I am taking some small losses now in Loopnet (LOOP) in respect of the sheer nastiness of the real estate markets.
I am in no way superstitious and my position is not any bigger than other positions, but it is being plopped into the same pool as homebuilders and financials and I want my money working in winners. I hope it marks the bottom, sure does not seem that way.
I assume I will be back in full at higher prices, and have kept a quarter position on because I am only selling out of being a wussy and having an opinion.
This market rally sure feels thin. If I were a gambling man, I would say September should be a mess.
I don’t gamble and I try to avoid trading based on feel.
I do have some experience so my feel comes from the sour mood developing on Wall Street. Bonuses will likely suck. They should.
Markets climb a wall of worry so the old adage goes, but what about ignorance and panic? I think ignorance and panic lead to the blame game and the blame game is never good for the market. Wall Street works better when the brokers are on offense.
As ‘marketing guru’ Seth Godin aptly points out in this post :
All real estate brokers working today have thrived in an environment in which the price of a house increased on a regular basis for fifty years. Fifty years. Of course, it’s not just home sellers, it’s us, too. Consumers have built their financial lives around this shared belief.
With home prices dropping for the first time in…forever, I am more focused on defense. Unwinding ’shared belief’ could be ugly. Because this trend has gone on so long, the rookies are going to be absolutely annihalated.
My wife is a bankruptcy attorney…a good one. When I asked her to read this New York Times piece on the mortgage crisis , it reminded her of the RTC and Savings and Loan crisis. Lovely how history has repeated itself in such short order, this time on massive steroids.
We have a major oversupply of housing and development. It will take time. Those with cash and a good eye are going to amass untold new fortunes.
There is definately some leadership in tech and I am staying the course, but I am not looking to get back on margin anytime soon.
Interesting cocktail for sure. September is shaping up to be a wild one.
I am reminded of the two idiot brothers Duke and Duke who want the machines truned back on to unwind their losses. I would not put that past Bush and Cheney .
I asked the good folk at Zillow to create Zillow 1.0 for nostalgic reasons so people could look back at their prices from 2006. They laughed of course, ROFL to be exact, but there is a model there!
I can’t do it all for them.
PS – Before all the agent hate mail remeber if you are good, this post does not matter. I speak in generalities.
My good friend Blair, who is kind enough to grant me office space in Phoenix, is a true veteran in lending money to developers has been trying to explain the meltdown that is occuring in the ‘Subprime’ space and amongst even saavy private developers.
Since it not my full area of expertise, I will try to keep it simple.
We are and have been ‘late in a great cycle’. It is not important when it ended, who called it, who has lost money and made money so far…more important is how do I protect gains and avoid disaster to stay in the game.
Private real estate developers are seeing the ugly side of leverage – even in ‘Bubblicious’ Phoenix/Scottsdale Arizona.
Here’s why:
Homebuilders are slashing prices. SLASHING. As Cisco’s John Chamber’s did AFTER a 50 percent decline in the stock, the Homebuilder’s too have said they can’t provide guidance. Swell.
That’s a codeword for Slash and Burn….BIIIITCH! Do what it takes to get at least a vision of what things are like. Clean up the balance sheet and let’s just start over. Not good business necessarily, but what it takes to please the pricks on Wall Street once things turn. The quarterly numbers expectation game unwinds much faster than it takes to build it.
Private developers are just stuck in the crossfire. Even an awesome development in the best of neighborhoods can fall victim to Beazer (BZH) or Toll Brothers (TOL) slashing prices from $230/square foot to $160/square foot.
DO NOT make it more complicated than that.
Eventually, prices will settle, but the initial 30-40 percent will WIPE OUT the fringe speculators, a wide swath of developers and even good businessmen. It’s happening. They are calling Blair. They are in denial about the fast drop.
Real cash and real investors need to come back to the space. Sitting next to Blair and seeing what he sees (and what he is actually doing), I would hazard to guess that we are a LONG way from that point.
Those with deep pockets are licking their chops.
Those with good ‘books’, like Blair, are first and foremost making the rounds and triple checking their good loans and not quite rushing to lend.
Those still levered are in the ‘HOPE’ game at this point.
Real estate agents are a favorite pet peeve of mine. They mainly suck. Period.
It was the same story for travel agents and stockbrokers and they have become dinosaurs, those remaining offering much different and BETTER services than the old days.
The markets have had a nice little rally the last few months. If strength continues I am looking for large caps and healthcare to continue to lead the way. One person happy to see the summer go is TraderTim . His bearish look at the markets is always entertaining.
I am long some Ebay, Adobe, Akamai and Apple and Yahoo tech big cap. I own some Rydex healthcare, XLV and Ambien maker SNY. I am not short anything at the moment in my accounts. I am not as happy as Tim to see the summer go
About a year late with this information, Barron’s has an article on housing entitled : “R.I.P., housing market?” . The shame is they cover their asses still by adding a question mark. No longer it is only a magazine worth skimming these days.
