Pump.
Check.
Dump.
Check.
HP has foretold that all homebuilders will be forced eventually (thank you Sarbanes-Oxley) to take MASSIVE write-offs on their SUBSTANTIALLY overvalued land holdings and options.
Well, let the parade begin. Lennar shook the market, but it's the first of many my friends. Remember the telecom asset write-downs in 2000-2002 (see Global Crossing chart for a reminder)? You ain't seen nothin' yet...
S&P Downgrades Lennar to Sell
Lennar warns that November quarter EPS are apt to be $0.70 to $0.75. After giving effect to inventory write-offs and valuation adjustments of $400 to 500 million, we are cutting our estimate to a loss of $1.15 from EPS of $1.17. New orders fell 6% in the Nov. quarter, contributing to our more bearish outlook for fiscal year 2007 (ending Nov.).
One bright sign we see in a dim picture is a new partner added to a key joint venture. We are lowering our EPS estimates to $3.78 from $6.05 for fiscal year 2006, and to $3.00 from $4.50 for fiscal year 2007. Our 12-month target price drops by $1 to $49, based on our updated book value estimate.
January 04, 2007
FLASH - Lennar (finally) faces the music, takes $500,000,000 write-down, first of many
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Now they downgrade it? Yeah, listen to the S&P folks, they are looking out for you.
THE BOTTOM IN HOUSING SLOWDOWN had a HUGE HOLE IN IT. !!!!!!
It`s leaking thru 2007 !!!!
Why buy a falling knife?
Be careful, u might get hurt pretty bad.
Pump and dump. Pump and dump.
Toll and his ilk keep pumping and selling all the way to the bank.
The sheeple will buy, buy, buy all the way to the bottom of the cliff. A fool and his money are soon parted!
Pass the popcorn.
The public HBs are 70% owned by institutions. With the new year they can safely sell so there's no reason to maintain the charade.
This reminds me of late 2001 when yahoo and ebay were at $8 and .coms were written off by the professional as well as self-dentified "experts". Anyone wish they'd bought YHOO or EBAY back then and be up 300-400% since?
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Steps in persuading people you are smart:
Step 1: Use the word sheeple.
With all due respect to "sane person", let's not forget Webvan, Pets.com. Global Crossing, JDS Uniphase (remember $220/share?), Lucent (on life support), Verisign, Corning, Cicso Systems (at $73 it was a screaming buy), Connexant Systems ($110 to $2 is hardly a home run).
The point being: not all dot coms were a bust but far more evaporated or faded away than were stellar performers. As this relates to housing, since it is all supply and demand, once supply increases (either via REO's or owners needing to bail out) there is a lessening on the demand side. How do imbalanced markets re-balance? By finding a new price equilibrium point.
Real estate cycles by their nature are long and slow to the downside. I would expect this to ake at least 1 and probably 2 years to unwind its way to the bottom.
Cheers!
Happy Sam,
JDSU...my brother in-law worked there. Cashed out at the right. Bought obscenely large Tahoe cabin near Squaw Valley. I go there 4-5 times a winter myself. God bless JDSU!!
Point taken. But all those .coms you mention were exitinct by late 2001 I think. pets.com was I know that. I mean that the big players like Yahoo and Ebay were wounded but survived and came back strong.
I see the same with home builders. The mom and pop operations (pets.com) will be gone in a year. The biggies like KB, DR Horton and Toll will be wounded but in 1-2 years they will be where Yahoo and Ebay where in late 2003.
U.S. Jobs Could See Decline
An early look at the U.S. economy in December offered a chillier forecast than the relatively balmy weather, as Automatic Data Processing (nyse: ADP - news - people ) on Wednesday forecast a 40,000 decline in American jobs.
If the payroll processing firm is correct, it would be the first time in nearly four years that U.S. employment rolls have declined. The market consensus is for a 115,000 gain, following 132,000 jobs created in November.
