Tag Archives: short sell ideas

Another Analyst Explains Why Housing Is In Trouble

This guy explains why the decline in foreclosures and distressed sales is a big negative for the housing market.   While counter-intuitive, his explanation is clear – crystal clear:

In summary, the halting of foreclosures and short sales due to can-kicking — and to a larger extent exotic mortgage mods — has caused serious structural damage to the demand equation of the macro housing market, which amazingly hasn’t not dawned on many yet.

Here’s the full article link:   Headwind For Housing

My first homebuilder short-sell is performing well so far – it has at least $10 of easy downside in it from here, with patience.   This stock traded below $5 in the 1990’s and I expect it go below $5 eventually once again:    Homebuilder Stock Short-Sell Idea

As the overall stock market begins to price in reality and sell-off quickly, it will exert particularly heavy downside force on the homebuilder stocks.

 

Fabulous Fraud-Filled Friday

“Government Employment Report Friday” and “fraud” are synonymous.  It would be redundant to say, “the employment is a fraud.”    If you just say, “employment report,” the word “fraud” is implied.   As an English major in college, I find that tautologies can be intellectually oppressive in certain contexts.  This is certainly one of them…

Of course, it now looks like Banco Espirito Santo is headed to the graveyard.   Most of the creditors and the stockholders, including the “mighty” Seth Klarman of the famed Baupost hedge fund, will see their money and their investors’ money incinerated.

This one was as easy to spot as was Enron.  But what about the derivatives?

Also easy to spot is the fraud known as  homebuilder stocks.  I saw a presentation yesterday by Jeffrey Gundlach here in Denver who gave a scathing assessment of the housing industry and referenced the homebuilder stocks as “insanely overvalued.”

Of course, I’ve been beating this drum since January 2013…You can see my first short-sell research report on a homebuilder with 360% more debt than book equity:   Homebuilder Short-Sell Report.    It’s overvalued by a factor of at least 4x and I uncovered a stunning fact about its accounting.

March Auto Sales: Fundamental Weakness Belies The Headline Reports

I did an in-depth analysis of March auto sales reported last week.  While the month to month from February to March looked good in the headlines, the year over year sales increase was only 1%.  This increase was fueled by exceptionally heavy incentive promotions, dealer channel-stuffing and subprime auto loans.

I wrote an article for Seeking Alpha which analyzes the numbers on a much more in-depth and candid level than any Wall Street/financial media analyst.   You can read the article here:   LINK.

I recommended selling and/or short-selling GM in an article I wrote in early January.  At the time GM was trading a little over $40.  Since then the stock is down over 16%.  During the same period of time the S&P 500 is up over 2%.  Less than half of GM’s decline can be attributed to its recall problems.  Away from the obvious and exceedingly overvalued high tech momentum stocks, I think GM stock is one of the better short-sell plays in the market.  GM is the most widely held stock by the universe of hedge funds and if the market starts to get pummeled, there will be an avalanche of GM stock for sale.   It’s no coincidence that the Government unloaded the rest of its share just a couple months before the recall problems were disclosed.

The overarching issue here is that both housing and auto sales were the primary sources of any economic growth over the past 24 months.   As we’ve seen with retail sales, the average American household/consumer is tapped out.   This has very ominous implications for the U.S. economy, especially as the global economy is also starting to contract.