k-man,
I always get something to think about from your point(s) of view. The investment bank analogy is interesting and certainly the retail investor in the homeboys is buying into the propaganda from the homeboys that they've somehow managed to transform themselves in 22 months from cyclical companies to growth companies deserving of higher p/e's and undeserving of the reversion to book value theology.
However, homeboys will be homeboys, after all. Although I presume they can try to add some sort of countercyclical business to their mix (2nd mortgages? furniture financing? lawn care?) it's hard to see them turning themselves into anything but homeboys for, like, forever.
Now, although I absolutely reject the "it's different this time" worldview, let me simply explain why it has been a litle "different" this time. The homeboys have been the beneficiaries of several individual events--think of this as the opposite of the Perfect Storm, call it the Perfect Calm:
9/11 arrives, causing a mass nesting instinct. There is something downright American about the American house, and when you don't feel like flying even to Schenectady, much less Europe, Asia or Africa on holiday, those dollars can go into the nest.
The markets crumble, leaving real estate the one "safe" place to park your fortune. Upper end houses maintain price stability.
11 rate cuts in one year--everybody and his gramma refinanced, bought or traded up. A lot of future activity, even from 3rd and 4th quarter of 2002 has been brought forward. AG destroys the 30 year bond, further lowering rates.
People shorted the homeboys too damned early, giving rise to a huge short interest box which effectively supports higher homeboy prices--every modest $3-4 selloff brings out short profit takers to cover and every modest or immodest $4-6 price rise brings out short squeezees--the prices are boxed in until the institutions make their serious run for the exits--watch 2Q 2002 for that.
Well, that's my story and I'm sticking to it.
Kb |
