I love Contrarian Chronicles. Here's Fleck's latest - I'd call this a stick-a-fork-in-it-it's-done piece on the late great housing ponzi scheme...
Missed in last week's 'Fed is done' euphoria was more stark evidence the housing bubble has burst. Growing numbers of homeowners can't make their payments.
The fabled engine of our economy is clearly unwinding.
At some point (sooner, rather than later), there will be a housing-finance-related "accident," due to an incendiary combination of housing debt and derivatives. That is what lies ahead. What remains to be seen is exactly when the financial bomb gets detonated.
Meanwhile, though this mess has just started, the end game is (and has been) very predictable, as the story states: "Some borrowers are opting to sell homes they can no longer afford."
That, ladies and gentlemen, is how Alan Greenspan managed to make folks' lives ultimately even worse, in attempting to bail out his equity bubble with a real-estate bubble. Let's never forget who the un-indicted architect of this mess was: Alan Greenspan and the other merry pranksters at the Fed.
Of course, those folks who didn't learn anything from the equity mania, and who will turn out to have gotten themselves trapped in the housing mania, really have only themselves to blame. As I have been warning for at least a couple of years now, all of this was going to be wonderful until it wasn't. That moment in time is upon us.
August 22, 2006
Fleckenstein: Face it: The housing bust is here
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10 comments:
that about nails it!
people who get burned by the housing crash will not have the excuse that they were not warned
they were warned over and over and chose to ignore the warnings
way to go fleck,
people will go from wealth to no wealth in a flash... there is no one to buy the mcmansion game over.
Not to be a shill but if anybody really like Fleck's commentary, I encourage them to purchase a subscription to his site:
http://fleckensteincapital.com/
For $120 a year, he writes a daily market wrap-up and answers daily questions from readers. He doesn't offer individual stock picks but instead shares his insight on the markets in general. I am an original subscriber and find his service invaluable.
On a related Fleckenstein note, he always hammers home how the stock market guys love it when a company "beats the street" and comes in ahead of massaged guidance numbers through accounting tricks. The perfect example is this morning's action so far in TOL stock. First TOL says, we are dropping our forcasts by about 50% a few weeks ago, and this morning they beat their own number by a few cents, and bang! Stock is moving up. Hilarious. That stock will be down by days end, absolutely no doubt. What a joke.
Home builder Toll Brothers Inc. (TOL) said Tuesday third-quarter net income dropped to $174.6 million, or $1.07 a share, from $215.5 million, or $1.27 a share, last year and that it is cutting its earnings guidance for the fourth quarter and 2006.
Analysts polled by Thomson First Call had been expecting the company to produce earnings of $1.04 a share in the third quarter.
Revenue slipped to $1.53 billion from $1.55 billion a year ago, while the company's quarter-end backlog dropped to $5.59 billion, from a 2005 figure of $6.43 billion.
Toll Brothers said it expects to deliver between 2,500 and 2,800 homes in the fourth quarter, which translates into deliveries of between 8,600 and 8,900 homes for 2006.
Fourth-quarter net income is expected at between $218 million and $250 million, or $1.33 to $1.53 a share, while 2006 net income is expected at between $727 million and $763 million, or $4.41 to $4.63 a share. Previously, the company forecasted 2006 earnings per share in a range of $4.69 to $5.16.
The revision is due to reduced deliveries and a third-quarter write-down of $23.9 million.
In 2007, Toll Brothers expects to deliver between 7,000 and 8,000 homes at an average price of $635,000 to $645,000.
TOL sez the deliveries will be down from 8700 to 7500, and the average price will be $640K? How many of these McMansions can be absorbed by families making over $200K per year? Why would they buy one of those anyways?
Some say, 'Where's this housing bubble that's been talked about for the last three or so years?
So when it does hit the fan, and it will, What will be their excuse then?
They've been warned!
the whole freaking world knew Katrina was on its was , yet the poor dumb govt assist tax sucking govt educated citizens of new orleans just sat there.
Ordinary people have been successfully investing in stock and real estate for over a hundred years--some well-beyond that.
As long as you don't lose your head and overextend yourself, you're fine. It always goes up in the long run, even if there are short term losses.
In other postings, you don't seem able to note difference in markets, particularly in different parts of Florida, and forget the fact that over 1,000 people move there a day and boomers are expected to continue this trend for the next ten years. Many huge biotech firms are moving in and salaries are slowly advancing upward to meet the cost of living, at least on the southeast coast.
But I guess this doesn't match your doom and gloom philosophy...
So funny to look back at the mentality of people who were caught up in the bubble, like the poster directly above this posting -- touting that Florida's housing is not going to be affected because of various reasons.
And in the end... well, we all know now how it ended for Florida.
Amazing that so many were so irrational at that time. My, how things have changed.
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