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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: mishedlo who wrote (7364)6/2/2004 12:41:11 AM
From: Elroy Jetson  Read Replies (2) of 116555
 
I got the date wrong for the bankruptcy of Kaufman & Broad Homes. They filed for bankruptcy in 1987, not 1992. They beat the pack to insolvency by building homes on filled ravines which were deeper than 38 feet. Once the homes were built the ground settled and destroyed the homes by collapsing their foundations.

Bruce Karatz and his band of unethical pirates bought the name from the bankruptcy trustee and incorporated KB Home in 1988. Lucky for them they didn't get a chance to buy much land before the bottom fell out of the housing market in 1990.

Each of these bankrupt builders left shareholders without a penny, while lenders traded their debt for raw land and used furniture which they typically sold for $0.07 on each dollar of debt outstanding.

Home owners were left without warranties or promised repair work. The lenders on Kaufman and Broad homes were given preference and received roughly 35% of their mortgage debt
from lenders and the bankrupt estate. The homeowners were completely wiped out.

This bubble is far larger than 1989 and, as a cursory read of any home builder's Balance Sheet will tell you, the decimation of the home building companies will be far more complete this time around.
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