonymous said...

Not only are the houses here way overpriced, they are headed for a major correction.

Funny thread to ask that question on tho, isn't it?

Check out the seattlebubble.blogspot.com.
It's fairly lame because there's still a lot of denial that there IS a bubble in Seattle, but I'm sure it'll pick up at some point

Anonymous said...

You know I usually am pretty disgusted by things like wasted effort- such as throwing a ton of newly-built homes on an already flooded market.

But I have to say these homebuilders are winning a place near & dear to my heart w/ their continued building in spite of everything.

What I really want are very very low house prices on existing homes and these guys are certainly doing their part.

I wrestle w/ my conscience about this one sometimes but, ultimately I have to say, thankyou homebuilders! You just build your little hearts out!

I have even gotten used to the picture in my mind of decrepid and decaying "new" homes littering the outskirts of every American city in a few years time.

Anonymous said...

This upgrade by Merrill and the others is absolutely criminal.

Yes the homebuilders will "make money" even in a falling market, but they won't make as much, and that's the point. If the mantra is that "stock prices anticipate business conditions six months from now, are we pretending to believe that this spring and summer will be better than the spring and summer of 2005? NFW! And the homebuilder stocks were 30% off the top then. Will it be as good as two years ago? Maybe -- and that's as far as I'll go -- but the stock prices then were half of what they are now. N!F!W! these should be down only 10% from the tippy tippy top of the most widespread real estate mania of all time.

I believe that the timetable for shorting is homebuilders, then mortgage lenders (even if no new homes are built, they can still be sold), building-improvement people (even if nothing is sold, people will keep fixing their places up either in hopes of selling or because they figure they'll be there for a while), then "grown-up toys" companies like cruise lines, Harley-Davidson / ATV's / jet-ski's, etc.

Countrywide Financial (CFC) announced their October and November monthly numbers on the 8th of the month. I'm very surprised that the December numbers are not out yet and tomorrow is the 11th. I begin to wonder if these hombduilder pump-and-dump upgrades are timed with knowledge of delayed and lousy CFC numbers to give the inside money just a couple of more days to unload.

Wes D said...

"The demographic story behind the housing market boom, as we always thought, was a giant hoax"

Thank you, thank you, thank you.

I always belived it was a hoax and now feel vindicated that a chief economist for a large bank believes so as well (never mind that Nobel laureate Dr. Robert Shiller agreed).

Baby-boomers buying second houses -
What the hell is going to happen when they retire? They are still going to make tax & insurance payments on a suburban house (assuming it's paid off) and have a mortgage on a lake cottage with t&i? I don't think so.

Immigration - yearly counts lower than it was 10 years ago, so that's a flat out lie.

Population growth - no sir-e. Not growing much.

Putting it all together there should be a complete plethora of suburban houses coming for sale in the next 10 years. It's going to be like the retailers on Black Friday. Those with the discounts will be selling, consumers will have plenty of choices on houses, and those with unrealistic pricing will be looking out the window wondering "Where are all the people?"

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