If you can’t eneter the site – here are the key paragraphs and links:
If you’re trying to buy or sell a home, chances are you’re taking the market’s pulse on a daily basis. For the rest of us, the Housing Bubble Blog (www.thehousingbubbleblog.com) might be a good place to start. Blogmaster Ben Jones posts several times daily, penning lengthy tomes with lots of links to regional and national housing-related stories. On Aug. 24, the day after the Commerce Department announced that existing-home sales were down 4.1% in July, Jones pulled in links to related stories from publications as varied as Fortune, the Reno Gazette-Journal and the Marco Island Sun-Times. These links take you to the full story.
Jones does a good job of spotlighting not just the major real-estate markets, but housing issues around the country. He offers illuminating anecdotes about a market seemingly in meltdown mode, such as the one about the woman who offered to throw in a Jeep Wrangler free with the purchase of her home at the asking price. The ploy didn’t work; she subsequently lowered the price. Then there’s the real-estate developer in Southwest Florida whose net income has fallen nearly 70% since 2005. The Housing Bubble Blog offers much of interest to real-estate specialists and non-specialists alike.
ON AUG. 24, when the numbers were released, Calculated Risk (calculatedrisk.blogspot.com) supplied viewers with charts and tables illustrating housing-market conditions, including sales prices and inventory levels, and specifics about the disheartening home-sales news. Links take viewers to sites such as Econbrowser (www.econbrowser.com), which offers analysis of economic conditions and policy.
The anonymous blogmaster at Calculated Risk describes himself as a retired senior executive with a background in investing, finance and economics. Once he had the chance to digest the announcement about July’s sales decline, he passed along a tip from a company insider about significant layoffs that could be coming at one of the nation’s largest home builders. He (or, perhaps, she) also linked to gloomy comments from economists and other industry insiders. Like all blogmasters, housing scribes have their biases, and many are none too cheery these days.
Other housing blogs worth a look include HouseBubble.com (www.housebubble.com), which posts links to key housing stories daily, and Housing Panic — The Bubble Blog with Attitude (housingpanic.blogspot.com), hosted by a “former homeowner” and “expat,” or expatriate. As promised, attitude abounds — about housing, politics, the Middle East and more — along with comments from readers. There’s some intelligent discussion here, but this blog is not for readers easily offended.
You won’t learn anything from watching CNBC or social stock picking networks. NOISE. You don’t need to pay big fees for walled stock market picks and pans.
You can learn from my market blogroll. Pretty much everything you need. No subscription costs.
It is hard to see a bubble when it is occurring. It is hard to imagine that we had back to back bubbles so close to themselves. Nasdaq – and now the unwinding of the housing bubble. The housing one is a scary one that no one seems to be talking about lately. I am actually shocked. Talk has turned instead to technology stocks. It is likely a big headfake. Just too much real damage and deflation in the industry to ever really make a comeback as a whole.
It is not a 300 page history book filled with boring dribble. it is a good 10 minute read that will walk you through all the thinking and signs and the fall. THAT IS – UP TO TODAY.
The rest is a mystery. Maybe we go back to all-time highs, maybe Armageddon is on it’s way now that interest only loans will be ratcheted up. Who the f@#ck knows. I do know that history suggests that what led the previous cycle will not lead again.
If you were not caught in the hype, you were o.k. If you don’t bottom fish, you may miss out on opportunity at best.
I take the signs as they come. For now, commodities are still trending and certain health care areas are strong.
Today’s assignment is to print out Bill’s post and all the links and remember the blueprint. They all look the same.
I had dinner with my old partner and best bud Mark last night . He takes losses like no other human being. I have handed him a few of those so TRUST ME
He swings for the fences and his positive attitude is o.k. for that style.
Mark is as honest about losses as anyone so it always pains me to have to break the truth to him.
A month or so ago, I posted that he called me all bummed about Apple . He had bought 2,000 shares at $84 and the stock was in the high 50’s. He wanted my advice. I said – read my blog Seriously, I remember posting that night that Apple was real close to bottoming based on the Mark Factor and went on to rally 18 points.
I know he punted it, but did not ask him last night. WE WERE TALKING LAND – RAW LAND.
Mark has become a bit of a raw land baron on the west side of Phoenix. So far West, I joke with him that it’s East LA
He has been killing it the last 18 months and I could not be happier. Every time we talked I said – “So Mark – take the money off the table and lend it out! What the hell so you know about raw land.
Last night was a different story. We were talking carrying costs and slowdowns and UGH! He is seeing the other side of a true bubble – THE UNWINDING.
Let’s just say that my advice last night was to – HIT THE BID!
.