The latest findings "suggest an abrupt slowing of employment, following three months during which, according to the ADP National Employment Report, gains in private nonfarm employment averaged 121,000 per month,” according to Joel Prakken, chairman of Macroeconomic Advisers, which collaborates on the report with ADP.
Since May, Automatic Data Processing has been offering its take on employment several days before the Labor Department. The jobs report is considered important in part because it is the first official government data for the preceding month. The December data is due to be released on Friday.
ADP's projections have differed at times from the data reported by the government. Subsequent revisions to the official reports, however, have shown the company's predictions to be more accurate. ADP processes about one out of every six U.S. paychecks and compiles its report from the data is keeps on about 14 million American workers.
The estimated decline in jobs for December surprised Goldman Sachs economist Andrew Tilton.
“Most of the indicators that we track to get a sense of the labor market have roughly held in line with the last few months, suggesting steady employment growth.” Tilton said. “Their report suggests a sharp deceleration.”
The ADP report could cause economists to revise their payroll forecasts, Tilton said. He has already pushed his own estimate down to 75,000 jobs from 125,000 jobs.
What explains the nose-dive? Tilton points to two possibilities.
First, companies may in fact have become more nervous about increasing their payrolls as growth slows. “Given the economic slowdown, particularly in housing, firms could be getting more cautious about hiring,” Tilton said.
Alternatively, Tilton also argued that the numbers released in December may be distorted because some companies only tally up their payroll figures at the end of the year, finally counting who exactly has left or quit.
“It could mean that firms are just now cleaning up payroll records as the year closes,” Tilton said.
Looking ahead, Tilton said the most vulnerable employees are those working in the residential real estate market.
“You have seen huge declines in home sales,” he said. “Yet housing employment is just slightly off. So this sector needs to shed some employment.”
Indeed the Commerce Department had more bad news from the construction sector on Wednesday. Building activity slipped 0.2% in November, to a seasonally adjusted annual rate of $1.18 trillion, which follows declines of 0.3% in October and 0.8% in September.
Home construction dropped 1.6%, following a 1.7% decrease in October.
That report impacted shares of homebuilders such as Toll Brothers (nyse: TOL - news - people ), which slipped 2.5%, or 79 cents, to $31.44; Centex (nyse: CTX - news - people ), off 2.6%, or $1.48 cents, at $54.79; and Pulte Homes (nyse: PHM - news - people ), which slipped 2.3%, or 75 cents, to $32.37.
Lennar (nyse: LEN - news - people ), which on Tuesday announced a reduced profit outlook and writedowns on some of its land holdings, plunged 3.5%, or $1.83, to $50.63.
The point being: not all dot coms were a bust but far more evaporated or faded away than were stellar performers.
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I remember I had a Dryfus Tech Gro mut fund back then.
Bought it at $29, and sat there for some time, then shot up to $72+!! WOW! This is great. It dipped to $65 and I sold 1/2 of it. I told myself: "When it goes back to the 70's, I'm dumping the rest."
I managed to get rid of the rest at $35. Still made a profit the whole way, but.............
“This should mean that land values are falling, right ???”
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Not here on the west side of Puget Sound - that is, if one believes the local realtor who told me that the RATE of appreciation has decreased, while land prices still continue to rise.
He read me a list of recently-sold 2-3 acre parcels, with both their asking prices and selling prices. Looks like the sellers wouldn’t come down more than 3K - 5K, on parcels they were asking 150K - 200K for.
(I had originally contacted this person to find out the selling price of the property adjacent to mine, since the “for sale” sign just came down, but he couldn’t find any info on it.) He keeps calling me every day - sheesh - now the Mammoth knows how a woman feels when a creepy guy keeps pestering her for a date.
Just might give in and decide to spend a Saturday with this RE clerk; let him show me various parcels of overpriced property. It would be worth it just to see the look on this guy’s face when I offer 50% of the asking price.
As a side note, there is very little discussion on HP about buying land - any thoughts on whether land prices are/will parallel housing price trends? It may at first appear intuitive that they will, but I am not so sure about it; at least not in the Seattle area.
-Mammoth
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