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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (6112)	5/11/2004 10:34:59 AM
From: Knighty Tin	Respond to of 116555

Good luck to him, but I think he's whistling past the graveyard. And when he says they have an insulated system, it reminds me of "portfolio insurance" just before the 1987 crash.

To: mishedlo who wrote (6112)	5/11/2004 10:40:16 AM
From: Elroy Jetson	Respond to of 116555

Splotto does a good job of explaining how these major builders were operating until this last January or February. They decided they were losing too many sales because the lots could not be brought on line quickly enough. So many, perhaps most, of the publicly traded builders decided to make a major bet four months ago and expand their land processing operations. This is all being done with bank loans and debt issuance. In every case the goal is to triple last year's home sales - like each company is connected by some mind meld (aka chat at the ULI and PCBC). Major money is now being invested in something that is going to be worth very little when the music stops. I don't know where Splotto is located, but why not ask him about the portfolio hedges William Lyon used to protect his company against a downturn. His lenders graciously allowe him to keep his home and and two automobiles, although they took his wife's weddinng ring, jewerly and personal artwork. A big come-down from a net worth in the billions. Ask him about Greystone.

To: mishedlo who wrote (6112)	5/11/2004 10:49:02 AM
From: Elroy Jetson	Respond to of 116555

You can tell these home builders are expanding their equity-base so they don't have to rely on debt: 1.) to fund their purchase of land; 2.) to fund their 100% extension of credit to their home buyers. Ooops! Perhaps they're doing just the opposite. There goes $200 million right there, shrinking their equity base by 7.5% more or less. NVR, a McLean homebuilder, said its board authorized the repurchase of $200 million worth of its outstanding common stock. The purchases will occur occasionally in the open market or in privately negotiated transactions. The authorization is a continuation of the stock repurchase program that began in 1994. NVR has 6.5 million shares of common stock outstanding. I've worked with real estate development companies since 1985. They just don't learn.